Amazon.com Announces Third Quarter Sales up 34% to $43.7 Billion

SEATTLE–(BUSINESS WIRE)–Oct. 26, 2017– Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its third quarter ended September 30, 2017.

Operating cash flow increased 14% to $17.1 billion for the trailing twelve months, compared with $15.0 billion for the trailing twelve months ended September 30, 2016. Free cash flow decreased to $8.1 billion for the trailing twelve months, compared with $9.0 billion for the trailing twelve months ended September 30, 2016. Free cash flow less lease principal repayments decreased to $3.5 billion for the trailing twelve months, compared with $5.3 billion for the trailing twelve months ended September 30, 2016. Free cash flow less finance lease principal repayments and assets acquired under capital leases decreased to an outflow of $1.0 billion for the trailing twelve months, compared with an inflow of $3.8 billion for the trailing twelve months ended September 30, 2016.

Common shares outstanding plus shares underlying stock-based awards totaled 503 million on September 30, 2017, compared with 496 million one year ago.

Net sales increased 34% to $43.7 billion in the third quarter, compared with $32.7 billion in third quarter 2016. Net sales includes $1.3 billion from Whole Foods Market, which Amazon acquired on August 28, 2017. Excluding Whole Foods Market and the $124 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 29% compared with third quarter 2016.

Operating income decreased 40% to $347 million in the third quarter, compared with operating income of $575 million in third quarter 2016. Operating income includes income of $21 million from Whole Foods Market.

Net income was $256 million in the third quarter, or $0.52 per diluted share, compared with net income of $252 million, or $0.52 per diluted share, in third quarter 2016.

“In the last month alone, we’ve launched five new Alexa-enabled devices, introduced Alexa in India, announced integration with BMW, surpassed 25,000 skills, integrated Alexa with Sonos speakers, taught Alexa to distinguish between two voices, and more. Because Alexa’s brain is in the AWS cloud, her new abilities are available to all Echo customers, not just those who buy a new device,” said Jeff Bezos, Amazon founder and CEO. “And it’s working — customers have purchased tens of millions of Alexa-enabled devices, given Echo devices over 100,000 5-star reviews, and active customers are up more than 5x since the same time last year. With thousands of developers and hardware makers building new Alexa skills and devices, the Alexa experience will continue to get even better.”

Highlights

• Amazon acquired Whole Foods Market on August 28, 2017. The two companies together will pursue the vision of making high-quality, natural, and organic food affordable for everyone. Upon closing, Whole Foods Market began offering lower prices on a selection of best-selling grocery staples across its stores, with more to come.
• Amazon introduced three new Echo devices: the all-new Echo ($99.99), featuring a new design, improved sound, a lower price, and a choice of colors to personalize your device; Echo Plus ($149.99) with a built-in smart home hub so customers can easily set up and control their smart home devices; and Echo Spot ($129.99), a compact Echo with a screen so you can see the weather, get the news with a video flash briefing, view lyrics with Amazon Music, watch a camera monitor, browse and listen to Audible, and more.
• Amazon introduced the all-new Fire TV with 4K Ultra HD, High Dynamic Range, and Alexa Voice Remote for $69.99.
• Amazon launched Alexa far-field voice control on Fire TV. Customers can now pair an Echo device with a Fire TV and simply ask Alexa to play a favorite show, launch an app, or control playback — all without having to pick up the remote.
• Amazon announced that you can now call anyone with Alexa with a new calling feature that offers free outbound calling to any number from Echo devices, and the all-new Echo Connect which brings the convenience of hands-free inbound and outbound calling to your home phone.
• The Alexa Skills store now offers customers more than 25,000 skills. Customers can keep up with their eHarmony accounts, play NFL Trivia with Marshawn Lynch, enjoy kids content from Nickelodeon and PBS, and more.
• Tens of thousands of developers are using the Alexa Voice Service to integrate Alexa into their products, including BMW and MINI vehicles, the Sonos One smart speaker, Harman Kardon’s Allure smart speaker, and Motorola’s X4 smartphone.
• Amazon and Microsoft announced that soon, Alexa will be able to talk to Cortana, and Cortana will be able to talk to Alexa. Alexa customers will be able to access Cortana’s unique features like accessing work calendars, booking a meeting, reminding you to pick up flowers on your way home, or reading your work email — all using just your voice. Similarly, Cortana customers can ask Alexa to control their smart home devices, shop on Amazon.com, interact with many of the skills built by third-party developers, and much more.
• Amazon announced that Alexa and Echo are coming to India and Japan, with an all-new Alexa experience designed from the ground up for Indian and Japanese customers. Developers in India, Japan, and around the world will be able to create new experiences for Alexa users with the Alexa Skills Kit and Alexa Voice Service.
• Amazon introduced multi-room music, a new Alexa feature that lets you control and synchronize your music across multiple Echo devices in your home.
• The Amazon Music app now features Alexa on iOS and Android in the U.S., U.K., Germany, and Austria, combining the power of natural language voice controls with a visual app experience.
• Amazon Music Unlimited launched for customers in France, Italy, and Spain, offering a full catalog streaming service with more than 50 million songs for just €9.99 per month, with Prime members receiving exclusive pricing on individual and family plans.
• Amazon introduced Amazon Key, a new service exclusively for Prime members that enables in-home delivery and secure home access for guests and service appointments. Amazon Key works with Amazon Cloud Cam, the company’s first home security offering. Cloud Cam is an intelligent indoor security camera featuring 1080p full HD resolution, night vision, two-way audio, a wide viewing angle, and clips from the last 24 hours for $119.99.
• Amazon introduced the all-new Fire HD 10, the next generation of Amazon’s largest tablet, with a 10.1-inch widescreen 1080p full HD display, 30% faster performance, more storage, longer battery life, and the option to use Alexa hands-free functionality for $149.99.
• Amazon announced the all-new Kindle Oasis, the latest e-reader with a larger 7-inch, 300 ppi high-resolution display and a light ergonomic design with customizable settings so customers can read comfortably for hours. The Kindle Oasis is waterproof so you can read in more places, and with built-in Audible access, subscribers can easily switch between reading and listening without changing devices, all for $249.99.
• NFL Thursday Night Football on Amazon Prime Video saw a total of 7.1 million views in the first four games. Prime members in 187 countries and territories have streamed games on living room devices, including smart TVs and Fire TVs, as well as the Prime Video mobile app and the web, with each viewer watching an average of 51 minutes.
• Amazon Studios closed deals with The Walking Dead creator Robert Kirkman and Gilmore Girls creators Amy Sherman-Palladino and Daniel Palladino, and greenlit a comedy series starring Fred Armisen and Maya Rudolph, as well as the drama series Tong Wars from Paul Attanasio and Wong Kar-wai. Amazon Studios also announced development on Underground Railroad with Barry Jenkins; The Boys with Seth Rogen and Evan Goldberg; Snow Crash from the novel by Neal Stephenson; Lazarus, based on a comic book by Greg Rucka; and Ringworld, based on Larry Niven’s sci-fi book series.
• Amazon introduced a convenient way for teens to shop or stream content on the Amazon App with their own login while still keeping their parents informed. Parents can choose to approve all orders or set pre-approved spending limits per purchase, offering teens a customized level of autonomy that can change and grow as they do.
• Amazon Business expanded to Japan and India, and now serves businesses of all sizes in five countries across the globe.
• Amazon Business launched Business Prime Shipping, offering unlimited free two-day shipping for multi-user business customers in the U.S. and Germany.
• Amazon expects to create more than 120,000 seasonal jobs in its U.S. network of fulfillment centers, sortation centers, and customer service sites. Last year, Amazon transitioned thousands of holiday positions to regular, full-time roles after the holidays, and plans to continue that trend this year.
• Amazon announced its search for Amazon HQ2, its second headquarters city in North America, where it expects to invest $5 billion and create as many as 50,000 jobs. Amazon received 238 proposals from across North America.
• Amazon expanded its support for homeless women, children, and families with a $1 million donation match offer for St. Mary’s Center — an organization in Boston, MA, that provides emergency shelter and critical services for families in need. This follows similar matches this year for Friendship Place in Washington, D.C. and Mary’s Place in Seattle, WA. Amazon is also building a permanent home for Mary’s Place within the newest building on its Seattle campus.
• Amazon hosted Take Your Kids to Work Day, Take Your Parents to Work Day, and Take Your Grandparents to Work Day, welcoming over 14,000 family members into its offices.
• Amazon Books opened bookstores in Bellevue, WA, San Jose, CA, Los Angeles, CA, and a second location in New York, NY. Amazon now has 12 bookstores across the U.S. with more stores planned, including Walnut Creek, CA, Washington, D.C., and Austin, TX. Amazon Books integrates the benefits of offline and online shopping to help customers discover books and devices.
• Amazon launched Amazon Wind Farm Texas, its largest windfarm yet, which generates more than 1,000,000 megawatt hours of clean energy annually from over 100 turbines. Amazon now has 18 solar and wind projects live across the U.S. with more than 35 on the way. Together, Amazon’s renewable energy projects now produce enough clean energy to power over 330,000 homes annually.
• Amazon Web Services (AWS) announced that the following customers are going all-in on AWS: Toyota Racing Development, one of the most accomplished and acclaimed engineering companies in motorsports; andRandstad, a leading global HR services company. GRAIL, a life sciences company whose mission is early cancer detection, Hulu, and FICO all selected AWS as their cloud provider. AWS was also named the preferred cloud provider for General Electric (GE) as it undergoes one of the largest and most important digital transformations in its history.
• AWS and Microsoft announced Gluon, a new open source deep learning library that allows developers of all skill levels to prototype, build, train, and deploy sophisticated machine learning models for the cloud, devices at the edge, and mobile apps.
• AWS launched per-second billing in all regions for Linux-based EC2 instances, Elastic Graphical Processing Units (GPU), Elastic Block Store (EBS) Volumes, AWS Batch, and Elastic Map Reduce (EMR). Customers using these services will now be billed in one-second (versus one-hour) increments.
• AWS introduced the AWS Migration Hub, a free service that provides a single location for customers to track the status of migrations across their application portfolio. AWS Migration Hub helps customers reduce the overall time and effort spent on migration projects while also helping to identify and troubleshoot issues along the way.
• AWS introduced the general availability of Lambda@Edge. This new AWS Lambda feature can be used to run Node.js functions across AWS locations globally without provisioning or managing servers, allowing customers to deliver richer, more personalized content with low latency to their end users.
• AWS and VMware announced the initial availability of VMware Cloud on AWS, which brings VMware’s software-defined data center (SDDC) to the AWS Cloud, and allows customers to run applications across operationally consistent VMware vSphere-based private, public, and hybrid cloud environments, with optimized access to AWS services. VMware Cloud on AWS is delivered, sold, and supported by VMware as an on-demand, elastically-scalable cloud service that removes barriers to cloud migration and cloud portability, increases IT efficiency, and opens up new opportunities for customers to leverage a hybrid cloud environment.Early customers include Brink’s, Cerner, Elemica, MIT, Moody’s, the State of Louisiana, and Sysco.
• AWS announced that it will open a new infrastructure region in the Middle East in 2019. Currently, AWS provides 44 Availability Zones across 16 infrastructure regions worldwide, with another 14 Availability Zones across five AWS Regions in China, France, Hong Kong, Sweden, and a second GovCloud Region in the U.S. expected to come online by the end of 2018.
• AWS announced the general availability of AWS Glue, a fully managed extract, transform, and load (ETL) service that makes it easy for customers to prepare and load their data into Amazon Simple Storage Service (Amazon S3), Amazon Redshift, Amazon Relational Database Service (Amazon RDS), and databases running on Amazon Elastic Compute Cloud (Amazon EC2) for query and analysis. Customers like NewsCorp, 21^stCentury Fox, myTomorrows, the OLX Group, and Herman Miller (via APN Partner OST) are using AWS Glue to make data available for analysis in minutes, and since AWS Glue is serverless, they only pay for the compute resources they consume while executing data preparation and loading jobs.
• AWS launched Amazon Macie, a new security service that uses machine learning to help customers prevent data loss by automatically discovering, classifying, and protecting sensitive data in AWS. Customers such as Autodesk, Edmunds, and Netflix are using Amazon Macie to recognize sensitive data such as personally identifiable information (PII) or intellectual property, and provide dashboards and alerts that give visibility into how this data is being accessed or moved. Amazon Macie continuously monitors data access activity for anomalies, and generates detailed alerts when it detects risk of unauthorized access or inadvertent data leaks.
• AWS announced general availability of Amazon EC2 Elastic GPUs, making it easy to attach low-cost graphics acceleration to a wide range of EC2 instances over the network for a fraction of the cost of standalone graphics instances.
• AWS GovCloud (US) received an Impact Level 5 (IL5) Department of Defense Provisional Authorization (PA) to Support Mission-Critical Systems. This means that DoD customers may now run workloads for highly-sensitive Controlled Unclassified Information as well as unclassified National Security Systems on AWS in the GovCloud Region.

Financial Guidance

The following forward-looking statements reflect Amazon.com’s expectations as of October 26, 2017, and are subject to substantial uncertainty. Our results are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and customer spending, world events, the rate of growth of the Internet, online commerce, and cloud services, and the various factors detailed below.

Fourth Quarter 2017 Guidance

• Net sales are expected to be between $56.0 billion and $60.5 billion, or to grow between 28% and 38% compared with fourth quarter 2016. This guidance includes approximately 1,000 basis points of impact to our year-over-year growth rate from Whole Foods Market. This guidance also anticipates a favorable impact of approximately $1.2 billion or 270 basis points from foreign exchange rates.
• Operating income is expected to be between $300 million and $1.65 billion, compared with $1.3 billion in fourth quarter 2016.
• This guidance assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded.

A conference call will be webcast live today at 2:30 p.m. PT/5:30 p.m. ET, and will be available for at least three months at www.amazon.com/ir. This call will contain forward-looking statements and other material information regarding the Company’s financial and operating results.

These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, in addition to the factors discussed above, the amount that Amazon.com invests in new business opportunities and the timing of those investments, the mix of products and services sold to customers, the mix of net sales derived from products as compared with services, the extent to which we owe income or other taxes, competition, management of growth, potential fluctuations in operating results, international growth and expansion, the outcomes of legal proceedings and claims, fulfillment, sortation, delivery, and data center optimization, risks of inventory management, seasonality, the degree to which the Company enters into, maintains, and develops commercial agreements, proposed and completed acquisitions and strategic transactions, payments risks, and risks of fulfillment throughput and productivity. Other risks and uncertainties include, among others, risks related to new products, services, and technologies, system interruptions, government regulation and taxation, and fraud. In addition, the current global economic climate amplifies many of these risks. More information about factors that potentially could affect Amazon.com’s financial results is included in Amazon.com’s filings with the Securities and Exchange Commission (“SEC”), including its most recent Annual Report on Form 10-K and subsequent filings.

Our investor relations website is www.amazon.com/ir and we encourage investors to use it as a way of easily finding information about us. We promptly make available on this website, free of charge, the reports that we file or furnish with the SEC, corporate governance information (including our Code of Business Conduct and Ethics), and select press releases and social media postings, which may contain material information about us, and you may subscribe to be notified of new information posted to this site.

About Amazon

Amazon is guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. Customer reviews, 1-Click shopping, personalized recommendations, Prime, Fulfillment by Amazon, AWS, Kindle Direct Publishing, Kindle, Fire tablets, Fire TV, Amazon Echo, and Alexa are some of the products and services pioneered by Amazon. For more information, visit www.amazon.com/about and follow @AmazonNews.