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Amazon profits may have tripled but don’t expect a dividend

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Amazon profits may have tripled but don’t expect a dividend

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The lesson from tech company earnings so far this year is that selling the infrastructure needed to build artificial intelligence services remains far more lucrative than selling the AI services themselves. Cloud computing divisions at Alphabet and Microsoft surpassed results in other parts of the business. Amazon makes it a hat-trick. 

Amazon Web Services, the world’s largest cloud computing business, now has a $100bn annual run rate. In the past quarter it accounted for 17 per cent of total revenue but more than 61 per cent of total operating income. This performance drove overall profit at the company. 

During the pandemic, Amazon’s huge expansion of warehouses, delivery infrastructure and headcount lifted operating expenses sharply just as revenue growth dimmed. Free cash flow was negative in 2021 and 2022. In response, it increased its debt and tightened up costs. Those moves are now paying off. In the quarter, the Seattle-based ecommerce and cloud company’s operating income and net income tripled. Trailing 12-month free cash flow topped $50bn. 

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The unanswered question is whether Amazon is on the cusp of another vast spending plan. It says that it plans to pay down debt and increase capital investment this year. But in a call with analysts, chief executive Andy Jassy was careful not to be drawn on questions of capital investment intensity and the long-term impact on profits. He may have been wary of reproducing the sort of downbeat share price reaction that Meta’s spending plans received last week.

Capital expenditure will rise this year. Amazon is pouring more money into data centres. But it is not clear how much it wants to spend on its own AI tools. It has positioned itself as a platform for multiple AI models but is also offering its own generative AI services to enterprise customers. It has expanded access to Q, a chatbot designed to act as an AWS assistant. At $20 per user a month this is cheaper than Microsoft’s Copilot or Google’s Duet AI. But Amazon offered little guidance about future revenue streams.

The second lingering question is how long it will be before Amazon joins Meta, Alphabet, Microsoft, Nvidia and Apple is paying a dividend. Those companies use the payments to prove they have the near-term interests of shareholders at heart even as they accelerate long-term spending plans. At Amazon, however, the resurgence of free cash flow is still fresh. Dividend payments may not be on the cards for 2024.

elaine.moore@ft.com

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US and Saudi Arabia close to defence and civil nuclear deal

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US and Saudi Arabia close to defence and civil nuclear deal

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A breakthrough diplomatic deal between Washington and Riyadh is “pretty much there” but a broader pact involving Israel hinges on “a credible path” towards the creation of a Palestinian state, a senior US official has said.

The US had made significant progress in talks with the kingdom over American help on defence and a civilian nuclear programme, the US official said, and the countries had a “near final set” of bilateral agreements in place.

The discussions are part of US efforts to secure a grand bargain that would include Saudi Arabia and Israel normalising their diplomatic relations — but depends on Israel’s willingness to grant concessions to the Palestinians.

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The seven-month war between Israel and Hamas in Gaza must also wind down before a final three-way deal was agreed, US officials and analysts said.

“We now have a near final set of arrangements, which would be the bilateral elements of this deal, and we really believe the Saudi deal is pretty much there,” the senior official said.

“But there are elements of it, including a credible pathway for the Palestinians and also some other elements, that would still have to be completed.”

The official added: “The crisis needs to recede to open up space for this.”

The US comments come just days after national security adviser Jake Sullivan held talks with Saudi Crown Prince Mohammed bin Salman in Riyadh and Israeli Prime Minister Benjamin Netanyahu in Jerusalem.

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A grand bargain between the three countries had initially appeared doomed after October 7, when Hamas’s deadly attack on Israel sparked Israel’s retaliatory war in Gaza, which has killed more than 35,000 people, according to Palestinian officials, and left hopes for progress on Palestinian statehood — a component of the trilateral deal — in peril.

Netanyahu, who heads the most far-right government in Israel’s history, has repeatedly ruled out any concessions to the Palestinians or towards establishment of an independent Palestinian state.

On Tuesday, the International Criminal Court’s prosecutor announced that he was seeking an arrest warrant for Netanyahu, as well as some leaders of Hamas, for alleged war crimes.

US officials have made clear that any deal also hinges on securing a pause in fighting in Gaza. A focus of Sullivan’s meetings in Israel was getting dormant talks over a ceasefire in exchange for the release of Israeli hostages held by Hamas “back on track”, the official said.

Whether Israel expands its offensive on Rafah, the southern Gazan city where more than 1mn people had sought sanctuary, would play a role in the ceasefire talks.

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More than 800,000 Palestinians have fled Rafah after Israel launched an offensive on the city this month, despite US opposition to an assault on such a densely populated area. Israel also took over the Gazan side of the Rafah crossing with Egypt, choking off a critical entry point for humanitarian aid into the besieged strip.

“Rafah may play into this, it does change the equation quite a bit and there may be some opportunities for getting the hostage deal back on track,” the senior official said.

US President Joe Biden has paused shipments of 2,000lb bombs and has threatened to withhold them fully if Israel goes ahead on a full-scale invasion of Rafah. After the meetings in Israel, the Biden administration felt that Israel had taken into account many of its concerns, the official said.

“We’re not here to greenlight Israeli military operations,” the senior official said. “It’s fair to say I think the Israelis have updated their plans, they’ve incorporated many of the concerns that we have expressed.”

The US and Israel also had a detailed discussion about how to transition to a stabilisation phase in the fighting and offered its resources to help track down Hamas’s leader in Gaza, Yahya Sinwar, the mastermind behind the October 7 attacks.

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The states where abortion is on the ballot in November : Consider This from NPR

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The states where abortion is on the ballot in November : Consider This from NPR

A protestor attends a Women’s March rally in Phoenix, Arizona in 2022.

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A protestor attends a Women’s March rally in Phoenix, Arizona in 2022.

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Plenty has happened with abortion access in the nearly two years since the Supreme Court overturned Roe v. Wade.

State laws have been changing constantly, new bans have taken effect, and there have been a slew of lawsuits and ballot measures.

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All Things Considered host Mary Louise Kelly sat down with NPR’s reproductive rights correspondent Elissa Nadworny, and Selena Simmons-Duffin, who covers health policy at NPR, to examine the state of abortion.

There are total bans on abortion with very limited exceptions in 14 states. A few more states have six-week bans.

“Florida was the most recent place for this [six-week ban] to take effect. There are states like Nebraska that ban abortion after 12 weeks. In Arizona, it’s 15 weeks. More than half of the states have restrictions. And in those states, the number of abortions has dropped drastically,” Nadworny said.

But despite that trend, the overall number of abortions in the U.S. has actually gone up — due in part to the growing accessibility of telehealth appointments that can provide medication abortions.

You’re reading the Consider This newsletter, which unpacks one major news story each day. Subscribe here to get it delivered to your inbox, and listen to more from the Consider This podcast.

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What voters want

When it comes to the ballot, Nadworny says abortion rights has been a winning issue.

“Nationally, polling shows 6 in 10 Americans say abortion should be legal in all or most cases, but that can vary by state,” she said. “But since Dobbs, voters in six states have weighed in on constitutional amendments on abortion. Voters chose access to abortion each time.”

Four states — Colorado, Florida, Maryland and South Dakota — will be voting on the right to an abortion in the upcoming elections. Six more states, including Arizona and Missouri, are working to get it on the ballot.

People gather at Utah’s state capitol in 2022 after the leaked draft opinion by Supreme Court Justice Samuel Alito suggested that the court was poised to overturn Roe v. Wade.

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Voters this fall may also be reacting to what they’ve seen when their access to reproductive healthcare becomes limited.

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In states with more restrictive bans, like Idaho, dozens of OB-GYNs have left the state, according to one doctor who spoke to NPR. And three maternity wards have closed since the state’s abortion ban took effect. Recruiting problems are widespread for hospitals that are operating in states with abortion bans.

What could change

Simmons-Duffin says that while abortion access is getting rolled back in some states, it is gaining more protections and funding in others. When Roe v. Wade was in place, there were lots of restrictions and regulations about when and how the procedure could be performed.

“Some states like Michigan, Colorado, Minnesota, California and others have made moves to undo some of those regulations,” she said. “They’re getting rid of things like waiting periods and gestational limits,” Simmons-Duffin said.

“They’re allowing more types of providers like nurse practitioners to provide abortions. They’re training more providers on abortions. Some states have stockpiled Mifepristone, one of the medicines that can be used for abortion, in case access is curtailed in the future.”

Simmons-Duffin added that some places, like New York City, have made abortion hubs part of the health department. “So you can call a number and find out where to get an abortion and how to get funding to cover the costs,” she said.

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Meanwhile, there are still two major decisions on abortion pending before the Supreme Court that are set to be announced next month:

“Both of these decisions will be coming down in early summer, just a few months before the election. So regardless of what the justices decide, it’s going to catapult abortion back into the headlines at a key time for voters,” Simmons-Duffin added.

For the full discussion on abortion in the U.S., listen to the episode of Consider This by tapping the play button at the top of the page.

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Trial of German plotters lifts curtain on QAnon-style conspiracy

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Trial of German plotters lifts curtain on QAnon-style conspiracy

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Nine men and women went on trial in Frankfurt on Tuesday accused of plotting to overthrow the German government, in a sensational case that has revealed how deeply QAnon conspiracy theories have penetrated the world of the German far-right.

The suspects, who were arrested in December 2022, stand accused of belonging to, or supporting, a terrorist organisation that planned to attack the German parliament, detain MPs and do away with the country’s postwar political order. They face 10 to 15 years in prison if found guilty.

Prosecutors have identified the ringleaders as Heinrich XIII Prinz Reuss, a real estate broker and scion of an aristocratic family, and Rüdiger von Pescatore, a former lieutenant colonel and paratrooper commander. The group also includes a former MP from the far-right Alternative for Germany party, ex-judge Birgit Malsack-Winkemann.

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Prosecutor Tobias Engelstetter spent most of the first day of the trial reading out the 617-page indictment, detailing a conspiracy that seemed so outlandish at times it drew gasps of astonishment from the public gallery.

Prosecutors said the conspirators shared a “profound rejection” of the country’s liberal democratic system, believed deeply in the QAnon conspiracy and shared the views of the “Reichsbürger” movement, which does not recognise Germany’s postwar order.

Engelstetter presented the plotters’ worldview as being built around the idea that Germany is controlled by members of a “deep state”, which runs a series of “underground military bases”. Here children are abused, killed and their bodies used to produce a special rejuvenating elixir.

According to this theory, the deep state is opposed by a secret association known as the Alliance, which brings together the armies, governments and intelligence services of various states, including the US and Russia, that have promised to liberate Germany.

The plotters, so prosecutors said, expected the Alliance to give a signal to presage “Day X”, which would in turn act as the trigger for the Reuss group to launch their coup. Some of them believed the death of Queen Elizabeth in the UK in September 2022 was just such a signal.

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They had allegedly formed a council and a military arm ready to take power once the current regime was removed from power, and had built up a €500,000 war chest and a huge firearms arsenal.

The suspects were aware, prosecutors said, that their attempt to seize power would “involve killing people”, and had drawn up lists of “enemies” that would be arrested, and likely killed, after the coup.

The plotters had, according to prosecutors, already decided on roles in the government they planned to set up after the power grab, with Prinz Reuss tapped to serve as head of state and Malsack-Winkemann to run the justice ministry.

One of the more bizarre parts of the indictment concerned the relationship of the alleged plotters with two brothers in Switzerland. Identified as Sandro and Claudio R, the siblings were paid huge sums of money to provide the group with illegal weapons, prosecutors said. The brothers were also supposed to help the conspirators find the entrance to the “deep underground military bases”, so the children allegedly held there could be freed. They did neither.

The case, which is being heard under tight security in an annex of Frankfurt’s higher regional court, has shone a spotlight on the Reichsbürger, an extremist movement whose members believe the German Reich of 1871-1945 still exists. They do not recognise the laws and institutions of postwar Germany, issue their own passports and stamps and refuse to pay fines issued by local authorities.

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Long dismissed by ordinary Germans as a bunch of harmless eccentrics, the Reichsbürger is estimated to have about 23,000 members and, according to Germany’s domestic intelligence agency, exhibits a “high affinity” for weapons. 

In a sign of the size and complexity of the case, different trials are being held in Stuttgart, Frankfurt and Munich.

A trial against the alleged military wing of the Reuss group started in Stuttgart in late April and includes several former senior officers in the German armed forces. One of the suspects on trial in Stuttgart is accused of having shot and wounded police carrying out a search of his apartment in March 2023 and faces an additional charge of attempted murder.

Proceedings against less prominent alleged members will start in Munich on June 18. 

 

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