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So, Arun, high level here, what's your take on this earnings report? It seems like overall strong and investors are approving.

Yeah, no, overall, I thought it was, it was a terrific report. Um, you know, I mean, really, you, you got the, you got the ingredients you needed for the stock to go up. One, you got the AWS speed or AWS was in line, but most importantly, AWS growth accelerated to 19, a little bit over the 19%. Uh, we needed to see that acceleration given that both Microsoft and Google saw accelerated growth. Uh, and then, uh, I think the real stand out here is on the operating income line. You know, we saw, uh, what was it? We saw, uh, about over 17.4 billion dollars in, in operating income and operating margins were 11%. Um, that's the strongest operating margin going back, uh, you know, at least several, several years. Uh, and you really saw margin improvement in all, uh, three business segments. The North America business segment, which is mainly the retail business, saw margin improvement. The international business, uh, is now profitable, uh, which is, which is great. And even AWS, uh, you saw, you saw margins and AWS accelerate to 38%, uh, from about 36% last quarter. Uh, so really every, you know, uh, everything you really need to, to, to, uh, for the stock to go up today.

Arun, there seems to be some conversation. I know Microsoft pointed to this on their call about spending on AI, perhaps weighing on margins, right? It doesn't seem like we're seeing that at least from this quarter with Amazon. I guess, why is that? How does the AI story sort of work with Amazon where it might be different, maybe perhaps what they're spending on it, than it would be at other companies?

Yeah, yeah, great, great question. Yeah, I mean, all the hyper scalers are, are increasing their CAPEX spend. You know, even this quarter for, uh, for Amazon, it looks like they spent, uh, about 20, uh, about 22 billion dollars in, in CAPEX this quarter, which is a pretty, a pretty notable acceleration from, uh, Q2 and, and, and Q1. Um, but yeah, you're right. You know, when, when you're initially investing in, in AI and, and servers and chips, uh, there's usually a margin headwind, um, associated with that. I think what's unique with Amazon, there's a few unique things. One, um, you know, Amazon's not, you know, solely reliant on chips from Nvidia, for example. They also build, uh, and, and, and create their own AI chips, uh, that are, you know, more cost-effective and, and um, of more value. Um, so they may not be seeing the same type of capacity constraint issues that, that, you know, Microsoft is seeing, um, at the moment. And then the other thing I would point out too is, you know, Amazon has multiple levers to grow margins. You know, so even in a given quarter, if in a given quarter, AWS margins are down, you know, then they can, you know, they can flex their e-commerce business and, and try to improve margins there. And we do believe that Amazon has, you know, significant margin potential, um, in their retail business. It's still, you know, the margins are still relatively low, about, you know, five, five-ish percent right now in the, or in that, in that retail business, about 6% in the North America retail business. But I think over the next year or two, the margins will improve. There's a lot of efficiencies, I think, in that retail business. And then, and lastly, I'll just point out, in advertising, that's a very high margin business, uh, for Amazon. And advertising is growing faster than their, than their core e-commerce business. And that bodes well for Amazon's overall margin profile.

So, Arun, you sound very bullish on Amazon, but in your notes, you did say there are cautious that growth for its profit and free cash flow may not be linear. What are the biggest concerns there and, and what could those possible headwinds mean for some of that growth in the stock in the longer term?

Yeah, yeah, no, I, we thought expectations, you know, expectations for Amazon are always really high. And, you know, uh, this quarter in particular, there are some unique, uh, I think headwinds to margins. Number one, you know, they're business called Project Kuiper, which is their satellite business, essentially, you know, uh, a competitor to Elon Musk's Starlink business. Uh, but they're just starting to, to launch satellites into the sky, for example, and there's production costs associated with that, and you know, we thought that would, you know, dent margins in the near term. Also, all the, all the money they're spending in, in data centers and chips, um, you know, that's typically, you know, margin headwind over the near term. So we just wanted to warn investors that, you know, you probably won't see that, you know, gradual, linear increase in margins. But, you know, at least in this quarter, margins were much better than we expected. Like I said, uh, 11% operating margins, um, you know, are quite strong, especially given that, you know, a few years ago, uh, Amazon was posting a loss, you know, for a few quarters. So they've gone a long way from becoming unprofitable to now, you know, 11% operating margins and over 17 billion in operating income.

Strong margin story here for Amazon. Again, the stock is up nearly 5% in after-hours trading. Arun, thank you so much for your thoughts and for joining us today along with Joshifur. Appreciate you, as always, joining us.