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MEMO FROM THE FUTURE: AMAZON

CEO Edition

EXECUTIVE STRATEGY MEMO June 2030

TO: Amazon Leadership Team

FROM: Andy Jassy, CEO

DATE: June 2030

SUBJECT: Navigating Retail Disruption While Maximizing AWS Potential

THE MOMENT WE'RE IN

Amazon faces the most significant strategic challenge in my tenure as CEO. AWS is thriving—22% growth, dominant market share, generating $40-50 billion in annual operating profit. But our retail core is facing disruption from AI agents that's more serious than we anticipated.

Prime member growth is slowing. Retail revenue growth is 3% annually (vs. 8-12% historically). Customer acquisition in retail is expensive because AI agents are efficiently routing customers to competitors.

We're not in crisis—Amazon generates enormous cash and is incredibly profitable. But the retail disruption is real, and we need a clear strategy to address it.

THE RETAIL DISRUPTION

When AI agents became sophisticated enough to understand shopping intent and compare options across retailers, we lost something fundamental: Amazon's role as the search and compare layer.

For 20 years, customers came to Amazon to search, compare, and buy. We captured value at every step. Sellers paid for advertising. Brands paid for placement. Amazon Prime kept customers sticky.

Now, customers ask ChatGPT or Claude to find the best coffee maker, and the agent compares Amazon, Walmart, Best Buy, Target, and direct-from-manufacturer options. Amazon's position is no longer privileged; it's just one option in the agent's comparison.

From Amazon's perspective, this reduces customer traffic, reduces advertising inventory value, and reduces Prime stickiness.

By June 2030, this is not theoretical. Retail growth is 3% YoY. It's measurable.

THE CHOICE AHEAD

Amazon can respond to retail disruption in three ways:

Option 1: Accept Retail as Mature/Declining

Strategy: Stop trying to grow retail. Instead, optimize retail for profitability and cash generation. Invest capital in AWS, advertising, and other high-growth segments.

Financial implications: Retail grows 2-3% annually through 2035, reaching $400-420B. Operating margin improves to 10-12% as we optimize for profitability rather than growth. Retail becomes a cash cow funding AWS investment.

Risk: Allows competitors to steal market share. Walmart, with better cost structure, could become the default choice as customers increasingly buy through agents without loyalty to Amazon.

Option 2: Invest in AI-Powered Shopping

Strategy: Build Amazon's own AI agent ("Amazon Agent") that understands shopping intent better than competitors' agents. Market this as "the shopping agent optimized for Amazon."

Also, invest in infrastructure (Amazon devices, Alexa, Kindle) that makes Amazon Agent the default agent for shopping queries.

Capex required: $3-5 billion over 3-5 years

Financial implications: Retail growth recovers to 6-8% annually. Agent ecosystem creates new advertising opportunities as brands pay to be recommended by Amazon Agent.

Risk: This assumes we can build a better agent than OpenAI, Anthropic, or Google, which is not obvious. We'd be competing on core AI competency, not on retail assets.

Option 3: Double Down on AWS + Be Selective on Retail

Strategy: Acknowledge that retail is mature. Stop chasing growth. Instead, double down on what we're good at:

Capex required: $10-15B annual investment in AWS and advertising infrastructure

Financial implications: AWS grows to $250B+ by 2035. Advertising becomes 15-20% of revenue. Retail stabilizes at $400-420B with modest growth. Company-wide growth: 10-12% annually.

Advantage: Plays to Amazon's core strength (infrastructure, scale, operational excellence) rather than trying to compete on AI models/agents.

MY RECOMMENDATION

I'm recommending Option 3: Double down on AWS and advertising, accept retail as mature.

Here's my reasoning:

First: AWS is a genuine competitive advantage. We built it, we run it, we understand infrastructure better than anyone. We should lean into this.

Second: Advertising at Amazon has massive potential. The question is not "sell ads on Amazon.com" but "how do brands reach customers in an AI-agent-mediated world?" Amazon, with its retail relationships and customer data, is uniquely positioned to own advertising in this world.

Third: Retail is not going away, but the growth days are behind us. Rather than invest $10B to chase 2-3% incremental growth, accept retail as a $400B+ profitable business and redeploy capital.

Fourth: We should not try to compete with OpenAI, Anthropic, or Google on core AI model quality. That's not where Amazon's strength lies.

THE EXECUTION PLAN

Phase 1: AWS Dominance (2030-2033)

Objective: AWS revenue grows from $145B to $200B+ by 2035. Market share remains 32-35%.

How: - Invest $8-10B annually in AI infrastructure (custom chips, distributed training infrastructure) - Build proprietary foundation models (Titan, Llama-based) optimized for enterprise workloads - Develop vertical-specific AI services (financial services, healthcare, manufacturing) bundled with AWS - Aggressive enterprise sales to financial services, healthcare, government

Expected outcome: AWS EBITDA grows to $70-80B by 2035.

Phase 2: Advertising Transformation (2030-2033)

Objective: Advertising revenue grows from $42B to $100B+ by 2035.

How: - Build "Amazon Ads Platform" that brands can use to reach customers through Amazon, agents, and affiliate networks - Develop integration with major AI agents (negotiate placement so Amazon products show up prominently in agent comparisons) - Create performance-based advertising (brands pay per conversion, not per impression) - Expand advertising beyond Amazon.com to retail partners (Whole Foods, Amazon device ecosystem)

Expected outcome: Advertising EBITDA grows to $50-60B by 2035 (60%+ margins).

Phase 3: Retail Optimization (2030-2035)

Objective: Retail stabilizes at $400-420B with 2-3% annual growth. Margins improve to 10-12%.

How: - Focus retail on high-loyalty customers (Prime members) - Optimize category mix (emphasize high-margin categories) - Improve operational efficiency (automation, reduced returns) - Leverage retail network as distribution for advertising and AWS services

Expected outcome: Retail EBITDA grows to $40-50B by 2035 (not from growth, but from margin expansion).

ORGANIZATIONAL IMPLICATIONS

AWS organization: Expand significantly. Hire 5,000+ engineers, product managers, and sales professionals focused on AI infrastructure and vertical solutions.

Advertising organization: New standalone business unit reporting to CEO. Hire 2,000+ people focused on advertiser solutions and agent integrations.

Retail organization: Optimize for profitability rather than growth. Some rationalization of lower-margin categories and operations. Headcount growth: 2-3% (vs. 10%+ historically).

FINANCIAL OUTLOOK

By 2035:

This implies valuation of $2.5-2.8 trillion by 2035 (if enterprise multiples remain stable at 13-15x EBITDA).

CLOSING THOUGHT

Amazon's strength has always been scale, execution, and willingness to do things that other companies can't. For 25 years, that meant building retail at scale. For the last 15 years, it meant building AWS at scale.

The next 5-7 years should mean building advertising and AI infrastructure at scale.

This requires us to shift capital and talent from retail growth to infrastructure growth. It requires us to accept that retail is mature and stop trying to grow it 10% annually.

But it positions Amazon to be the infrastructure and advertising provider for the AI-agent-mediated future, which is genuinely valuable.

Let's execute on this path.

Andy

Confidential — Leadership Team Only