[Tianfeng Overseas Technology] Amazon Begins Positive Feedback

English summary

Amazon is following a script similar to Google's: after a full stock adjustment, even with negative short-term free cash flow, the market is beginning to give positive feedback to revenue acceleration and ROI visibility. Fundamentals mainly include: For the first time, it systematically explained the CapEx return model. Servers and network equipment are usually purchased months before use; if demand is poor, it can choose not to order. The average payback period is less than three years, with a useful life of at least 5-6 years. Most AI capacity is currently under contracts of at least five years. Data centers require investment about two years in advance, but have a useful life of over 30 years and can host 5-6 generations of servers. The point is that long-term data center assets can be reused, while short-cycle server purchases have strong demand visibility. Thus, Amazon believes it is not gambling on demand without orders. It also admits short-term free cash flow will be poor, but attempts to prove this is more a timing mismatch between revenue recognition and capital expenditure than projects lacking returns. ...