10-QPeriod: Q1 FY2020

AMAZON COM INC Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 1, 2020For Securities:AMZN

Summary

Amazon.com, Inc.'s first quarter 2020 report, ending March 31, 2020, shows a significant increase in net sales, growing 26% year-over-year to $75.45 billion. This growth was driven by strong performance in both North America (up 29%) and International (up 18%) segments, reflecting increased consumer demand for essential products amidst the early stages of the COVID-19 pandemic. Amazon Web Services (AWS) also continued its robust expansion, with sales increasing by 33%. Despite the top-line growth, operating income saw a slight decrease from $4.42 billion in Q1 2019 to $3.99 billion in Q1 2020. This compression was primarily due to increased fulfillment and shipping costs, particularly in the North America and International segments, driven by pandemic-related expenses such as investments in employee safety, hiring, and benefits. The company anticipates these increased costs to continue impacting profitability in the near term, with guidance for Q2 2020 operating income ranging from a loss of $1.5 billion to a profit of $1.5 billion, explicitly noting approximately $4.0 billion in expected COVID-19 related costs.

Financial Highlights

52 data points
Beta

Revenue

$75.45B

41.3% Gross Margin

Net Income

$2.54B

3.4% Net Margin

EPS (Diluted)

$0.25

Total Assets

$221.24B

Cash & Equivalents

$27.50B

Free Cash Flow

$3.06B

Financial Statements
Beta
Revenue$75.45B
Cost of Revenue$44.26B
Gross Profit$31.20B
Operating Expenses$71.46B
Operating Income$3.99B
Interest Expense$402.00M
Net Income$2.54B
EPS (Basic)$0.25
EPS (Diluted)$0.25
Shares Outstanding (Basic)9.96B
Shares Outstanding (Diluted)10.12B

Key Highlights

  • 1Total net sales surged 26% year-over-year to $75.45 billion in Q1 2020.
  • 2North America segment sales grew 29%, while International sales increased by 18%, both boosted by increased demand for essential products.
  • 3AWS revenue continued its strong growth trajectory, up 33% to $10.22 billion.
  • 4Operating income decreased by 9.7% to $3.99 billion, impacted by higher fulfillment and shipping costs.
  • 5Net income attributable to shareholders decreased to $2.535 billion from $3.561 billion in the prior year's quarter.
  • 6Diluted earnings per share (EPS) fell to $5.01 from $7.09 in Q1 2019.
  • 7The company reported significant investments in technology and content, as well as fulfillment, with costs rising substantially year-over-year.

Frequently Asked Questions

The COVID-19 pandemic significantly boosted net sales, particularly for essential products in the North America and International segments, as consumers stayed home. However, it also led to substantially increased fulfillment and shipping costs due to investments in employee safety, hiring, and benefits, which compressed operating income. Amazon also noted an increase in the allowance for doubtful accounts receivable, primarily in the AWS segment, due to the pandemic's economic impact.

Amazon provided guidance for Q2 2020 anticipating operating income between a loss of $1.5 billion and a profit of $1.5 billion. This wide range reflects significant uncertainty, and the company explicitly stated this guidance assumes approximately $4.0 billion in costs related to COVID-19. This indicates a challenging near-term outlook for profitability due to ongoing pandemic-related expenses.

Amazon significantly increased its investment in property and equipment, with purchases totaling $6.795 billion in Q1 2020, up from $3.290 billion in the prior year's quarter. This investment is primarily directed towards expanding capacity for fulfillment operations and increasing technology infrastructure to support AWS and overall business growth.

Amazon's consolidated net sales grew by 26% year-over-year. The North America segment saw the strongest growth at 29%, followed by AWS at 33%. The International segment also showed solid growth of 18%. This indicates broad-based demand across its core businesses, with AWS continuing its strong expansion, albeit at a slightly slower pace than the prior year.