Market Overview

Amazon.com Announces Second Quarter Sales up 39% to $52.9 Billion

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Amazon.com, Inc. (NASDAQ:AMZN) today announced financial results for
its second quarter ended June 30, 2018.

Operating cash flow increased 22% to $21.8 billion for the trailing
twelve months, compared with $17.8 billion for the trailing twelve
months ended June 30, 2017. Free cash flow increased to $10.4 billion
for the trailing twelve months, compared with $9.6 billion for the
trailing twelve months ended June 30, 2017. Free cash flow less lease
principal repayments decreased to $4.1 billion for the trailing twelve
months, compared with $5.4 billion for the trailing twelve months ended
June 30, 2017. Free cash flow less finance lease principal repayments
and assets acquired under capital leases decreased to $546 million for
the trailing twelve months, compared with $1.4 billion for the trailing
twelve months ended June 30, 2017.

Common shares outstanding plus shares underlying stock-based awards
totaled 506 million on June 30, 2018, compared with 502 million one year
ago.

Net sales increased 39% to $52.9 billion in the second quarter, compared
with $38.0 billion in second quarter 2017. Excluding the $760 million
favorable impact from year-over-year changes in foreign exchange rates
throughout the quarter, net sales increased 37% compared with second
quarter 2017.

Operating income increased to $3.0 billion in the second quarter,
compared with operating income of $628 million in second quarter 2017.

Net income increased to $2.5 billion in the second quarter, or $5.07 per
diluted share, compared with net income of $197 million, or $0.40 per
diluted share, in second quarter 2017.

"We want customers to be able to use Alexa wherever they are," said Jeff
Bezos, Amazon founder and CEO. "There are now tens of thousands of
developers across more than 150 countries building new devices using the
Alexa Voice Service, and the number of Alexa-enabled devices has more
than tripled in the past year. Our partners are creating a wide variety
of new Alexa-enabled devices and experiences, including soundbars from
Polk and Sonos; headphones from Jabra; smart home devices from ecobee
and First Alert; Windows 10 PCs from Acer, HP, and Lenovo; and cars from
automakers including BMW, Ford, and Toyota."

Highlights

  • Amazon and Best Buy released the first of the next generation Fire TV
    Edition smart TVs to customers in the U.S. The new Toshiba 4K TVs are
    now available for purchase in Best Buy stores and online at
    bestbuy.com and amazon.com, with additional models coming later this
    year to customers in the U.S. and Canada.
  • Amazon announced the Fire TV Cube, a 4K Ultra HD streaming media
    player with Alexa that allows customers to control the TV with their
    voice. Fire TV Cube uses multi-directional infrared technology,
    cloud-based protocols, and HDMI CEC to control compatible TVs, sound
    bars, cable and satellite boxes, and AV receivers.
  • Amazon introduced the Fire HD 10 Kids Edition, which comes bundled
    with a Fire HD 10 tablet, a year of Amazon FreeTime Unlimited, a
    kid-proof case, and a two-year worry-free guarantee. Additionally,
    Amazon FreeTime Unlimited is now available on iOS devices, offering
    kids access to over 10,000 age-appropriate books, movies, and TV shows.
  • Amazon announced Show Mode and the Show Mode Charging Dock for Fire HD
    8 and Fire HD 10 tablets. Show Mode offers a hands-free Alexa
    experience with full screen visual responses. The Show Mode Charging
    Dock automatically switches Fire HD tablets into Show Mode and holds
    the device at an adjustable angle while charging.
  • Amazon launched Echo and Alexa in France, offering an all-new Alexa
    experience built from the ground up for French customers.
    Additionally, Echo Spot launched in India and Japan, allowing
    customers to experience Alexa with a screen. Amazon also announced
    that Echo and Alexa are coming to Italy, Mexico, and Spain later this
    year.
  • Amazon added new Alexa capabilities, including calendaring features,
    such as the ability to move meetings via voice; new information on
    current events like the Royal Wedding, World Cup, and NBA Playoffs;
    Remember This, a new feature which enables Alexa to remember important
    information such as birthdays, anniversaries, and more; new ways to
    navigate and control video content with Alexa, including integrations
    with TiVo, Dish, Netflix, and DirecTV, and new ways for the blind and
    visually impaired community to interact with Alexa with the launch of
    Tap to Alexa and global expansion of Alexa Captioning.
  • The Alexa Skills store now offers more than 45,000 skills created by
    third-party developers, including entertainment and gaming skills like
    Jurassic World Revealed, Westworld: The Maze, Skyrim Very Special
    Edition, When in Rome, and Hotel Transylvania Stories. Additionally,
    customers can now use Alexa to control more than 13,000 smart home
    devices from over 2,500 unique brands.
  • Amazon announced Alexa for Hospitality, which brings the convenience
    of Alexa to hotels, vacation rentals, and other hospitality locations.
    Offered by invitation, Alexa for Hospitality lets hoteliers create new
    voice-first experiences so guests can ask Alexa for hotel information,
    play music in their room, request guest services, and more.
  • Alexa is available on even more products via the Alexa Voice Service,
    including soundbars from Polk and Sonos; headphones from Jabra; smart
    home devices from ecobee and First Alert; Windows 10 PCs from Acer,
    HP, and Lenovo; and select vehicles from BMW, Ford, and Toyota.
  • Amazon introduced new machine learning tools for developers to make
    Alexa skills even more engaging and discoverable, including a feature
    that allows U.S. customers to launch skills using more natural phrases
    and requests; the ability for developers to turn text into lifelike
    speech using Amazon Polly, for free; and the release of the software
    development kit for Python that allows developers to more easily build
    Alexa skills. Amazon also expanded the ability for developers to earn
    money or sell goods and services through their Alexa skills using
    in-skill purchasing or Amazon Pay.
  • The Alexa Fund invested in new companies, including Aaptiv,
    DefinedCrowd, Novel Effect, Tact.ai, and Sensible Object, and kicked
    off the second round of the Alexa Accelerator powered by Techstars, a
    program empowering entrepreneurs who are innovating voice technology.
  • Amazon announced an offering that helps entrepreneurs build their own
    companies by delivering Amazon packages. Business owners can grow
    their companies by accessing Amazon's delivery technology and package
    volume, as well as receiving discounts on a suite of assets and
    services such as vehicle leases and comprehensive insurance.
    Additionally, Amazon committed $1 million to fund startup costs for
    eligible military veterans to start their own delivery businesses.
  • Amazon and Ring announced Ring Alarm, a do-it-yourself home security
    system that offers professional monitoring for just $10 per month.
  • Amazon Prime Video received 22 Emmy nominations for its original
    programming, including 14 nominations for comedy series The
    Marvelous Mrs. Maisel.
  • Prime Video and the National Football League renewed their streaming
    partnership for Thursday Night Football, which will be available
    globally during the 2018 and 2019 seasons to over 100 million Prime
    members. Additionally, Prime Video and the Premier League announced
    that live and exclusive Premier League football matches will be
    available in the U.K. beginning in 2019 at no extra cost to Prime
    members.
  • Prime Video debuted the second season of Original Series Goliath,
    starring Billy Bob Thornton in his Golden Globe-winning role. Prime
    Video continues to launch local Original Series around the world,
    including Comicstaan in India, an unscripted series that looks
    to discover India's next big comedic sensation; Diablo Guardián
    in Mexico, based on an award-winning novel of the same name; and
    season two of The Bachelor Japan.
  • Prime Video Channels is now available to Prime members in Japan with
    more than 30 channels including J Sports, BBC World News, and Nikkei
    CNBC Plus.
  • The fourth annual Prime Day was Amazon's biggest global shopping event
    ever, welcoming more new Prime members on July 16th than
    any other previous day in Amazon history. Members purchased more than
    100 million products, and the best-selling items worldwide were the
    Fire TV Stick with Alexa Voice Remote and Echo Dot. Small and
    medium-sized businesses selling on Amazon exceeded $1.5 billion in
    sales during the Prime Day event. Additionally, Prime members saved
    millions of dollars at Whole Foods Market with Prime Day deals.
  • Amazon launched Prime member savings at Whole Foods Market stores
    nationwide, offering Prime members 10% off hundreds of sale items and
    deep discounts on popular products.
  • Amazon continues to expand grocery delivery from Whole Foods Market to
    more than 20 cities in the U.S., offering customers ultrafast delivery
    on natural and organic products through Prime Now.
  • Amazon Fashion launched Prime Wardrobe in the U.S., allowing Prime
    members to try clothing, shoes, and accessories before they buy.
    Customers can choose from eligible styles, have up to seven days to
    try them on at home, and are charged only for those items they decide
    to keep.
  • Amazon Business expanded to Italy and Spain, and now serves businesses
    of all sizes in eight countries across the globe, including the U.S.,
    the U.K., Germany, Japan, India, and France. Amazon Business now ships
    to business customers in over 70 countries worldwide.
  • Amazon continues to expand Prime member benefits internationally,
    launching Prime free same-day delivery in select cities in Italy and
    Spain; Prime Music and Prime Reading in Italy, Spain, and France; and
    Prime Student in Japan.
  • Amazon launched Prime in Australia, offering members unlimited free
    delivery on millions of local and international items, Prime Video,
    Prime Reading, Twitch Prime, and access to exclusive deals.
  • Amazon was proud to be the presenting sponsor of the 2018 Special
    Olympics USA Games Closing Ceremony in Seattle. Hundreds of Amazonians
    volunteered throughout the week at the various sporting events and at
    the Closing Ceremony. The 2018 USA Games welcomed more than 4,000
    athletes and coaches, including Amazon's own San Antonio fulfillment
    center associate Leonard Flowers, who won two silver medals in tennis.
  • Amazon Web Services (AWS) announced several new enterprise customers
    during the quarter: Ryanair and Epic Games have gone all-in on AWS;
    zulily is moving its infrastructure to AWS to further enhance the
    online shopping experience for customers; 21st Century Fox chose AWS
    for the vast majority of its workloads to create a consistent set of
    digital media capabilities across its brands; Verizon and its
    subsidiary Oath selected AWS as its preferred public cloud provider;
    Major League Baseball named AWS its official provider for machine
    learning, artificial intelligence, and deep learning; and Formula One
    is moving the vast majority of its infrastructure from on-premises
    data centers to AWS and standardizing on AWS's machine learning and
    data analytics services to accelerate its cloud transformation.
  • AWS announced the general availability of Amazon Elastic Container
    Service for Kubernetes (Amazon EKS), a fully managed service that
    makes it easy to deploy, manage, and scale containerized applications
    using Kubernetes on AWS. Amazon EKS removes the complexity of
    operating Kubernetes clusters with high availability, automatically
    running the Kubernetes management infrastructure across multiple
    availability zones to eliminate a single point of failure. Amazon EKS
    is certified Kubernetes conformant, so customers can run their
    existing Kubernetes applications without any code changes using
    existing Kubernetes tooling.
  • AWS announced the general availability of DeepLens, the world's first
    deep learning-enabled wireless video camera built to give developers
    hands-on experience with machine learning. In addition to built-in
    sample projects that run on the device, AWS DeepLens customers can
    also create their own models in Amazon SageMaker — a fully-managed
    service that enables developers to quickly and easily build, train,
    and deploy machine learning models. Thousands of DeepLens devices have
    shipped since becoming generally available in June.
  • AWS announced the general availability of Amazon Neptune, a fast,
    reliable, and fully-managed graph database service. With Amazon
    Neptune, customers can efficiently store and navigate highly-connected
    data, allowing developers to create sophisticated, interactive graph
    applications that can query billions of relationships with millisecond
    latency.
  • AWS announced pay-per-session pricing for Amazon QuickSight, the first
    business intelligence service with pay-per-session pricing. Amazon
    QuickSight is a fast, cloud-powered, business analytics service that
    makes it easy for all users within an organization to build
    visualizations, perform ad-hoc analysis, and quickly get business
    insights from their data, regardless of their technical skill. With
    pay-per-session pricing, any user can have read-only access to
    interactive, data driven dashboards in Amazon QuickSight and pay only
    when they've accessed these dashboards, making Amazon QuickSight an
    even more cost-effective way for customers to make personalized
    business analytics available to everyone, whether they have tens,
    hundreds, or thousands of users.
  • AWS announced a new Amazon Elastic Compute Cloud (Amazon EC2) instance
    for AWS Snowball Edge devices (SBE1). AWS Snowball Edge is a 100TB
    data transfer device with on-board storage and compute that can be
    used to move large amounts of data into and out of AWS, as a temporary
    storage tier for large local data sets, or to support independent
    local workloads in remote locations. Customers can now run compute
    instances using the same Amazon Machine Images (AMIs) that are used in
    Amazon EC2 directly on Snowball Edge devices, expanding the range of
    applications available for collecting and processing data in locations
    with limited or no network connection such as in certain mining,
    military, energy, and manufacturing use cases. SBE1 expands upon
    Snowball Edge's existing on-board compute and storage capabilities —
    AWS Greengrass running AWS Lambda functions and Amazon Simple Storage
    Service (Amazon S3) — to give customers greater choice for operating
    their edge environments.
  • AWS announced the general availability of C5d Instances with Local
    NVMe Storage and I3 Bare Metal Instances, two new features which are
    part of the Amazon EC2 service within AWS's compute portfolio. C5
    Instances with Local NVMe Storage bring customers high-speed,
    ultra-low latency local storage to compute-intensive C5 instances. I3
    Bare Metal Instances provide applications with direct access to the
    processor and memory resources of the underlying server, allowing EC2
    customers to run applications that benefit from deep performance
    analysis tools, specialized workloads that require direct access to
    bare metal infrastructure, legacy workloads not supported in virtual
    environments, and licensing-restricted business critical applications.
  • AWS announced thousands of enterprise customers are running SAP
    workloads on AWS. Businesses of all sizes and across virtually every
    industry and geography are running their SAP landscapes on AWS to
    simplify infrastructure management, improve time-to-market, lower
    costs, and deliver innovation with AWS services integration. Compass
    Group, Illumina, AGC Asahi Glass Co., Petronas Lubricants, Sumitomo
    Chemical, Visy, Mitsui & Co., Cardinal Health, Bose, Louisiana
    Pacific, Citco, Thermo Fisher, Contact Energy, Mercury, Del Monte, L&T
    Infotech, Edelweiss General Insurance, Oppo Electronics, Videocon, and
    BR Distribuidora are just a few of the customers running SAP solutions
    on AWS.
  • In its second year of availability, the number of databases migrated
    to AWS using the AWS Database Migration Service has grown to more than
    80,000 databases.
  • AWS announced the general availability of Amazon Sumerian, a new
    managed service that allows developers to create and publish augmented
    reality (AR), virtual reality (VR), and 3D applications quickly and
    easily without requiring any specialized programming or 3D graphics
    expertise. With Amazon Sumerian, customers can build VR, AR, and 3D
    experiences for a wide variety of popular hardware systems including
    mobile devices, head-mounted displays, digital signs, and web browsers.

Financial Guidance

The following forward-looking statements reflect Amazon.com's
expectations as of July 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.

Third Quarter 2018 Guidance

  • Net sales are expected to be between $54.0 billion and $57.5 billion,
    or to grow between 23% and 31% compared with third quarter 2017. This
    guidance anticipates an unfavorable impact of approximately 30 basis
    points from foreign exchange rates.
  • Operating income is expected to be between $1.4 billion and $2.4
    billion, compared with $347 million in third 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 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 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 amazon.com/about and follow @AmazonNews.

     
AMAZON.COM, INC.
Consolidated Statements of Cash Flows
(in millions)
(unaudited)
 
Three Months Ended
June 30,
Six Months Ended
June 30,
Twelve Months Ended
June 30,
2017   2018 2017   2018 2017   2018
 
 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD $ 16,301 $ 17,616 $ 19,934 $ 21,856 $ 12,977 $ 13,851
OPERATING ACTIVITIES:
Net income 197 2,534 921 4,163 1,922 6,275
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
2,633 3,630 5,068 7,301 9,448 13,711
Stock-based compensation 1,158 1,468 1,952 2,651 3,615 4,914
Other operating expense, net 60 85 102 141 164 240
Other expense (income), net (120 ) 110 (160 ) (75 ) (162 ) (207 )
Deferred income taxes 376 (139 ) 354 3 (8 ) (380 )
Changes in operating assets and liabilities:
Inventories (682 ) (1,090 ) 265 1,130 (1,874 ) (2,717 )
Accounts receivable, net and other (1,221 ) (1,364 ) (257 ) (336 ) (2,925 ) (4,859 )
Accounts payable 2,088 2,703 (4,777 ) (7,513 ) 5,046 4,364
Accrued expenses and other (252 )

(205

) (1,657 )

(2,430

) 1,039

(491

)
Unearned revenue (387 )

(283

)

419

 

623

  1,537  

943

 
Net cash provided by (used in) operating activities 3,850 7,449 2,230 5,658 17,802 21,793
INVESTING ACTIVITIES:
Purchases of property and equipment, including internal-use software
and website development
(3,113 ) (3,243 ) (5,261 ) (6,341 ) (9,763 ) (13,035 )
Proceeds from property and equipment incentives 612 294 899 665 1,556 1,663
Acquisitions, net of cash acquired, and other (633 ) (866 ) (678 ) (879 ) (765 ) (14,173 )
Sales and maturities of marketable securities 2,070 1,660 3,980 4,337 6,530 10,034
Purchases of marketable securities (4,210 ) (537 ) (5,564 ) (1,007 ) (10,731 ) (8,173 )
Net cash provided by (used in) investing activities (5,274 ) (2,692 ) (6,624 ) (3,225 ) (13,173 ) (23,684 )
FINANCING ACTIVITIES:
Proceeds from long-term debt and other 49 96 70 221 612 16,380
Repayments of long-term debt and other (48 ) (149 ) (88 ) (351 ) (170 ) (1,564 )
Principal repayments of capital lease obligations (1,228 ) (1,284 ) (2,060 ) (3,297 ) (4,003 ) (6,037 )
Principal repayments of finance lease obligations (47 ) (57 ) (85 ) (129 ) (170 ) (244 )
Net cash provided by (used in) financing activities (1,274 ) (1,394 ) (2,163 ) (3,556 ) (3,731 ) 8,535
Foreign currency effect on cash, cash equivalents, and restricted
cash
248   (443 ) 474   (197 ) (24 ) 41  
Net increase (decrease) in cash, cash equivalents, and restricted
cash
(2,450 ) 2,920   (6,083 ) (1,320 ) 874   6,685  
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD $ 13,851   $ 20,536   $ 13,851   $ 20,536   $ 13,851   $ 20,536  
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest on long-term debt $ 146 $ 168 $ 150 $ 450 $ 295 $ 628
Cash paid for interest on capital and finance lease obligations 62 125 123 254 234 449
Cash paid for income taxes, net of refunds 447 300 693 813 879 1,077
Property and equipment acquired under capital leases 2,724 2,335 4,612 4,605 8,019 9,631
Property and equipment acquired under build-to-suit leases 748 795 1,948 1,536 2,575 3,128

______________________________

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
June 30,
Six Months Ended
June 30,
2017   2018 2017   2018
 
 
Net product sales $ 24,745 $ 31,864 $ 48,479 $ 63,468
Net service sales 13,210   21,022   25,190   40,460  
Total net sales 37,955 52,886 73,669 103,928
Operating expenses:
Cost of sales 23,451 30,632 45,891 61,367
Fulfillment 5,158 7,932 9,855 15,724
Marketing 2,229 2,901 4,150 5,600
Technology and content 5,549 7,247 10,363 14,006
General and administrative 874 1,111 1,669 2,177
Other operating expense, net 66   80   109   143  
Total operating expenses 37,327   49,903   72,037   99,017  
Operating income 628 2,983 1,632 4,911
Interest income 44 94 83 173
Interest expense (143 ) (343 ) (282 ) (673 )
Other income (expense), net 137   (129 ) 185   109  
Total non-operating income (expense) 38   (378 ) (14 ) (391 )
Income before income taxes 666 2,605 1,618 4,520
Provision for income taxes (467 ) (74 ) (695 ) (361 )
Equity-method investment activity, net of tax (2 ) 3   (2 ) 4  
Net income $ 197   $ 2,534   $ 921   $ 4,163  
Basic earnings per share $ 0.41   $ 5.21   $ 1.93   $ 8.58  
Diluted earnings per share $ 0.40   $ 5.07   $ 1.87   $ 8.34  
Weighted-average shares used in computation of earnings per share:
Basic 479   486   478   485  
Diluted 492   500   491   499  
 
   
AMAZON.COM, INC.
Consolidated Statements of Comprehensive Income
(in millions)
(unaudited)
 
Three Months Ended
June 30,
Six Months Ended
June 30,
2017   2018 2017   2018
 
 
Net income $ 197 $ 2,534 $ 921 $ 4,163
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax of $(2), $(1),
$(15), and $17
194 (466 ) 381 (411 )
Net change in unrealized gains (losses) on available-for-sale debt
securities:
Unrealized gains (losses), net of tax of $3, $0, $2, and $9 (6 ) 1 (8 ) (40 )
Reclassification adjustment for losses (gains) included in "Other
income (expense), net," net of tax of $0, $0, $0, and $0
2   1   5   1  
Net unrealized gains (losses) on available-for-sale debt securities (4 ) 2   (3 ) (39 )
Total other comprehensive income (loss) 190   (464 ) 378   (450 )
Comprehensive income $ 387   $ 2,070   $ 1,299   $ 3,713  
 
 
AMAZON.COM, INC.
Segment Information
(in millions)
(unaudited)
 
Three Months Ended
June 30,
Six Months Ended
June 30,
2017   2018 2017   2018
 
 
North America
Net sales $ 22,370 $ 32,169 $ 43,362 $ 62,894
Operating expenses 21,934   30,334   42,330   59,910  
Operating income $ 436   $ 1,835   $ 1,032   $ 2,984  
 
International
Net sales $ 11,485 $ 14,612 $ 22,546 $ 29,487
Operating expenses 12,209   15,106   23,752   30,603  
Operating income (loss) $ (724 ) $ (494 ) $ (1,206 ) $ (1,116 )
 
AWS
Net sales $ 4,100 $ 6,105 $ 7,761 $ 11,547
Operating expenses 3,184   4,463   5,955   8,504  
Operating income $ 916   $ 1,642   $ 1,806   $ 3,043  
 
Consolidated
Net sales $ 37,955 $ 52,886 $ 73,669 $ 103,928
Operating expenses 37,327   49,903   72,037   99,017  
Operating income 628 2,983 1,632 4,911
Total non-operating income (expense) 38 (378 ) (14 ) (391 )
Provision for income taxes (467 ) (74 ) (695 ) (361 )
Equity-method investment activity, net of tax (2 ) 3   (2 ) 4  
Net income $ 197   $ 2,534   $ 921   $ 4,163  
 
Segment Highlights:
Y/Y net sales growth:
North America 27 % 44 % 25 % 45 %
International 17 27 16 31
AWS 42 49 42 49
Consolidated 25 39 24 41
Net sales mix:
North America 59 % 61 % 59 % 61 %
International 30 28 31 28
AWS 11   11   10   11  
Consolidated 100 % 100 % 100 % 100 %
 
 
AMAZON.COM, INC.
Consolidated Balance Sheets
(in millions, except per share data)
 
December 31, 2017 June 30, 2018
(unaudited)

ASSETS

Current assets:
Cash and cash equivalents $ 20,522 $ 19,823
Marketable securities 10,464 7,227
Inventories 16,047 14,824
Accounts receivable, net and other 13,164   12,607  
Total current assets 60,197 54,481
Property and equipment, net 48,866 54,768
Goodwill 13,350 13,944
Other assets 8,897   10,907  
Total assets $ 131,310   $ 134,100  

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 34,616 $ 27,657
Accrued expenses and other 18,170 17,140
Unearned revenue 5,097   6,004  
Total current liabilities 57,883 50,801
Long-term debt 24,743 24,638
Other long-term liabilities 20,975 23,666
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 511
Outstanding shares — 484 and 487 5 5
Treasury stock, at cost (1,837 ) (1,837 )
Additional paid-in capital 21,389 24,028
Accumulated other comprehensive loss (484 ) (934 )
Retained earnings 8,636   13,733  
Total stockholders' equity 27,709   34,995  
Total liabilities and stockholders' equity $ 131,310   $ 134,100  
 
             
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions, except per share data)
(unaudited)
 
Q1 2017   Q2 2017   Q3 2017   Q4 2017   Q1 2018   Q2 2018   Y/Y %

Change

Cash Flows and Shares
Operating cash flow -- trailing twelve months (TTM) (1) $ 17,547 $ 17,802 $ 16,996 $ 18,365 $ 18,194 $ 21,793 22 %
Operating cash flow -- TTM Y/Y growth 52 % 36 % 13 % 7 % 4 % 22 % N/A
Purchases of property and equipment, including internal-use software
and website development, net of proceeds from property and equipment
incentives -- TTM
$ 7,417 $ 8,207 $ 9,027 $ 10,058 $ 10,924 $ 11,372 39 %
Principal repayments of capital lease obligations -- TTM $ 3,891 $ 4,003 $ 4,331 $ 4,799 $ 5,981 $ 6,037 51 %
Principal repayments of finance lease obligations -- TTM $ 155 $ 170 $ 175 $ 200 $ 235 $ 244 44 %
Property and equipment acquired under capital leases -- TTM $ 6,717 $ 8,019 $ 8,905 $ 9,637 $ 10,020 $ 9,631 20 %
Free cash flow -- TTM (1) (2) $ 10,130 $ 9,595 $ 7,969 $ 8,307 $ 7,270 $ 10,421 9 %
Free cash flow less lease principal repayments -- TTM (1) (3) $ 6,084 $ 5,422 $ 3,463 $ 3,308 $ 1,054 $ 4,140 (24 )%
Free cash flow less finance lease principal repayments and assets
acquired under capital leases -- TTM (1) (4)
$ 3,258 $ 1,406 $ (1,111 ) $ (1,530 ) $ (2,985 ) $ 546 (61 )%
Invested capital (5) $ 42,114 $ 45,537 $ 52,690 $ 60,368 $ 68,377 $ 76,600 68 %
Common shares and stock-based awards outstanding 497 502 503 504 504 506 1 %
Common shares outstanding 478 480 482 484 485 487 1 %
Stock-based awards outstanding 20 22 21 20 19 19 (12 )%
Stock-based awards outstanding -- % of common shares outstanding 4.1 % 4.5 % 4.4 % 4.2 % 3.9 % 3.9 % N/A
Results of Operations
Worldwide (WW) net sales $ 35,714 $ 37,955 $ 43,744 $ 60,453 $ 51,042 $ 52,886 39 %
WW net sales -- Y/Y growth, excluding F/X 24 % 26 % 33 % 36 % 39 % 37 % N/A
WW net sales -- TTM $ 142,572 $ 150,123 $ 161,154 $ 177,866 $ 193,194 $ 208,125 39 %
WW net sales -- TTM Y/Y growth, excluding F/X 26 % 26 % 27 % 31 % 34 % 36 % N/A
Operating income $ 1,005 $ 628 $ 347 $ 2,127 $ 1,927 $ 2,983 375 %
F/X impact -- favorable (unfavorable) $ (31 ) $ (38 ) $ (39 ) $ (33 ) $ (29 ) $ 42 N/A
Operating income -- Y/Y growth (decline), excluding F/X (3 )% (48 )% (33 )% 72 % 95 % 369 % N/A
Operating margin -- % of WW net sales 2.8 % 1.7 % 0.8 % 3.5 % 3.8 % 5.6 % N/A
Operating income -- TTM $ 4,120 $ 3,462 $ 3,234 $ 4,106 $ 5,028 $ 7,384 113 %
Operating income -- TTM Y/Y growth (decline), excluding F/X 34 % (9 )% (17 )% 1 % 25 % 115 % N/A
Operating margin -- TTM % of WW net sales 2.9 % 2.3 % 2.0 % 2.3 % 2.6 % 3.5 % N/A
Net income $ 724 $ 197 $ 256 $ 1,856 $ 1,629 $ 2,534 N/A
Net income per diluted share $ 1.48 $ 0.40 $ 0.52 $ 3.75 $ 3.27 $ 5.07 N/A
Net income -- TTM $ 2,583 $ 1,922 $ 1,926 $ 3,033 $ 3,938 $ 6,275 226 %
Net income per diluted share -- TTM $ 5.31 $ 3.94 $ 3.94 $ 6.15 $ 7.90 $ 12.63 221 %

______________________________

(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)
 
Q1 2017   Q2 2017   Q3 2017   Q4 2017   Q1 2018   Q2 2018   Y/Y %

Change

Segments
North America Segment:
Net sales $ 20,992 $ 22,370 $ 25,446 $ 37,302 $ 30,725 $ 32,169 44 %
Net sales -- Y/Y growth, excluding F/X 23 % 27 % 35 % 42 % 46 % 44 % N/A
Net sales -- TTM $ 83,781 $ 88,476 $ 95,048 $ 106,110 $ 115,843 $ 125,642 42 %
Operating Income:
Operating income $ 596 $ 436 $ 112 $ 1,692 $ 1,149 $ 1,835 321 %
F/X impact -- favorable (unfavorable) $ 4 $ 11 $ (12 ) $ (8 ) $ (10 ) $ 1 N/A
Operating income -- Y/Y growth (decline), excluding F/X 1 % (40 )% (51 )% 108 % 95 % 321 % N/A
Operating margin -- % of North America net sales 2.8 % 1.9 % 0.4 % 4.5 % 3.7 % 5.7 % N/A
Operating income -- TTM $ 2,369 $ 2,102 $ 1,960 $ 2,837 $ 3,390 $ 4,788 128 %
Operating margin -- TTM % of North America net sales 2.8 % 2.4 % 2.1 % 2.7 % 2.9 % 3.8 % N/A
International Segment:
Net sales $ 11,061 $ 11,485 $ 13,714 $ 18,038 $ 14,875 $ 14,612 27 %
Net sales -- Y/Y growth, excluding F/X 21 % 22 % 28 % 22 % 21 % 21 % N/A
Net sales -- TTM $ 45,477 $ 47,119 $ 50,224 $ 54,297 $ 58,111 $ 61,239 30 %
Operating income (loss):
Operating income (loss) $ (481 ) $ (724 ) $ (936 ) $ (919 ) $ (622 ) $ (494 ) 32 %
F/X impact -- favorable (unfavorable) $ (32 ) $ (59 ) $ (13 ) $ 20 $ 70 $ 86 N/A
Operating income/loss -- Y/Y growth (decline), excluding F/X 272 % 393 % 71 % 93 % 44 % 20 % N/A
Operating margin -- % of International net sales (4.4 )% (6.3 )% (6.8 )% (5.1 )% (4.2 )% (3.4 )% N/A
Operating income (loss) -- TTM $ (1,644 ) $ (2,233 ) $ (2,629 ) $ (3,062 ) $ (3,202 ) $ (2,971 ) 33 %
Operating margin -- TTM % of International net sales (3.6 )% (4.7 )% (5.2 )% (5.6 )% (5.5 )% (4.9 )% N/A
AWS Segment:
Net sales $ 3,661 $ 4,100 $ 4,584 $ 5,113 $ 5,442 $ 6,105 49 %
Net sales -- Y/Y growth, excluding F/X 43 % 42 % 42 % 44 % 48 % 49 % N/A
Net sales -- TTM $ 13,314 $ 14,529 $ 15,882 $ 17,459 $ 19,240 $ 21,244 46 %
Operating income:
Operating income $ 890 $ 916 $ 1,171 $ 1,354 $ 1,400 $ 1,642 79 %
F/X impact -- favorable (unfavorable) $ (3 ) $ 10 $ (14 ) $ (45 ) $ (89 ) $ (45 ) N/A
Operating income -- Y/Y growth, excluding F/X 48 % 26 % 38 % 51 % 67 % 84 % N/A
Operating margin -- % of AWS net sales 24.3 % 22.3 % 25.5 % 26.5 % 25.7 % 26.9 % N/A
Operating income -- TTM $ 3,395 $ 3,593 $ 3,903 $ 4,331 $ 4,840 $ 5,567 55 %
Operating margin -- TTM % of AWS net sales 25.5 % 24.7 % 24.6 % 24.8 % 25.2 % 26.2 % N/A
 
             
AMAZON.COM, INC.
Supplemental Financial Information and Business Metrics
(in millions, except employee data)
(unaudited)
 
Q1 2017   Q2 2017   Q3 2017   Q4 2017   Q1 2018   Q2 2018   Y/Y %

Change

Net Sales:
Online stores (1) $ 22,826 $ 23,754 $ 26,392 $ 35,383 $ 26,939 $ 27,165 14 %
Online stores - Y/Y growth, excluding F/X 16 % 18 % 22 % 17 % 13 % 12 % N/A
Physical stores (2) $ 1,276 $ 4,522 $ 4,263 $ 4,312 N/A
Third-party seller services (3) $ 6,438 $ 6,991 $ 7,928 $ 10,523 $ 9,265 $ 9,702 39 %
Third-party seller services - Y/Y growth, excluding F/X 36 % 40 % 40 % 38 % 39 % 36 % N/A
Subscription services (4) $ 1,939 $ 2,165 $ 2,441 $ 3,177 $ 3,102 $ 3,408 57 %
Subscription services - Y/Y growth, excluding F/X 52 % 53 % 59 % 47 % 56 % 55 % N/A
AWS $ 3,661 $ 4,100 $ 4,584 $ 5,113 $ 5,442 $ 6,105 49 %
AWS - Y/Y growth, excluding F/X 43 % 42 % 42 % 44 % 48 % 49 % N/A
Other (5) $ 850 $ 945 $ 1,123 $ 1,735 $ 2,031 $ 2,194 132 %
Other - Y/Y growth, excluding F/X 58 % 53 % 58 % 60 % 132 % 129 % N/A
 
Stock-based Compensation Expense
Cost of sales $ 8 $ 12 $ 13 $ 14 $ 15 $ 19 55 %
Fulfillment $ 163 $ 261 $ 230 $ 256 $ 244 $ 320 22 %
Marketing $ 94 $ 133 $ 135 $ 148 $ 161 $ 190 42 %
Technology and content $ 441 $ 633 $ 595 $ 637 $ 631 $ 788 25 %
General and administrative $ 86 $ 119 $ 112 $ 124 $ 132 $ 151 27 %
Total stock-based compensation expense $ 792 $ 1,158 $ 1,085 $ 1,179 $ 1,183 $ 1,468 27 %
Other
WW shipping costs $ 4,383 $ 4,568 $ 5,401 $ 7,368 $ 6,069 $ 5,990 31 %
WW shipping costs -- Y/Y growth 34 % 36 % 39 % 31 % 38 % 31 % N/A
WW paid units -- Y/Y growth (6) 24 % 27 % 25 % 23 % 22 % 17 % N/A
WW seller unit mix -- % of WW paid units (6) 50 % 51 % 50 % 51 % 52 % 53 % N/A
Employees (full-time and part-time; excludes contractors & temporary
personnel)
351,000 382,400 541,900 566,000 563,100 575,700 51 %
Employees (full-time and part-time; excludes contractors & temporary
personnel) -- Y/Y growth
43 % 42 % 77 % 66 % 60 % 51 % 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 and any 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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