Amazon.com Announces Third Quarter Sales up 29% to $56.6 Billion

SEATTLE--(BUSINESS WIRE)--Oct. 25, 2018-- Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its third quarter ended September 30, 2018.

Operating cash flow increased 57% to $26.6 billion for the trailing twelve months, compared with $17.0 billion for the trailing twelve months ended September 30, 2017. Free cash flow increased to $15.4 billion for the trailing twelve months, compared with $8.0 billion for the trailing twelve months ended September 30, 2017. Free cash flow less lease principal repayments increased to $8.1 billion for the trailing twelve months, compared with $3.5 billion for the trailing twelve months ended September 30, 2017. Free cash flow less finance lease principal repayments and assets acquired under capital leases increased to an inflow of $5.4 billion for the trailing twelve months, compared with an outflow of $1.1 billion for the trailing twelve months ended September 30, 2017.

Common shares outstanding plus shares underlying stock-based awards totaled 507 million on September 30, 2018, compared with 503 million one year ago.

Net sales increased 29% to $56.6 billion in the third quarter, compared with $43.7 billion in third quarter 2017. Excluding the $260 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 30% compared with third quarter 2017.

Operating income increased to $3.7 billion in the third quarter, compared with operating income of $347 million in third quarter 2017.

Net income increased to $2.9 billion in the third quarter, or $5.75 per diluted share, compared with net income of $256 million, or $0.52 per diluted share, in third quarter 2017.

“Amazon Business has now reached a $10 billion annual sales run rate and is serving millions of private and public-sector organizations in eight countries,” said Jeff Bezos, Amazon founder and CEO. “And we’re not slowing down – Amazon Business is adding customers rapidly, including large educational institutions, local governments, and more than half of the Fortune 100. These organizations are choosing Amazon Business because it increases transparency into business spending and streamlines purchasing, with increased control. The team is doing a fantastic job building and innovating for customers.”

Highlights

• Amazon introduced a new family of Echo devices: the next generation Echo Dot, Echo Plus, and Echo Show; Echo Auto, the new Echo for the car; and companion devices, including Echo Wall Clock, Echo Input, Echo Sub, Echo Link, and Echo Link Amp.
• Amazon introduced the all-new Fire HD 8 tablet, featuring an 8” HD display, a quad-core processor, 16 GB of internal storage with support for up to 400 GB more via microSD, up to 10 hours of mixed use battery life, and hands-free access to Alexa. Amazon also expanded availability for Show Mode on Fire tablets and launched the Show Mode Charging Dock in the U.K. and Germany.
• Amazon announced new experiences designed for kids and parents, including: the all-new Fire HD 8 Kids Edition tablet; Spanish language support for Amazon FreeTime and Amazon FreeTime Unlimited, with over 1,000 kid-friendly Spanish language books, videos, apps, games, and Audible books; and new FreeTime on Alexa features including routines, podcasts, and skills for kids.
• Amazon introduced the new Kindle Paperwhite, which is thinner, lighter, and waterproof with a flush-front display.
• Amazon announced Fire TV Recast, a DVR that lets you watch and record live over-the-air TV at home and on mobile devices with no monthly fees. Additionally, Amazon introduced Fire TV Stick 4K, the first streaming media stick to support HDR10+ and Dolby Vision, in the U.S., Canada, Germany, India, Japan, and the U.K.
• Amazon and Ring announced the all-new Stick Up Cam, an indoor/outdoor HD home security camera that comes in battery and wired versions.
• The number of Alexa-compatible smart home devices has quintupled year to date to more than 20,000 devices from over 3,500 brands. Through new tools including updated Alexa Smart Home Skill APIs and the Alexa Connect Kit, developers and device makers can enable voice control of any device and feature with Alexa. The AmazonBasics Microwave is the first device built with these new tools.
• Amazon announced new Alexa smart home features, including: Alexa Guard, which helps keep customers’ homes safe when they are away; Hunches, which allows Alexa to sense when connected smart devices are not in their usual state; and Frustration-Free Setup, designed to make it easy to connect new smart home devices to Wi-Fi.
• Amazon announced new scientific advances in Alexa’s artificial intelligence, including: the application of deep neural networks to advance Alexa's ability to detect challenging acoustic phenomena such as whispered speech and anomalous events like glass breaking; breakthroughs in combining transfer learning and deep learning to teach Alexa new languages and capabilities faster; improved contextual understanding and added memory to help customers discover skills and ask follow-up questions more naturally; and the use of active learning and unsupervised learning to improve foundational wake word detection, speech recognition, and natural language understanding.
• Alexa is getting even smarter. She can give more updates on sports with predictions, live streams, and summaries; answer more questions about upcoming concerts and top music venues worldwide; help with even more math, science, engineering, and geography questions; show more videos and live TV with Hulu and NBC; walk you through step-by-step cooking instructions on Echo Show; call more people with Skype voice and video calling; and much more.
• Amazon introduced new Alexa experiences for the car, including an upcoming integration of Alexa into select Audi vehicles; the Alexa Auto SDK, which lets automakers and suppliers build Alexa into in-car infotainment systems; and Echo Auto, an easy and affordable way for customers to bring Alexa into vehicles they already own.
• Amazon introduced new tools for Alexa skill developers and device makers, including the Alexa Presentation Language, a new language that enables developers to build rich visual Alexa skills and customize them for different device types; and the Alexa Smart Screen and TV Device SDK, a solution that enables device makers to create screen-based products with Alexa. Companies are using the SDK to create new visual devices and experiences, including Lenovo and Sony.
• Prime Video and Comcast announced an agreement to launch Prime Video on Comcast’s Xfinity X1, giving Xfinity TV customers easy access to thousands of additional premium shows and movies online.
• NFL Thursday Night Football (TNF) returned to Prime Video for a second season, reaching more than 8 million combined viewers worldwide in the first 4 games on Prime Video and Twitch. Amazon added a new alternative audio feed this season featuring sports journalists Hannah Storm and Andrea Kremer, the first-ever all-female sportscasting team to call NFL games, available exclusively on Prime Video. In addition, Amazon is bringing interactivity to TNF with several innovations including X-Ray for TNF on FireTV, enabling fans to access live stats, player information, and in-app shopping; as well as the TNF on Twitch experience, allowing members of the global interactive community to watch, comment, and predict game outcomes.
• Prime Video debuted Original Series Tom Clancy’s Jack Ryan, The Romanoffs, and season 3 of The Man in the High Castle. Prime Video continues to announce Original Series debuting in 2018, including: Homecoming, a psychological thriller starring Julia Roberts, and produced and directed by Sam Esmail; as well as season 2 of The Marvelous Mrs. Maisel, recent winner of eight Emmy awards including Outstanding Comedy Series.
• Amazon continues to enable flexibility in Prime membership options internationally, launching monthly Prime membership in Canada and Mexico, quarterly Prime membership in China, and monthly Prime Student membership in Germany.
• Amazon launched the Prime Credit Card in Germany, which comes with no annual credit card fee and enables Prime members to enjoy 3% in reward points for their purchases on Amazon.de and 0.5% in reward points for all other payments where Visa is accepted.
• Amazon launched Prime Book Box to all U.S. Prime members. The subscription service delivers curated children’s books every one, two, or three months for just $22.99 per box, saving Prime members up to 35% off list price.
• Amazon expanded grocery delivery from Whole Foods Market through Prime Now. The service is currently available in more than 60 U.S. cities, offering customers delivery in as fast as an hour on thousands of natural and organic groceries and locally-sourced items.
• Amazon launched grocery pickup from Whole Foods Market through Prime Now, allowing customers to place their order via the Prime Now app and pick up their groceries in as little as 30 minutes. The service is available in more than 10 U.S. cities with plans for continued expansion.
• Amazon Go, a new kind of physical store with no checkout required, recently opened five new stores in Seattle, Chicago, and San Francisco. Amazon Go’s checkout-free experience is enabled by our Just Walk Out Technology, a combination of computer vision, sensor fusion, and deep learning.
• Amazon launched Amazon 4-star in New York City, a physical store that carries a highly-curated selection of products from the top categories across Amazon.com including devices, consumer electronics, toys, games, books, kitchen, home, and more. Products in the store are rated 4 stars and above, are a top seller, or are new and trending on Amazon.com.
• Amazon introduced Amazon Storefronts in the U.S., Germany, and the U.K. Combined, these new stores allow customers to shop online for over one million products exclusively from small and medium-sized businesses selling on Amazon.
• Amazon launched Amazon.com.tr in Turkey, offering customers millions of products across 15 categories from over 1,000 local sellers, along with low prices and free delivery for orders above 50 Turkish Lira.
• Amazon India announced the launch of Amazon.in in Hindi. Customers can now read detailed product information, find deals and discounts, place the orders, pay for their orders, manage their account information, track their orders and view order history conveniently in Hindi.
• Amazon Fashion continues to expand and enhance its selection with a variety of styles for customers including partnering with J.Crew to launch J.Crew Mercantile on Amazon Fashion, bringing Calvin Klein’s re-launch of its new denim assortment to customers, and adding a wide collection from Ralph Lauren’s CHAPS brand.
• Amazon Business is generating $10 billion in annualized sales, serving hundreds of thousands of business sellers and millions of customers across eight countries. Amazon Business launched new Business Prime benefits in the U.S., Germany, and Japan including Spend Visibility and Guided Buying features.
• Amazon and American Express launched the Amazon Business American Express Card offering flexible benefits that allow small businesses to choose rewards or payment terms purchase by purchase without an annual credit card fee. Benefits vary based on customers’ Prime membership; eligible Prime and Business Prime members can choose between 5% back and 90-day payment terms on U.S. purchases at Amazon Business, Amazon Web Services, Amazon.com, and Whole Foods Market.
• Amazon acquired PillPack, an online pharmacy that offers pre-sorted doses of medications, home delivery, and a commitment to customer service. The two companies will work together to offer customers the best possible pharmacy experience.
• Amazon announced it is increasing its hourly minimum wage to $15 in the U.S., £10.50 in the London area, and £9.50 in the rest of the U.K. The increase is for all full-time, part-time, temporary (including those hired by agencies), and seasonal employees in these locations, effective November 1. The new minimum wages will benefit more than 250,000 Amazon employees in the U.S. and 17,000 Amazon employees in the U.K. In addition, it will benefit over 100,000 seasonal employees in the U.S. and over 20,000 in the U.K. who will be hired at Amazon sites across the country this holiday. All of Amazon’s U.S. and U.K. hourly operations and customer service employees will see an increase, including those whose base wage is already at the higher minimum wage.
• Amazon announced a $10 million investment in Closed Loop Fund to support recycling infrastructure in the U.S. This investment will improve recycling for three million homes in communities across the country, diverting one million tons of recyclable material from landfill into the recycling stream and eliminating the equivalent of two million metric tons of CO2 by 2028.
• In response to Hurricanes Florence and Michael in the U.S., the Disaster Relief by Amazon team deployed more than 30 trucks with more than 600,000 Amazon-donated disaster relief items, including: bottles of water, food, supplies for children, and other essentials. In addition, thousands of Amazon customers donated items and money to the American Red Cross, Feeding America, and Save the Children through their Wish Lists, Amazon Pay, and for the first time, via Alexa.
• Amazon Web Services (AWS) announced several new customer commitments and major migrations during the quarter: DoorDash is all-in on AWS; Hubspot and Samsung Heavy Industries selected AWS as their Preferred Public Cloud Provider; and Yelp moved its master database from its own data center to AWS, completing its migration to the AWS cloud.
• Together with DXC, AWS announced a multi-year, global agreement to build a new multi-billion dollar DXC - AWS Integrated Practice that will deliver IT migration, application transformation, and business innovation to global Fortune 1000 clients. The DXC - AWS Integrated Practice will offer clients secure, cloud-first solutions that combine the breadth and depth of cloud services offered through AWS with DXC enterprise services to enable them to innovate in their industries, be more agile, and better adapt to dynamic market conditions with speed and at scale while also modernizing their operations for a digital era.
• AWS announced the general availability of new High Memory instances for Amazon Elastic Compute Cloud (Amazon EC2). Built to run large in-memory databases, including production deployments of SAP HANA, Amazon EC2 High Memory instances deliver 6 TB, 9 TB, and 12 TB of memory today, with 18 TB and 24 TB instances coming in 2019.
• AWS announced the general availability of T3 instances, the next generation of burstable general-purpose instances for Amazon EC2, providing up to 30 percent improved price performance than previous generation T2 instances. Designed for applications with variable CPU usage that experience occasional spikes in demand, T3 instances enable customers’ applications to burst seamlessly to meet temporary traffic peaks and then scale back down to operate at typical traffic levels. T3 instances feature Intel Xeon Scalable processors and support up to 5 Gbps in peak network bandwidth.
• AWS announced general availability of a high frequency instance (z1d) for Amazon EC2, as well as the next generation of memory optimized instances (R5), and memory optimized instances with local storage (R5d). z1d instances are designed for workloads requiring the highest single-thread performance along with a large amount of memory; these are workloads such as electronic design automation, relational databases, and financial simulations. R5 and R5d instances deliver improved price-per-gigabyte for memory intensive applications, such as high performance databases, in-memory caches and databases, and big data analytics.
• AWS announced the general availability of Amazon Aurora Serverless, a new deployment option for Amazon Aurora that automatically starts, scales, and shuts down database capacity with per-second billing for applications with less predictable usage patterns. Amazon Aurora Serverless offers database capacity without the need to provision, scale, and manage any servers, and brings the power of the MySQL-compatible database built for the cloud to applications with intermittent or cyclical usage patterns.
• At VMworld 2018, AWS announced Amazon Relational Database Service (Amazon RDS) on VMware. Amazon RDS on VMware is a service that will make it easy for customers to set up, operate, and scale databases in VMware-based software-defined data centers and hybrid environments and to migrate them to AWS or VMware Cloud on AWS. Available in the coming months, Amazon RDS on VMware will support Microsoft SQL Server, Oracle, PostgreSQL, MySQL, and MariaDB databases.
• Together with VMware, AWS announced the expansion of VMware Cloud on AWS into the AWS Asia Pacific (Sydney) Region, with additional regions expected to go live in Q4 including Asia Pacific (Tokyo), EU (Ireland), U.S. West (N. California), U.S. East (Ohio), and AWS GovCloud (U.S.). VMware Cloud on AWS offers customers an operationally consistent and familiar way to run, manage, and secure applications in a hybrid cloud, with access to a broad range of innovative and comprehensive AWS services and robust disaster protection. New customers include Massachusetts Institute of Technology, Playtika, and Stagecoach.
• AWS announced two more Amazon Lightsail instance sizes at the top end of the range, 16 GB and 32 GB, and reduced pricing by up to 50 percent for existing instances. Amazon Lightsail gives customers access to the power of AWS with the simplicity of a virtual private server. This marks the fourth time AWS has reduced prices thus far in 2018, and the 67th time since its inception.
• AWS announced the general availability of IoT Device Defender, a fully-managed service that helps customers keep their connected devices safe by auditing device fleets, detecting anomalous behavior, and recommending mitigations for any issues found. AWS IoT Device Defender makes it easy to maintain and enforce IoT configurations - such as ensuring device identity, authenticating and authorizing devices, and encrypting device data - while allowing customers to work at scale and in an environment that contains multiple types of devices.

Financial Guidance

The following forward-looking statements reflect Amazon.com’s expectations as of October 25, 2018, 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 2018 Guidance

• Net sales are expected to be between $66.5 billion and $72.5 billion, or to grow between 10% and 20% compared with fourth quarter 2017. This guidance anticipates an unfavorable impact of approximately 80 basis points from foreign exchange rates.
• Operating income is expected to be between $2.1 billion and $3.6 billion, compared with $2.1 billion in fourth quarter 2017.
• 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 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 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, 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 amazon.com/about and follow @AmazonNews.

Amazon.com, Inc.

Certain Definitions

Customer Accounts

• References to customers mean customer accounts, which are unique e-mail addresses, established either when a customer places an order or when a customer orders from other sellers on our websites. Customer accounts exclude certain customers, including customers associated with certain of our acquisitions, Amazon Payments customers, AWS customers, and the customers of select companies with whom we have a technology alliance or marketing and promotional relationship. Customers are considered active when they have placed an order during the preceding twelve-month period.

Seller Accounts

• References to sellers means seller accounts, which are established when a seller receives an order from a customer account. Sellers are considered active when they have received an order from a customer during the preceding twelve-month period.

AWS Customers

• References to AWS customers mean unique AWS customer accounts, which are unique customer account IDs that are eligible to use AWS services. This includes AWS accounts in the AWS free tier. Multiple users accessing AWS services via one account ID are counted as a single account. Customers are considered active when they have had AWS usage activity during the preceding one-month period.

Units

• References to units mean physical and digital units sold (net of returns and cancellations) by us and sellers at Amazon domains worldwide as well as Amazon-owned items sold through non-Amazon domains. Units sold are paid units and do not include units associated with AWS, certain acquisitions, rental businesses, or advertising businesses, or Amazon gift cards.

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Source: Amazon.com, Inc.

Amazon.com Investor Relations
Dave Fildes, amazon-ir@amazon.com
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or
Amazon.com Public Relations
Dan Perlet, amazon-pr@amazon.com
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