10-QPeriod: Q1 FY2018

AMAZON COM INC Quarterly Report for Q1 Ended Mar 31, 2018

Filed April 27, 2018For Securities:AMZN

Summary

Amazon.com Inc.'s first quarter 2018 results demonstrate robust top-line growth driven by strong performance across all major segments. Total net sales surged by 43% year-over-year to $51.04 billion. This growth was fueled by a 46% increase in North America, a 34% increase in International markets, and a significant 49% surge in Amazon Web Services (AWS) revenue. Profitability also showed improvement, with operating income more than doubling to $1.93 billion, up from $1.01 billion in the prior year's first quarter. This operational leverage was particularly evident in AWS, which remains a key profit driver, and the North America segment. Despite ongoing investments in fulfillment and technology, the company managed to improve its operating income margin, reflecting effective cost management and scaling efficiencies.

Financial Highlights

51 data points
Beta

Revenue

$51.04B

39.8% Gross Margin

Net Income

$1.63B

3.2% Net Margin

EPS (Diluted)

$0.16

Total Assets

$126.36B

Cash & Equivalents

$23.51B

Free Cash Flow

-$1.79B

Financial Statements
Beta
Revenue$51.04B
Cost of Revenue$30.73B
Gross Profit$20.31B
Operating Expenses$49.12B
Operating Income$1.93B
Interest Expense$330.00M
Net Income$1.63B
EPS (Basic)$0.17
EPS (Diluted)$0.16
Shares Outstanding (Basic)9.68B
Shares Outstanding (Diluted)9.96B

Key Highlights

  • 1Total net sales grew 43% to $51.04 billion in Q1 2018, compared to $35.71 billion in Q1 2017.
  • 2Operating income more than doubled to $1.93 billion in Q1 2018, from $1.01 billion in Q1 2017.
  • 3AWS revenue increased by 49% year-over-year, reaching $5.44 billion, showcasing continued strong demand for cloud services.
  • 4North America segment sales grew by 46% to $30.73 billion, boosted by the Whole Foods Market acquisition and organic growth.
  • 5International segment sales saw a 34% increase to $14.88 billion, indicating healthy expansion in global markets.
  • 6Diluted earnings per share (EPS) significantly increased to $3.27 in Q1 2018, from $1.48 in Q1 2017.
  • 7The company adopted new accounting guidance for revenue recognition (ASU 2014-09) effective January 1, 2018, which had a notable impact on the presentation of Prime membership fees and advertising services.

Frequently Asked Questions

Amazon reported a strong 43% increase in total net sales, reaching $51.04 billion in the first quarter of 2018 compared to $35.71 billion in the prior year. This growth was primarily driven by robust performance across all segments, including a 46% increase in North America (partially due to the Whole Foods acquisition), a 34% increase in International sales, and a substantial 49% growth in AWS revenue.

Profitability saw a significant improvement. Operating income more than doubled to $1.93 billion in Q1 2018, up from $1.01 billion in Q1 2017. This increase reflects strong revenue growth coupled with effective cost management, particularly in the AWS segment which continues to be a major contributor to operating income.

Amazon adopted ASU 2014-09 effective January 1, 2018. Key impacts include reclassifying Prime membership fees as a single performance obligation recognized over the membership period, leading to an increase in service sales and a decrease in product sales. Additionally, certain advertising services were reclassified from a reduction of cost of sales to revenue. The adoption also impacted the recognition of unredeemed gift cards, which are now recognized over the expected customer usage period.

Amazon generated $18.19 billion in net cash from operating activities for the twelve months ended March 31, 2018. However, investing activities, particularly purchases of property and equipment, led to a significant use of cash. Free cash flow for the trailing twelve months ended March 31, 2018, was $7.27 billion, down from $10.13 billion in the prior year, largely due to increased capital expenditures. The company maintained substantial cash and marketable securities balances, ending the quarter with $24.96 billion.