Market Overview

Amazon.com Announces First Quarter Sales up 43% to $51.0 Billion

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Amazon.com, Inc. (NASDAQ:AMZN) today announced financial results for
its first quarter ended March 31, 2018.

Operating cash flow increased 4% to $18.2 billion for the trailing
twelve months, compared with $17.5 billion for the trailing twelve
months ended March 31, 2017. Free cash flow decreased to $7.3 billion
for the trailing twelve months, compared with $10.1 billion for the
trailing twelve months ended March 31, 2017. Free cash flow less lease
principal repayments decreased to $1.1 billion for the trailing twelve
months, compared with $6.1 billion for the trailing twelve months ended
March 31, 2017. Free cash flow less finance lease principal repayments
and assets acquired under capital leases decreased to an outflow of $3.0
billion for the trailing twelve months, compared with an inflow of $3.3
billion for the trailing twelve months ended March 31, 2017.

Common shares outstanding plus shares underlying stock-based awards
totaled 504 million on March 31, 2018, compared with 497 million one
year ago.

Net sales increased 43% to $51.0 billion in the first quarter, compared
with $35.7 billion in first quarter 2017. Excluding the $1.6 billion
favorable impact from year-over-year changes in foreign exchange rates
throughout the quarter, net sales increased 39% compared with first
quarter 2017.

Operating income increased 92% to $1.9 billion in the first quarter,
compared with operating income of $1.0 billion in first quarter 2017.

Net income was $1.6 billion in the first quarter, or $3.27 per diluted
share, compared with net income of $724 million, or $1.48 per diluted
share, in first quarter 2017.

"AWS had the unusual advantage of a seven-year head start before facing
like-minded competition, and the team has never slowed down," said Jeff
Bezos, Amazon founder and CEO. "As a result, the AWS services are by far
the most evolved and most functionality-rich. AWS lets developers do
more and be nimbler, and it continues to get even better every day.
That's why you're seeing this remarkable acceleration in AWS growth, now
for two quarters in a row. A huge thank you to all our AWS customers,
and you can be sure we'll keep working hard for you."

Highlights

  • For the third year in a row, customers voted Amazon #1 in corporate
    reputation in the Harris Poll, a poll that surveys more than 25,000
    people and evaluates public perceptions classified into six dimensions
    of corporate reputation: Workplace Environment, Social Responsibility,
    Emotional Appeal, Financial Performance, Vision & Leadership, and
    Products & Services.
  • U.S. consumers ranked Amazon #1 in the American Customer Satisfaction
    Index for the Internet Retail category for the eighth year in a row.
    The 50,000-person poll measures perceptions of quality and value
    across retailers nationwide. Additionally, U.K. customers ranked
    Amazon.co.uk #1 in customer satisfaction for the fifth consecutive
    time based on a nationwide poll of 10,000 consumers by the U.K.
    Customer Satisfaction Index.
  • LinkedIn recognized Amazon as the #1 most desirable workplace in the
    U.S. based on data about where job seekers want to work and how long
    employees stay with companies across the country.
  • Amazon and Best Buy announced a multi-year, exclusive collaboration to
    bring the next generation of Fire TV Edition smart TVs to customers in
    the U.S. and Canada. Together, Amazon and Best Buy will launch more
    than ten 4K and HD Fire TV Edition models from Toshiba and Insignia
    brands, available for purchase in 2018 through Best Buy stores,
    BestBuy.com, and Amazon.com.
  • Amazon acquired Ring, a home security company. The two companies will
    work together to accelerate Ring's mission to reduce crime in
    neighborhoods with affordable, effective home security products and
    services.
  • Amazon introduced FreeTime on Alexa, the first Alexa experience built
    from the ground-up just for kids. These new offerings bring
    Alexa-specific features and premium content to Amazon's popular
    FreeTime and FreeTime Unlimited services, all available on Echo, Echo
    Dot, and Echo Plus devices. Amazon also announced the Echo Dot Kids
    Edition, the easiest way to get started with FreeTime and FreeTime
    Unlimited on Alexa.
  • Amazon released new features for Alexa, including Follow-Up mode,
    which makes Alexa more conversational by allowing for follow-up
    requests without having to repeat the wake word; Alexa Donations,
    which allows customers to make donations to charities via voice using
    Amazon Pay; Brief Mode, which shortens Alexa's responses; the ability
    to add music and podcasts to daily Alexa Routines; and hands-free
    Alexa support on Fire 7 and Fire HD 8 tablets when plugged in, so
    customers can simply use their voice to ask Alexa on their tablet to
    play a song, turn off the lights, start or pause a movie, and much
    more.
  • Amazon introduced Alexa Skill Blueprints so customers with no
    programming experience can create their own personalized Alexa skills.
    Through a set of easy-to-use templates, customers in the U.S. can
    create unique experiences for their Alexa-enabled devices in just
    minutes, including jokes, stories, party games, Q&A, and more.
  • Amazon released new developer tools and Alexa features to make
    voice-controlled entertainment even easier, including the expansion of
    far-field voice control on Fire TV for the U.K. and Germany, and
    additions to the Video Skill API such as capabilities that enable
    customers to set and manage DVR recordings with their voice.
  • Amazon introduced more ways for Alexa developers to build engaging
    skills, including the new Alexa Skills Kit developer console, which
    provides a streamlined experience to help developers create, manage,
    and publish Alexa skills. Alexa now features more than 40,000 skills
    created by third-party developers, including new experiences from
    Lonely Planet, Pokémon, Denny's, a Westwood One Sports Integration for
    March Madness, and a premium streaming service from TuneIn exclusively
    for Alexa.
  • Amazon introduced new ways for customers to communicate using Alexa,
    including the launch of Alexa Calling and Messaging on Fire, iOS, and
    Android tablets, as well as Alexa Announcements, a new feature to make
    one-way announcements to all other Echo devices in the household.
  • Alexa is now available on even more devices via the Alexa Voice
    Service, including new car models from Toyota, including Avalon, Rav4,
    and Corolla, and the Switch+ connected light switch from ecobee.
  • Amazon Studios greenlit new series Cortés from executive
    producers Steven Spielberg and Steven Zaillian, starring Javier
    Bardem, and Utopia, a series written by Gillian Flynn, author
    of Gone Girl. Additionally, Amazon Studios acquired the global
    television rights to Consider Phlebas, the first novel of the
    Culture series by Iain M. Banks.
  • Prime Video premiered new seasons of customer-favorites Bosch
    (season four) and Sneaky Pete (season two).
  • The Prime Video Direct Film Festival Stars Program has made 70 films
    available exclusively on Prime Video. This program provides a
    distribution model for films screened at premiere film festivals,
    including Sundance, Tribeca, SXSW, and TIFF, and has resulted in
    millions of dollars of upfront cash bonuses being paid to independent
    filmmakers and rights holders.
  • Tens of millions of paid customers are now enjoying Amazon Music, and
    Amazon Music Unlimited subscriptions grew more than 100% over the last
    six months.
  • Amazon, Chase, and Whole Foods Market announced that eligible Prime
    members can earn 5% back on Whole Foods Market purchases when using
    the Amazon Prime Rewards Visa Card.
  • Amazon introduced grocery delivery from Whole Foods Market in 10
    cities in the U.S., offering customers free two-hour delivery on
    thousands of natural and organic groceries and locally-sourced items.
  • Amazon.com.mx celebrated the first anniversary of Prime and now has
    over 20 million items available for fast, free delivery. In the past
    year, members in over 13,000 postal codes in Mexico received Amazon
    Prime packages.
  • Amazon.cn launched Prime Reading, the first entertainment benefit for
    Prime members in China. Prime Reading joins the growing list of
    benefits for Prime members in China.
  • Amazon Global Selling allows small and medium-sized businesses to more
    easily connect with international customers. In 2017, global sellers'
    sales grew by more than 50% worldwide, representing more than 25% of
    total third-party seller sales on Amazon.
  • Amazon launched Fulfillment by Amazon (FBA) in Australia, offering
    small and medium-sized businesses selling on Amazon.com.au the ability
    to leverage the Amazon fulfillment network to better scale and reach
    more customers.
  • In Europe, Amazon launched additional locations for public fulfillment
    center tours in Spain, Italy, and the U.K., joining over 25 other
    sites across North America and Europe.
  • The Amazon Sustainability Question Bank was launched to help customers
    quickly find information on the sustainability programs that are
    important to them. The site contains information about many of
    Amazon's sustainability programs, including renewable energy,
    sustainable packaging, and improving efficiency across its operations.
    To learn more, visit www.amazon.com/sustainabilityquestionbank.
  • Amazon now has 15 fulfillment centers in the U.S. with solar panels
    producing power, as part of our commitment to host solar energy
    systems at 50 fulfillment centers by 2020, and our goal to power all
    of our global infrastructure using 100% renewable energy.
  • Amazon Web Services (AWS) announced several enterprise customers
    during the quarter: GoDaddy, Cox Automotive, Shutterfly, and NextGen
    Healthcare are going all-in on AWS; Amway built an IoT platform on AWS
    using a serverless architecture; LG Electronics has chosen AWS IoT
    Core services to connect all LGE Home appliances under the LG
    SmartThinQ brand; and Pfizer has selected Amazon Redshift as the
    enterprise standard for its mission critical analytical applications.
  • Tens of thousands of customers are using AWS machine learning
    services, with active users increasing more than 250% in the last
    year, spurred by the broad adoption of Amazon SageMaker. New customers
    using AWS machine learning technologies include Articulate, Cathay
    Pacific, Cerner, Cookpad, Cox Automotive, DailyLook, DigitalGlobe, Dow
    Jones, Echo360, Edmunds.com, Enetpulse, Expedia.com, FamilySearch,
    FICO, GE Healthcare, Genesys, Grammarly, Intuit, KloudGin, Lau
    Brothers, Limbik, Lionbridge, NFL, One Hour Translation, Polotico.eu,
    POPSUGAR, PubNub, Realtor.com, RedAwning.com, Shutterfly, TINT,
    Tinder, VidMob, VMware, and ZipRecruiter.
  • Amazon Aurora continues to be the fastest growing service in the
    history of AWS, with tens of thousands of customers using Amazon
    Aurora for their relational databases, a number that has increased by
    approximately 2.5x in the last year. New customers include ADP,
    Autodesk, Choice Hotels, TIBCO, Trend Micro, Cloudability,
    ZipRecruiter, BMLL Tech, Beachbody, Arizona State University,
    RecoChoku, FirstFuel, Mitel, and Wappa.
  • AWS announced that all generally available AWS services and features
    comply with the European Union's General Data Protection Regulation
    (GDPR), meaning customers can deploy AWS services as a key part of
    their GDPR compliance plans in advance of the May 25, 2018 enforcement
    deadline.
  • AWS launched AWS Secrets Manager, a new service that helps customers
    protect access to their applications, services, and IT resources. With
    AWS Secrets Manager, customers can easily rotate, manage, and retrieve
    secrets — such as database credentials and API keys — in the AWS
    Cloud, on third-party services, and on-premises.
  • AWS announced Amazon Simple Storage Service (Amazon S3) One
    Zone-Infrequent Access (Z-IA) and general availability of Amazon S3
    Select. Amazon S3 Z-IA is a new storage class that stores objects in a
    single Availability Zone and is designed for customers who want a
    lower-cost option for infrequently accessed data, but do not require
    the multiple Availability Zone data resilience model of other S3
    storage classes. Amazon S3 Select enables customers to retrieve only
    the data they need from an object, which can dramatically improve the
    performance and reduce the cost of applications that need to access
    data in S3.
  • AWS launched the general availability of Amazon Transcribe and Amazon
    Translate, two new machine learning services which are part of the AWS
    machine learning portfolio. Amazon Transcribe provides grammatically
    correct transcriptions of audio files to allow audio data to be
    analyzed, indexed, and searched. Amazon Translate is a deep learning
    powered machine translation service that provides natural sounding
    language translation in both real-time and batch scenarios. These
    services further extend the language capabilities already provided on
    AWS with Amazon Lex for conversational interfaces, Amazon Polly for
    Text-to-Speech, and Amazon Comprehend for processing natural language
    to discover insights and contextual relationships in text.
  • Together with VMware, AWS announced the expansion of VMware Cloud on
    AWS into Europe and powerful new capabilities for migrating and
    protecting applications. VMware Cloud on AWS offers customers an
    operationally consistent and familiar way to run, manage, and secure
    applications in a hybrid cloud, with access to a broad range of
    innovative and comprehensive AWS services and robust disaster
    protection. New customers include The Brinks Company, Scripps Network
    Interactive, Cerner, and systems integrator DXC, who is launching a
    new portfolio of managed services for VMware Cloud on AWS.
  • AWS continues to expand its infrastructure, launching two Availability
    Zones and one Local Region in Osaka, Japan during the first quarter of
    2018. AWS now operates 54 Availability Zones within 18 geographic
    Regions, and one Local Region, with announced plans for 12 more
    Availability Zones and four more regions in Bahrain, Hong Kong SAR,
    Sweden, and a second AWS GovCloud Region in the U.S. coming online
    between now and early 2019.

Financial Guidance

The following forward-looking statements reflect Amazon.com's
expectations as of April 26, 2018, and are subject to substantial
uncertainty. Our results are inherently unpredictable and may be
materially affected by many factors, such as fluctuations in foreign
exchange rates, changes in global economic conditions and customer
spending, world events, the rate of growth of the Internet, online
commerce, and cloud services, and the various factors detailed below.

Second Quarter 2018 Guidance

  • Net sales are expected to be between $51.0 billion and $54.0 billion,
    or to grow between 34% and 42% compared with second quarter 2017. This
    guidance anticipates a favorable impact of approximately $1.2 billion
    or 320 basis points from foreign exchange rates.
  • Operating income is expected to be between $1.1 billion and $1.9
    billion, compared with $628 million in second quarter 2017.
  • This guidance assumes, among other things, that no additional business
    acquisitions, investments, restructurings, or legal settlements are
    concluded.

A conference call will be webcast live today at 2:30 p.m. PT/5:30 p.m.
ET, and will be available for at least three months at
www.amazon.com/ir. This call will contain forward-looking statements and
other material information regarding the Company's financial and
operating results.

These forward-looking statements are inherently difficult to predict.
Actual results could differ materially for a variety of reasons,
including, in addition to the factors discussed above, the amount that
Amazon.com invests in new business opportunities and the timing of those
investments, the mix of products and services sold to customers, the mix
of net sales derived from products as compared with services, the extent
to which we owe income or other taxes, competition, management of
growth, potential fluctuations in operating results, international
growth and expansion, the outcomes of legal proceedings and claims,
fulfillment, sortation, delivery, and data center optimization, risks of
inventory management, seasonality, the degree to which the Company
enters into, maintains, and develops commercial agreements, proposed and
completed acquisitions and strategic transactions, payments risks, and
risks of fulfillment throughput and productivity. Other risks and
uncertainties include, among others, risks related to new products,
services, and technologies, system interruptions, government regulation
and taxation, and fraud. In addition, the current global economic
climate amplifies many of these risks. More information about factors
that potentially could affect Amazon.com's financial results is included
in Amazon.com's filings with the Securities and Exchange Commission
("SEC"), including its most recent Annual Report on Form 10-K and
subsequent filings.

Our investor relations website is www.amazon.com/ir and we encourage
investors to use it as a way of easily finding information about us. We
promptly make available on this website, free of charge, the reports
that we file or furnish with the SEC, corporate governance information
(including our Code of Business Conduct and Ethics), and select press
releases and social media postings, which may contain material
information about us, and you may subscribe to be notified of new
information posted to this site.

About Amazon

Amazon is guided by four principles: customer obsession rather than
competitor focus, passion for invention, commitment to operational
excellence, and long-term thinking. Customer reviews, 1-Click shopping,
personalized recommendations, Prime, Fulfillment by Amazon, AWS, Kindle
Direct Publishing, Kindle, Fire tablets, Fire TV, Amazon Echo, and Alexa
are some of the products and services pioneered by Amazon. For more
information, visit www.amazon.com/about and follow @AmazonNews.

     
AMAZON.COM, INC.
Consolidated Statements of Cash Flows
(in millions)
(unaudited)
 

Three Months Ended
March 31,

Twelve Months Ended
March 31,

2017   2018 2017   2018
 
 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD $ 19,934 $ 21,856 $ 12,781 $ 16,301
OPERATING ACTIVITIES:
Net income 724 1,629 2,583 3,938
Adjustments to reconcile net income to net cash from operating
activities:
Depreciation of property and equipment, including internal-use
software and website development, and other amortization, including
capitalized content costs
2,435 3,671 8,725 12,714
Stock-based compensation 792 1,182 3,223 4,605
Other operating expense, net 42 56 157 216
Other expense (income), net (40 ) (184 ) (10 ) (437 )
Deferred income taxes (22 ) 141 (279 ) 134
Changes in operating assets and liabilities:
Inventories 947 2,220 (1,249 ) (2,309 )
Accounts receivable, net and other 965 1,029 (2,872 ) (4,716 )
Accounts payable (6,865 ) (10,216 ) 3,935 3,749
Accrued expenses and other (1,404 ) (2,225 ) 1,277 (538 )
Unearned revenue 807   906   2,057   838  
Net cash provided by (used in) operating activities (1,619 ) (1,791 ) 17,547 18,194
INVESTING ACTIVITIES:
Purchases of property and equipment, including internal-use software
and website development
(2,148 ) (3,098 ) (8,539 ) (12,905 )
Proceeds from property and equipment incentives 287 371 1,122 1,981
Acquisitions, net of cash acquired, and other (45 ) (13 ) (146 ) (13,939 )
Sales and maturities of marketable securities 1,910 2,677 5,350 10,444
Purchases of marketable securities (1,354 ) (470 ) (7,997 ) (11,846 )
Net cash provided by (used in) investing activities (1,350 ) (533 ) (10,210 ) (26,265 )
FINANCING ACTIVITIES:
Proceeds from long-term debt and other 21 125 630 16,332
Repayments of long-term debt and other (40 ) (202 ) (192 ) (1,463 )
Principal repayments of capital lease obligations (832 ) (2,015 ) (3,891 ) (5,981 )
Principal repayments of finance lease obligations (37 ) (72 ) (155 ) (235 )
Net cash provided by (used in) financing activities (888 ) (2,164 ) (3,608 ) 8,653
Foreign currency effect on cash, cash equivalents, and restricted
cash
224   248   (209 ) 733  
Net increase (decrease) in cash, cash equivalents, and restricted
cash
(3,633 ) (4,240 ) 3,520   1,315  
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD $ 16,301   $ 17,616   $ 16,301   $ 17,616  
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest on long-term debt $ 4 $ 282 $ 292 $ 607
Cash paid for interest on capital and finance lease obligations 61 129 220 387
Cash paid for income taxes, net of refunds 246 513 520 1,224
Property and equipment acquired under capital leases 1,888 2,270 6,717 10,020
Property and equipment acquired under build-to-suit leases 1,200 741 2,057 3,081

______________________________

As a result of the adoption of new accounting guidance, we
retrospectively adjusted our consolidated statements of cash flows
to add restricted cash to cash and cash equivalents.
 
 
AMAZON.COM, INC.
Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
 
Three Months Ended
March 31,
2017   2018
 
 
Net product sales $ 23,734 $ 31,605
Net service sales 11,980   19,437  
Total net sales 35,714 51,042
Operating expenses:
Cost of sales 22,440 30,735
Fulfillment 4,697 7,792
Marketing 1,920 2,699
Technology and content 4,813 6,759
General and administrative 795 1,067
Other operating expense, net 44   63  
Total operating expenses 34,709   49,115  
Operating income 1,005 1,927
Interest income 39 80
Interest expense (139 ) (330 )
Other income (expense), net 48   239  
Total non-operating income (expense) (52 ) (11 )
Income before income taxes 953 1,916
Provision for income taxes (229 ) (287 )
Net income $ 724   $ 1,629  
Basic earnings per share $ 1.52   $ 3.36  
Diluted earnings per share $ 1.48   $ 3.27  
Weighted-average shares used in computation of earnings per share:
Basic 477   484  
Diluted 490   498  
 
 
AMAZON.COM, INC.
Consolidated Statements of Comprehensive Income
(in millions)
(unaudited)
 
Three Months Ended
March 31,
2017   2018
 
 
Net income $ 724 $ 1,629
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax of $(13) and $21 187 59
Net change in unrealized gains (losses) on available-for-sale debt
securities:
Unrealized gains (losses), net of tax of $(1) and $9 (2 ) (44 )
Reclassification adjustment for losses (gains) included in "Other
income (expense), net," net of tax of $0 and $0
3   2  
Net unrealized gains (losses) on available-for-sale debt securities 1   (42 )
Total other comprehensive income (loss) 188   17  
Comprehensive income $ 912   $ 1,646  
 
 
AMAZON.COM, INC.
Segment Information
(in millions)
(unaudited)
 
Three Months Ended
March 31,
2017   2018
 
 
North America
Net sales $ 20,992 $ 30,725
Operating expenses 20,396   29,576  
Operating income $ 596   $ 1,149  
 
International
Net sales $ 11,061 $ 14,875
Operating expenses 11,542   15,497  
Operating income (loss) $ (481 ) $ (622 )
 
AWS
Net sales $ 3,661 $ 5,442
Operating expenses 2,771   4,042  
Operating income $ 890   $ 1,400  
 
Consolidated
Net sales $ 35,714 $ 51,042
Operating expenses 34,709   49,115  
Operating income 1,005 1,927
Total non-operating income (expense) (52 ) (11 )
Provision for income taxes (229 ) (287 )
Net income $ 724   $ 1,629  
 
Segment Highlights:
Y/Y net sales growth:
North America 24 % 46 %
International 16 34
AWS 43 49
Consolidated 23 43
Net sales mix:
North America 59 % 60 %
International 31 29
AWS 10   11  
Consolidated 100 % 100 %
 
     
AMAZON.COM, INC.
Consolidated Balance Sheets
(in millions, except per share data)
 
December 31, 2017 March 31, 2018
(unaudited)

ASSETS

Current assets:
Cash and cash equivalents $ 20,522 $ 16,676
Marketable securities 10,464 8,287
Inventories 16,047 13,840
Accounts receivable, net and other 13,164   12,026  
Total current assets 60,197 50,829
Property and equipment, net 48,866 52,331
Goodwill 13,350 13,388
Other assets 8,897   9,814  
Total assets $ 131,310   $ 126,362  

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 34,616 $ 25,172
Accrued expenses and other 18,170 16,691
Unearned revenue 5,097   6,182  
Total current liabilities 57,883 48,045
Long-term debt 24,743 24,640
Other long-term liabilities 20,975 22,214
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value:
Authorized shares — 500

Issued and outstanding shares — none

Common stock, $0.01 par value:
Authorized shares — 5,000
Issued shares — 507 and 508
Outstanding shares — 484 and 485 5 5
Treasury stock, at cost (1,837 ) (1,837 )
Additional paid-in capital 21,389 22,563
Accumulated other comprehensive loss (484 ) (467 )
Retained earnings 8,636   11,199  
Total stockholders' equity 27,709   31,463  
Total liabilities and stockholders' equity $ 131,310   $ 126,362  
 
             
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions, except per share data)
(unaudited)
 
Q4 2016   Q1 2017   Q2 2017   Q3 2017   Q4 2017   Q1 2018  

Y/Y %
Change

Cash Flows and Shares

Operating cash flow — trailing twelve months (TTM) (1)

$ 17,203 $ 17,547 $ 17,802 $ 16,996 $ 18,365 $ 18,194 4 %

Operating cash flow — TTM Y/Y growth

44 % 52 % 36 % 13 % 7 % 4 % N/A

Purchases of property and equipment, including internal-use
software and website development, net of proceeds from property
and equipment incentives — TTM

$ 6,737 $ 7,417 $ 8,207 $ 9,027 $ 10,058 $ 10,924 47 %

Principal repayments of capital lease obligations — TTM

$ 3,860 $ 3,891 $ 4,003 $ 4,331 $ 4,799 $ 5,981 54 %

Principal repayments of finance lease obligations — TTM

$ 147 $ 155 $ 170 $ 175 $ 200 $ 235 52 %

Property and equipment acquired under capital leases — TTM

$ 5,704 $ 6,717 $ 8,019 $ 8,905 $ 9,637 $ 10,020 49 %

Free cash flow — TTM (1) (2)

$ 10,466 $ 10,130 $ 9,595 $ 7,969 $ 8,307 $ 7,270 (28 )%

Free cash flow less lease principal repayments — TTM (1) (3)

$ 6,459 $ 6,084 $ 5,422 $ 3,463 $ 3,308 $ 1,054 (83 )%

Free cash flow less finance lease principal repayments and assets
acquired under capital leases — TTM (1) (4)

$ 4,615 $ 3,258 $ 1,406 $ (1,111 ) $ (1,530 ) $ (2,985 ) (192 )%
Invested capital (5) $ 39,126 $ 42,114 $ 45,537 $ 52,690 $ 60,368 $ 68,377 62 %
Common shares and stock-based awards outstanding 497 497 502 503 504 504 1 %
Common shares outstanding 477 478 480 482 484 485 1 %
Stock-based awards outstanding 20 20 22 21 20 19 (2 )%

Stock-based awards outstanding — % of common shares outstanding

4.2 % 4.1 % 4.5 % 4.4 % 4.2 % 3.9 % N/A
Results of Operations
Worldwide (WW) net sales $ 43,741 $ 35,714 $ 37,955 $ 43,744 $ 60,453 $ 51,042 43 %

WW net sales — Y/Y growth, excluding F/X

24 % 24 % 26 % 33 % 36 % 39 % N/A

WW net sales — TTM

$ 135,987 $ 142,572 $ 150,123 $ 161,154 $ 177,866 $ 193,194 36 %

WW net sales — TTM Y/Y growth, excluding F/X

28 % 26 % 26 % 27 % 31 % 34 % N/A
Operating income $ 1,255 $ 1,005 $ 628 $ 347 $ 2,127 $ 1,927 92 %

F/X impact — favorable (unfavorable)

$ 7 $ (31 ) $ (38 ) $ (39 ) $ (33 ) $ (29 ) N/A

Operating income — Y/Y growth (decline), excluding F/X

13 % (3 )% (48 )% (33 )% 72 % 95 % N/A

Operating margin — % of WW net sales

2.9 % 2.8 % 1.7 % 0.8 % 3.5 % 3.8 % N/A

Operating income — TTM

$ 4,186 $ 4,120 $ 3,462 $ 3,234 $ 4,106 $ 5,028 22 %

Operating income — TTM Y/Y growth (decline), excluding F/X

83 % 34 % (9 )% (17 )% 1 % 25 % N/A

Operating margin — TTM % of WW net sales

3.1 % 2.9 % 2.3 % 2.0 % 2.3 % 2.6 % N/A
Net income $ 749 $ 724 $ 197 $ 256 $ 1,856 $ 1,629 125 %
Net income per diluted share $ 1.54 $ 1.48 $ 0.40 $ 0.52 $ 3.75 $ 3.27 121 %

Net income — TTM

$ 2,371 $ 2,583 $ 1,922 $ 1,926 $ 3,033 $ 3,938 52 %

Net income per diluted share — TTM

$ 4.90 $ 5.31 $ 3.94 $ 3.94 $ 6.15 $ 7.90 49 %

______________________________

(1)   As a result of the adoption of new accounting guidance, we
retrospectively adjusted our consolidated statements of cash flows
to add restricted cash to cash and cash equivalents.
(2) Free cash flow is cash flow from operations reduced by "Purchases of
property and equipment, including internal-use software and website
development, net of proceeds from property and equipment
incentives," which both are included in cash flow from investing
activities.
(3) Free cash flow less lease principal repayments is free cash flow
reduced by "Principal repayments of capital lease obligations," and
"Principal repayments of finance lease obligations," which are
included in cash flow from financing activities.
(4) Free cash flow less finance lease principal repayments and assets
acquired under capital leases is free cash flow reduced by
"Principal repayments of finance lease obligations," which is
included in cash flow from financing activities, and property and
equipment acquired under capital leases. In this measure, property
and equipment acquired under capital leases is reflected as if these
assets had been purchased with cash, which is not the case as these
assets have been leased.
(5) Average Total Assets minus Current Liabilities (excluding current
portion of Long-Term Debt and current portion of capital lease
obligations and finance lease obligations) over five quarter ends.
 
             
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions)
(unaudited)
 
Q4 2016   Q1 2017   Q2 2017   Q3 2017   Q4 2017   Q1 2018  

Y/Y %
Change

Segments
North America Segment:
Net sales $ 26,240 $ 20,992 $ 22,370 $ 25,446 $ 37,302 $ 30,725 46 %

Net sales — Y/Y growth, excluding F/X

22 % 23 % 27 % 35 % 42 % 46 % N/A

Net sales — TTM

$ 79,785 $ 83,781 $ 88,476 $ 95,048 $ 106,110 $ 115,843 38 %
Operating Income:
Operating income $ 816 $ 596 $ 436 $ 112 $ 1,692 $ 1,149 93 %

F/X impact — favorable (unfavorable)

$ 11 $ 4 $ 11 $ (12 ) $ (8 ) $ (10 ) N/A

Operating income — Y/Y growth (decline), excluding F/X

26 % 1 % (40 )% (51 )% 108 % 95 % N/A

Operating margin — % of North America net sales

3.1 % 2.8 % 1.9 % 0.4 % 4.5 % 3.7 % N/A

Operating income — TTM

$ 2,361 $ 2,369 $ 2,102 $ 1,960 $ 2,837 $ 3,390 43 %

Operating margin — TTM % of North America net sales

3.0 % 2.8 % 2.4 % 2.1 % 2.7 % 2.9 % N/A
International Segment:
Net sales $ 13,965 $ 11,061 $ 11,485 $ 13,714 $ 18,038 $ 14,875 34 %

Net sales — Y/Y growth, excluding F/X

23 % 21 % 22 % 28 % 22 % 21 % N/A

Net sales — TTM

$ 43,983 $ 45,477 $ 47,119 $ 50,224 $ 54,297 $ 58,111 28 %
Operating income (loss):
Operating income (loss) $ (487 ) $ (481 ) $ (724 ) $ (936 ) $ (919 ) $ (622 ) 29 %

F/X impact — favorable (unfavorable)

$ 5 $ (32 ) $ (59 ) $ (13 ) $ 20 $ 70 N/A

Operating income/loss — Y/Y growth (decline), excluding F/X

354 % 272 % 393 % 71 % 93 % 44 % N/A

Operating margin — % of International net sales

(3.5 )% (4.4 )% (6.3 )% (6.8 )% (5.1 )% (4.2 )% N/A

Operating income (loss) — TTM

$ (1,283 ) $ (1,644 ) $ (2,233 ) $ (2,629 ) $ (3,062 ) $ (3,202 ) 95 %

Operating margin — TTM % of International net sales

(2.9 )% (3.6 )% (4.7 )% (5.2 )% (5.6 )% (5.5 )% N/A
AWS Segment:
Net sales $ 3,536 $ 3,661 $ 4,100 $ 4,584 $ 5,113 $ 5,442 49 %

Net sales — Y/Y growth, excluding F/X

47 % 43 % 42 % 42 % 44 % 48 % N/A

Net sales — TTM

$ 12,219 $ 13,314 $ 14,529 $ 15,882 $ 17,459 $ 19,240 45 %
Operating income:
Operating income $ 926 $ 890 $ 916 $ 1,171 $ 1,354 $ 1,400 57 %

F/X impact — favorable (unfavorable)

$ (9 ) $ (3 ) $ 10 $ (14 ) $ (45 ) $ (89 ) N/A

Operating income — Y/Y growth, excluding F/X

61 % 48 % 26 % 38 % 51 % 67 % N/A

Operating margin — % of AWS net sales

26.2 % 24.3 % 22.3 % 25.5 % 26.5 % 25.7 % N/A

Operating income — TTM

$ 3,108 $ 3,395 $ 3,593 $ 3,903 $ 4,331 $ 4,840 43 %

Operating margin — TTM % of AWS net sales

25.4 % 25.5 % 24.7 % 24.6 % 24.8 % 25.2 % N/A
 
             
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions, except employee data)
(unaudited)
 
Q4 2016   Q1 2017   Q2 2017   Q3 2017   Q4 2017   Q1 2018  

Y/Y %
Change

Net Sales:
Online stores (1) $ 29,548 $ 22,826 $ 23,754 $ 26,392 $ 35,383 $ 26,939 18 %

Online stores — Y/Y growth, excluding F/X

16 % 16 % 18 % 22 % 17 % 13 % N/A
Physical stores (2) $ 1,276 $ 4,522 $ 4,263 N/A
Third-party seller services (3) $ 7,456 $ 6,438 $ 6,991 $ 7,928 $ 10,523 $ 9,265 44 %

Third-party seller services — Y/Y growth, excluding F/X

39 % 36 % 40 % 40 % 38 % 39 % N/A
Subscription services (4) $ 2,130 $ 1,939 $ 2,165 $ 2,441 $ 3,177 $ 3,102 60 %

Subscription services — Y/Y growth, excluding F/X

33 % 52 % 53 % 59 % 47 % 56 % N/A
AWS $ 3,536 $ 3,661 $ 4,100 $ 4,584 $ 5,113 $ 5,442 49 %

AWS — Y/Y growth, excluding F/X

47 % 43 % 42 % 42 % 44 % 49 % N/A
Other (5) $ 1,071 $ 850 $ 945 $ 1,123 $ 1,735 $ 2,031 139 %

Other — Y/Y growth, excluding F/X

99 % 58 % 53 % 58 % 60 % 132 % N/A
 
Stock-based Compensation Expense
Cost of sales $ 9 $ 8 $ 12 $ 13 $ 14 $ 15 76 %
Fulfillment $ 190 $ 163 $ 261 $ 230 $ 256 $ 244 49 %
Marketing $ 102 $ 94 $ 133 $ 135 $ 148 $ 161 71 %
Technology and content $ 493 $ 441 $ 633 $ 595 $ 637 $ 631 43 %
General and administrative $ 93 $ 86 $ 119 $ 112 $ 124 $ 132 54 %
Total stock-based compensation expense $ 887 $ 792 $ 1,158 $ 1,085 $ 1,179 $ 1,183 49 %
Other
WW shipping costs $ 5,634 $ 4,383 $ 4,568 $ 5,401 $ 7,368 $ 6,069 38 %

WW shipping costs — Y/Y growth

35 % 34 % 36 % 39 % 31 % 38 % N/A

WW paid units — Y/Y growth (6)

24 % 24 % 27 % 25 % 23 % 22 % N/A

WW seller unit mix — % of WW paid units (6)

49 % 50 % 51 % 50 % 51 % 52 % N/A
Employees (full-time and part-time; excludes contractors & temporary
personnel)
341,400 351,000 382,400 541,900 566,000 563,100 60 %

Employees (full-time and part-time; excludes contractors &
temporary personnel) — Y/Y growth

48 % 43 % 42 % 77 % 66 % 60 % N/A

________________________

(1)   Includes product sales and digital media content where we record
revenue gross. We leverage our retail infrastructure to offer a wide
selection of consumable and durable goods that includes media
products available in both a physical and digital format, such as
books, music, videos, games, and software. These product sales
include digital products sold on a transactional basis. Digital
product subscriptions that provide unlimited viewing or usage rights
are included in Subscription services.
(2) Includes product sales where our customers physically select items
in a store.
(3) Includes commissions, related fulfillment and shipping fees, and
other third-party seller services.
(4) Includes annual and monthly fees associated with Amazon Prime
membership, as well as audiobook, e-book, digital video, digital
music, and other non-AWS subscription services.
(5) Primarily includes sales of advertising services, as well as sales
related to our other service offerings.
(6) Excludes the impact of Whole Foods Market.
 

Amazon.com, Inc.
Certain Definitions

Customer Accounts

  • References to customers mean customer accounts, which are unique
    e-mail addresses, established either when a customer places an order
    or when a customer orders from other sellers on our websites. Customer
    accounts exclude certain customers, including customers associated
    with certain of our acquisitions, Amazon Payments customers, AWS
    customers, and the customers of select companies with whom we have a
    technology alliance or marketing and promotional relationship.
    Customers are considered active when they have placed an order during
    the preceding twelve-month period.

Seller Accounts

  • References to sellers means seller accounts, which are established
    when a seller receives an order from a customer account. Sellers are
    considered active when they have received an order from a customer
    during the preceding twelve-month period.

AWS Customers

  • References to AWS customers mean unique AWS customer accounts, which
    are unique customer account IDs that are eligible to use AWS services.
    This includes AWS accounts in the AWS free tier. Multiple users
    accessing AWS services via one account ID are counted as a single
    account. Customers are considered active when they have had AWS usage
    activity during the preceding one-month period.

Units

  • References to units mean physical and digital units sold (net of
    returns and cancellations) by us and sellers at Amazon domains
    worldwide as well as Amazon-owned items sold through non-Amazon
    domains. Units sold are paid units and do not include units associated
    with AWS, certain acquisitions, rental businesses, or advertising
    businesses, or Amazon gift cards.

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