10-QPeriod: Q2 FY2020

AMAZON COM INC Quarterly Report for Q2 Ended Jun 30, 2020

Filed July 31, 2020For Securities:AMZN

Summary

Amazon.com, Inc. reported robust financial performance for the second quarter and first half of 2020, demonstrating significant growth across its key segments. Total net sales surged by 40% year-over-year in Q2 2020 to $88.9 billion, and by 34% for the first six months to $164.4 billion. This growth was broad-based, with strong contributions from North America (up 43% in Q2), International (up 38% in Q2), and Amazon Web Services (AWS) (up 29% in Q2). The company successfully navigated the challenges posed by the COVID-19 pandemic, incurring over $4 billion in related costs in Q2 while adapting operations and hiring 175,000 additional employees to meet increased demand. Net income saw a substantial increase, more than doubling in Q2 to $5.2 billion from $2.6 billion in the prior year quarter, reflecting strong sales coupled with operational efficiencies and a favorable accounting change related to server useful life. The company's balance sheet remains strong, with total assets increasing to $258.3 billion as of June 30, 2020, supported by healthy cash and marketable securities balances of $71.4 billion. Investing activities reflect significant capital expenditures of $7.5 billion in Q2, primarily directed towards expanding fulfillment and technology infrastructure to support ongoing growth. Financing activities showed a net inflow, largely due to debt issuances. Despite the substantial costs incurred due to COVID-19, Amazon's operational execution and strategic investments continue to drive impressive top-line growth and profitability, positioning it well for continued expansion.

Financial Highlights

52 data points
Beta

Revenue

$88.91B

40.8% Gross Margin

Net Income

$5.24B

5.9% Net Margin

EPS (Diluted)

$0.52

Total Assets

$258.31B

Cash & Equivalents

$37.84B

Free Cash Flow

$20.61B

Financial Statements
Beta
Revenue$88.91B
Cost of Revenue$52.66B
Gross Profit$36.25B
Operating Expenses$83.07B
Operating Income$5.84B
Interest Expense$403.00M
Net Income$5.24B
EPS (Basic)$0.53
EPS (Diluted)$0.52
Shares Outstanding (Basic)10.00B
Shares Outstanding (Diluted)10.18B

Key Highlights

  • 1Total net sales grew 40% year-over-year in Q2 2020 to $88.9 billion, and 34% for the first six months of 2020 to $164.4 billion.
  • 2North America segment sales increased by 43% in Q2 2020, International sales by 38%, and AWS sales by 29%.
  • 3Net income more than doubled to $5.2 billion in Q2 2020, compared to $2.6 billion in Q2 2019.
  • 4Operating income increased significantly to $5.8 billion in Q2 2020, up from $3.1 billion in the prior year quarter.
  • 5The company incurred over $4 billion in COVID-19 related costs in Q2 2020 but successfully hired 175,000 new employees to manage increased demand.
  • 6Cash, cash equivalents, and marketable securities stood at a robust $71.4 billion as of June 30, 2020.
  • 7Capital expenditures were substantial at $7.5 billion in Q2 2020, focused on expanding fulfillment and technology infrastructure.

Frequently Asked Questions

The primary driver of Amazon's significant sales growth in Q2 2020 was the substantial increase in demand across all segments, particularly from consumers spending more time at home due to the COVID-19 pandemic. This led to higher unit sales in both the North America and International segments, as well as continued growth in AWS usage. The company also noted increased sales from third-party sellers contributing to the overall growth.

Amazon incurred over $4 billion in costs directly related to the COVID-19 pandemic in Q2 2020. These costs included expenses for employee safety measures, additional compensation for employees and service providers, and investments to increase fulfillment network capacity. Despite these significant costs, the company managed to achieve substantial revenue growth and an increase in net income, demonstrating resilience and operational adaptability.

Amazon's financial health and liquidity remain very strong. As of June 30, 2020, the company held $71.4 billion in cash, cash equivalents, and marketable securities. Net cash provided by operating activities was robust at $20.6 billion for the quarter and $23.7 billion for the first six months of 2020. The company believes its liquidity is sufficient to meet its operating needs for at least the next twelve months.

Amazon continues to make significant capital investments, with purchases of property and equipment totaling $7.5 billion in Q2 2020. These investments are primarily focused on expanding its fulfillment network capacity and technology infrastructure, particularly to support the growth of AWS and its e-commerce operations, in anticipation of continued business growth.