Amazon.com Inc (NASDAQ:AMZN)’s increasing investment in robotics is on track to deliver billions in cost savings and significantly improve the company’s retail margins, according to Bank of America analysts.
The analysts project that Amazon’s growing fleet of intelligent machines can unlock $16 billion per year in savings by 2032, adding 1.6 points to long-term retail margins.
Although more than 750,000 robots are already integrated into Amazon’s operations and involved in 75% of customer orders, the analysts emphasized that the company is just at the beginning of its robotics-driven efficiency curve.
The recent launch of Amazon’s first 12th-generation automated fulfillment center in late 2024 and the introduction of eight new robots in May, primarily aimed at enhancing delivery station efficiencies, point to Amazon’s efforts to accelerate its robotic ramp, the analysts added.
The bank believes AI will boost retail shopping transparency, benefiting companies like Amazon with lower cost structures and faster shipping speeds.
“Per Amazon, recent AI breakthroughs have driven a ‘step change in how automation and AI can assist our employees,’ thus creating an opportunity for Amazon to take another logistics step forward, ahead of competitors,” they wrote.
“We think spatial awareness that enables robots to sort, pick, and pack could be a significant breakthrough for fulfilment and delivery, and expect Amazon to adopt these technologies well ahead of competitors, aided by AWS' AI capabilities.”
They also see the savings opportunity expanding beyond fulfilment to delivery stations and last-mile delivery. Amazon plans to roll out more robots in delivery stations and is testing autonomous drone delivery in Arizona and Texas.
“Assuming a 20% efficiency savings in new fulfillment centers, 15% efficiencies in updated delivery stations, and 40% drone delivery savings on a subset of packages, we estimate robots can drive $16 billion in annual cost savings by 2032,” the analysts explained.
They boosted their price target on ‘Buy’-rated Amazon, citing recent Software-as-a-Service and retail sector multiple expansion.
Shares of Amazon were flat on Monday afternoon, trading at $205.