So we’re glad to see the improvement in the bounce back in free cash flow. A lot of — and we do debate and discuss capital structure policies annually or more often. And I have nothing to announce today, but again, we primarily think we have a lot of strong investments in front of us. We’re good — we’re glad to have the liquidity — better liquidity at the end of 2023, and we’re going to try to continue to build that.
Operator: And our next question comes from the line of Doug Anmuth with JPMorgan. Please proceed with your question.
Doug Anmuth : Thanks for taking the questions. Brian, you’ve seen very good improvement in International profitability over the last several quarters. Can you just talk about some of the levers here that you’re thinking about just as you look to move into positive operating income and then how International could potentially approach North America levels over time? And then just a follow-up there. Are you seeing any shipping disruptions currently related to the Red Sea and does that factor into your outlook at all for 1Q? Thanks.
Brian Olsavsky: Yes. Let me start with the second one first. So we’re mindful of the geopolitical issues around the world, especially as you say in the supply chain and how that might impact shipments both to the U.S. and to Europe. We’re just working very hard to make that not back up on customers, and we’ll continue to work that. It’s not a material impact into the — it estimated in our guidance in Q1. But again, as I said, we’re vigilant on that, and we’ll work to take steps where we need to, to make sure that customer experience is not impacted. On the International segment, operating income, yes, we’re very pleased with the results, especially over the last few quarters. We improved operating income by $1.8 billion year-over-year.
And I would attribute it to the steady progress that Andy was saying about the U.S. is, again, cost of serve down, advertising is stronger, a lot of attention to cost, a lot of attention to investments, and we are going to invest and other fixed cost control. So a lot of that is what we’re seeing in the established countries of Europe and Japan. I would divide the segment a bit into a couple of buckets. First, there’s that International segment, excuse me, European established country segment. And that’s — it behaves a lot like you would see in North America. If you look at the emerging countries, and again, we’ve launched 10 countries in the last 7 years. They’re all on their own trajectory of journey to profitability and significance with customers, and we’re pleased with that.
I think they’re all growing nicely and again, leveraging their cost structure, investing wisely and Prime benefits, but all on a curve to breakeven and then be a contributor to income and free cash flow. The other thing I’d point out is that we have advanced loaded, I would say, price benefits in our International markets. We think it’s a very good source of customer acquisition and customer retention. The investment in those areas can fluctuate quarter-to-quarter. We had a bit of a higher spend in — excuse me, in digital content in Q4 as we had a number of marketing and content, especially around live sports, English Premier League and Champions League in Germany and Italy, for example. But we like those benefits in those investments, different proven vehicle for customer acquisition, as I said, and it gets people shopping at our sites and engaging with benefits is always positive for the relationship with Amazon.
Operator: And the next question comes from the line of Mark Mahaney with Evercore ISI. Please proceed with your question.
Mark Mahaney : Okay. Thanks. Two questions, please. I think you mentioned, Brian, that the North American margins have improved for 7 quarters in a row or something like that, a significant number. I would assume that most of the factors like rising capacity utilization given your CapEx commentary about retail, the regional center efficiencies and then overall, moderation in shipping and logistics costs, labor costs, I mean, all these factors probably mean that we’ll continue to get an improvement in North American margins, but if you would comment on that. And then secondly, on the Primetime Video — Amazon Prime video, I know we just launched. But could you provide any color or context on expectations around that? You’ve got a massive number of Prime users who are coming in with a reasonable CPM with low ad load, but it seems like there should be a substantial opportunity for you.
So if you want to try to size that for us or how you think about the upside, that would be really appreciated. Thank you.
Brian Olsavsky: Sure, Mark. Thank you. I think Andy laid it out pretty well a few minutes ago on the cost structure, the regionalization, the — growing into the assets that we added during the pandemic, great efficiency and work with productivity across really all of our operations network fixed — attention to fixed cost and lowering costs where we can, maintaining costs where we can, the increase in advertising, success in advertising revenue growth that’s outpaced our traffic growth rates. So all of those trends we expect to continue, and we’re going to work hard to make sure they continue. And as we said, we have one guidepost is maybe pre-pandemic profitability, but we are working to — we’re not putting a limit on our improvement.
We’re going to continue to look for ways to lower the cost to serve. And I might add, at the same time, increase the customer experience because we did that — we had that cost improvement at the same time when we at first got back to our shipping speeds from pre-pandemic and then exceeded them. So we’re happy with that, and we’ll continue to do both to improve the customer experience and also to lower our costs and leverage our cost structure. Yes, your second question on ads. I can’t scale it right now. I mean what I would say for ads in videos is that advertisers are excited to access our Prime customer base. We are looking for ways to increase our advertising in our streaming properties, including Fire TV, but also — and Prime Video, but also things like Freevee and Twitch.
And it’s an important part of the total business model, and we expect it will allow us to have a healthy business to continue to invest in content and to continue to grow that. And we feel good about it, and we — the way we anticipate the ads progressing, we will not have heavy ad loads relative to see other network TV and other things. And like all of our advertising, we’re trying to be useful for customers.
Operator: And our next question comes from the line of Scott Devitt with Wedbush Securities. Please proceed with your question.
Scott Devitt : Thanks. I have one on grocery and one on healthcare. First, on grocery, I was wondering if you could talk a bit about the progress that you’re making in unifying the offering between Dotcom, Fresh and Whole Foods. And — and as it relates to reverse logistics and using the grocery facilities, how that’s lowering the cost of logistics and whether there is a significant opportunity there in terms of driving traffic and revenue in the grocery business? Then secondly, on health care, in such a poor — notoriously poor customer experience industry, you’ve made significant efforts now within acquisition and offering primary care. Just be curious if you could talk a little bit more about the longer-term vision in healthcare. Thank you.
Andrew Jassy: Yes. On grocery, we’re pleased with the progress we’re making there. When we think about our grocery business right now and kind of, I’ll call it, 3 big macro segments. The first is nonperishables where these are things like consumables and canned goods and pet food and health and beauty products and pharmaceutical. And we — it’s a big business and it’s continuing to grow at a very healthy clip, and we’re really pleased with that business. And it’s really the way the most mass merchandisers got into the grocery business a few decades ago. So that continues to grow at a very healthy clip. We have a physical presence along with online, but Whole Foods market, which is really the pioneer and the leader in organic grocery and that’s continuing to grow at a very good clip.
We also made a number of changes in the business last year on the profitability side, where we really like the profitability trajectory we see there. And so again, you’ll see that keep growing and expanding and feel very good about that as well. If you want to serve as many grocery needs as we do, you have to have a mass physical presence. And that’s what we’ve been trying to do with Fresh over several years. We have tested — we’ve been testing a V2 of our Fresh format in a few locations near Chicago, in a few locations in Southern California. It’s very early. It’s just a few months in, but the results thus far are very promising and on almost every dimension. And so we need to see it for a little bit longer time, but the results appear like we have something that’s resonating.
