01—Abstract
Summary
Summary of the 10-K filed January 28, 2011. Cited figures are marked; the original filing is the authoritative source.
Amazon.com, Inc.'s 2010 Form 10-K, filed in January 2011, highlights a company experiencing robust growth across its North America and International segments.
Net sales surged by 40% to $34.2 billiona, driven by increases in unit sales, expansion into general merchandise, and the impact of acquisitions like Zappos. While the company continues to invest heavily in technology and infrastructure, including Amazon Web Services (AWS), it maintained a consistent gross margin of 22.3% in 2010. Free cash flow, a key metric for the company, was strong at $2.52 billion, though it saw a slight decrease from the prior year due to increased capital expenditures.
The report emphasizes Amazon's commitment to long-term customer focus, evidenced by its strategy of lowering prices and offering free shipping. Significant investments were made in fulfillment capacity and technology infrastructure to support continued growth.
The company also detailed its ongoing legal battles and potential risks, including intense competition, international expansion challenges, and the ever-evolving regulatory landscape. Despite these risks, Amazon demonstrated strong operational execution and continued its aggressive investment in future growth drivers.
02—Key points
Key Highlights
- Net sales increased by 40% to $34.2 billion in 2010, up from $24.5 billion in 2009.
- The company reported a net income of $1.15 billion in 2010, an increase from $902 million in 2009.
- Free cash flow for 2010 was $2.52 billion, demonstrating strong operational cash generation, although down from $2.92 billion in 2009.
- Investments in technology and content, including AWS, continued to be a significant focus, with spending increasing to $1.73 billion in 2010.
- Amazon continued its global expansion with the International segment growing 33% to $15.5 billion in net sales.
- The company maintained a consistent gross margin of 22.3% in 2010.
- A significant number of legal proceedings and potential risks were disclosed, reflecting the company's aggressive growth and market position.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Amazon.com Inc kept $0.03.
- Revenue$34.20B100.0%
- Cost of revenue−$26.56B77.7%
- Gross profit$7.64B22.3%
- Operating costs−$6.24B18.2%
- Operating income$1.41B4.1%
- Interest, other & tax−$254.0M0.7%
- Net income$1.15B3.4%
Where FY2010 revenue went
$34.20B- Cost of revenue: $26.56B, 78% of revenue
- Operating costs: $6.24B, 18% of revenue
- Net income: $1.15B, 3.4% of revenue
- Interest, other & tax: $254.0M, 0.7% of revenue
Kept 3.4% as net incomeNet income $1.15B · 3.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed January 28, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $34.20B$24.51B | +39.6% |
| Cost of Revenue | $26.56B$18.98B | +40.0% |
| Gross Profit | $7.64B$5.53B | +38.2% |
| Operating Expenses | $32.80B$4.40B | +645.1% |
| Operating Income | $1.41B$1.13B | +24.5% |
| Interest Expense | $39.00M$34.00M | +14.7% |
| Net Income | $1.15B$902.00M | +27.7% |
| EPS (Basic) | $0.13$0.10 | +24.0% |
| EPS (Diluted) | $0.13$0.10 | +24.0% |
| Shares Outstanding (Basic) | 8.94B8.66B | +3.2% |
| Shares Outstanding (Diluted) | 9.12B8.84B | +3.2% |
05—Questions
Frequently Asked Questions
What was Amazon's primary growth driver in 2010?
Amazon's primary growth driver in 2010 was a significant increase in net sales, up 40% year-over-year, fueled by strong performance in both its North America and International segments. This growth was attributed to increased unit sales, expansion into broader merchandise categories (like electronics and other general merchandise), and the positive impact of acquisitions, notably Zappos.
How is Amazon funding its growth and investments?
Amazon is primarily funding its growth and investments through strong operating cash flows, which generated $3.5 billion in 2010. The company also maintains substantial cash, cash equivalents, and marketable securities, totaling $8.8 billion at the end of 2010. While capital expenditures increased significantly to $979 million in 2010, driven by investments in technology infrastructure (including AWS) and fulfillment capacity, the company's liquidity position remains robust.
What are the key risks and challenges highlighted in the 10-K filing?
The filing emphasizes several key risks, including intense competition from both online and physical retailers, the strain on management and operational resources due to rapid global expansion, potential fluctuations in operating results, and the challenges of expanding into international markets. The company also notes risks associated with optimizing fulfillment centers, inventory management, intellectual property protection, and evolving government regulations.
What is Amazon's strategy regarding pricing and customer loyalty programs?
Amazon's core strategy remains focused on customer obsession, which includes offering the lowest prices possible, improving product selection and convenience, and ensuring fast, reliable delivery. Programs like Amazon Prime and free shipping offers are highlighted as fundamental to their long-term success and customer loyalty, despite the associated shipping costs which are expected to continue to increase.
06—Continue