10-QPeriod: Q3 FY2019

AMAZON COM INC Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 25, 2019For Securities:AMZN

Summary

Amazon.com, Inc. reported strong top-line growth for the third quarter and first nine months of 2019, with consolidated net sales increasing by 24% and 20% year-over-year, respectively. This growth was driven by robust performance across all segments, particularly AWS, which saw sales increase by 35% year-over-year in Q3. Despite revenue growth, operating income for the third quarter saw a slight decrease due to increased costs in fulfillment and marketing, particularly in the North America segment. However, for the nine-month period, operating income showed a significant increase, driven by strong AWS performance and improved international operational efficiency. Cash flow from operations remained strong, increasing to $35.3 billion for the trailing twelve months ended September 30, 2019, and free cash flow also saw a healthy rise to $23.5 billion. The company's balance sheet remains robust, with total assets growing to nearly $200 billion. Significant investments continue in property and equipment, primarily to support fulfillment operations and AWS infrastructure. The company provided cautious guidance for the fourth quarter of 2019, expecting net sales growth between 11% and 20%, but a decrease in operating income compared to the prior year's Q4, suggesting continued investment and cost pressures are anticipated.

Financial Highlights

52 data points
Beta

Revenue

$69.98B

41.0% Gross Margin

Net Income

$2.13B

3.0% Net Margin

EPS (Diluted)

$0.21

Total Assets

$199.10B

Cash & Equivalents

$23.55B

Free Cash Flow

$7.89B

Financial Statements
Beta
Revenue$69.98B
Cost of Revenue$41.30B
Gross Profit$28.68B
Operating Expenses$66.82B
Operating Income$3.16B
Interest Expense$396.00M
Net Income$2.13B
EPS (Basic)$0.22
EPS (Diluted)$0.21
Shares Outstanding (Basic)9.90B
Shares Outstanding (Diluted)10.08B

Key Highlights

  • 1Consolidated net sales grew 24% year-over-year in Q3 2019 to $69.98 billion, and 20% for the nine months ended September 30, 2019, to $193.09 billion.
  • 2AWS revenue increased by 35% in Q3 2019 and 38% for the nine months ended September 30, 2019, reaching $8.99 billion and $25.07 billion respectively, highlighting its continued strength.
  • 3Operating income for the nine months ended September 30, 2019, increased to $10.66 billion, up from $8.64 billion in the prior year period, primarily driven by AWS and improved international results.
  • 4Free cash flow increased significantly to $23.46 billion for the twelve months ended September 30, 2019, up from $15.37 billion in the prior year period, indicating strong operational cash generation.
  • 5Total assets grew to $199.10 billion as of September 30, 2019, up from $162.65 billion at the end of 2018, reflecting continued investment and growth.
  • 6The company adopted new lease accounting guidance (ASU 2016-02) effective January 1, 2019, resulting in the recognition of significant operating lease assets and liabilities on the balance sheet.

Frequently Asked Questions

Amazon's revenue growth in Q3 2019 was driven by strong performance across all its segments. AWS continued its rapid expansion with a 35% year-over-year increase in sales. The North America and International segments also saw healthy growth, with net sales increasing by 24% and 18% respectively, primarily due to increased unit sales and third-party seller activity.

In Q3 2019, consolidated operating income decreased slightly to $3.16 billion from $3.72 billion in Q3 2018. This was primarily due to increased shipping costs and marketing expenses, particularly impacting the North America segment, which were not fully offset by revenue growth. However, for the nine-month period, operating income increased to $10.66 billion.

Amazon provided guidance for Q4 2019, expecting net sales between $80.0 billion and $86.5 billion, representing a growth of 11% to 20% year-over-year. However, operating income is expected to be between $1.2 billion and $2.9 billion, compared to $3.8 billion in Q4 2018. This projected decrease in operating income suggests that the company anticipates continued investments in growth areas and potential cost pressures, as outlined in the risk factors and operational discussions.

Amazon adopted new lease accounting guidance (ASU 2016-02) effective January 1, 2019. This resulted in the recognition of significant operating lease assets and liabilities on the balance sheet, impacting comparability with prior periods. Additionally, new guidance for film costs was adopted, leading to the capitalization of substantially all production costs for episodic television content.