The speaker is discussing Amazon’s expenses as a percentage of revenue and indicating that these expenses are higher than a company like Walmart. However, the speaker also mentions that if Amazon were not investing in new initiatives like digital and Web Services, its cost structure would be different. These investments, including advertising and technology/content, contribute to about 7.5% of Amazon’s revenue over the past decade.
To calculate normalized operating margins, the speaker suggests adding back only one-third of the growth investments to reach an average operating margin of 7% over the past decade, which is comparable to Walmart’s operating margins. By doing this calculation, Amazon’s adjusted EBIT margin would be 6.7% on average.
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