Amazon Revenues and Profits Analysis – 2017 Update

Amazon is a global technology leader in online retail and cloud computing. Amazon makes money primarily by selling consumer products and subscriptions through its North America and International websites. In addition, Amazon sells cloud services for on-demand delivery of IT resources and applications via Internet. In this article, we will provide an analysis of Amazon revenues and profits.

Amazon Revenues and Profits during past five years - 2012 to 2016

Amazon generated $136.0 billion of revenues during 2016, up 27.1% yoy, from $107.0 billion in 2015. Amazon reported a net income of $2.4 billion during 2016 and the net profit margin was 1.7%. Amazon revenues, revenue growth, net income, and net profit margins for the past five years are presented in the diagram below.

US Tech Top-10 - 2 Amazon - Revenues and Profits 2012 to 2016

Amazon 2016 Revenues and Profits by Business Segments

Amazon reports its revenues for the following business segments: North America, International, and AWS. Here is a brief description of these business segments:

The North America segment consists primarily of amounts earned from retail sales of consumer products (including from sellers) and subscriptions through North America-focused websites such as www.amazon.com, www.amazon.ca, and www.amazon.com.mx. This segment includes export sales from these websites.

The International segment consists primarily of amounts earned from retail sales of consumer products (including from sellers) and subscriptions through internationally-focused websites such as www.amazon.com.au, www.amazon.com.br, www.amazon.cn, www.amazon.fr, www.amazon.de, www.amazon.in, www.amazon.it, www.amazon.co.jp, www.amazon.nl, www.amazon.es, and www.amazon.co.uk. This segment includes export sales from these internationally-focused websites (including export sales from these sites to customers in the U.S., Mexico, and Canada), but excludes export sales from North American websites.

The Amazon Web Services (AWS) segment consists of amounts earned from global sales of compute, storage, database, and other AWS service offerings for start-ups, enterprises, government agencies, and academic institutions.

Amazon Business Segments Revenues 2016

Of the $136.0 billion of total net sales in 2016, Amazon generated:

  • $79.8 billion, 58.7% of the total, from the North America segment;
  • $44.0 billion, 32.3% of the total, from the International segment; and
  • $12.2 billion, 9.0% of the total, from the Amazon Web Services (AWS) segment.

Amazon Business Segments Operating Profits 2016

The operating income and operating margin of the Amazon business segments during 2016 is provided as follows:

  • North America segment had a segment operating income of $2.4 billion and a segment operating margin of 3.0%.
  • International segment had a segment operating income of -$1.3 billion and a segment operating margin of -2.9%.
  • AWS segment had a segment operating income of $3.1 billion and a segment operating margin of 25.4%.

Amazon Business Segment Revenues and Profits 2016

Amazon North America and International Segments 2016 Net Sales by Category

Amazon reports the North America and International Segments net sales by the following categories: Media, Electronics and other general merchandise, Other.

Media consists of amounts earned from retail sales from all sellers in categories such as books, movies, music, digital downloads, software and video games (including game consoles).

Electronics and Other General Merchandise consists of amounts earned from retail sales from all sellers of items in categories not included in Media, such as electronics and computers, devices, home and garden, toys, kids and baby, grocery, apparel, shoes and jewelry, health and beauty, sports and outdoors, tools, and auto and industrial.

Other consists of amounts earned from non-retail activities, such as certain advertising services and Amazon co-branded credit card agreements.

Of the $79.8 billion of net sales from North America segment in 2016, Amazon generated

  • $13.9 billion, 17.0% of the total, from Media.
  • $64.9 billion, 81.3% of the total, from Electronics and Other General Merchandise.
  • $1.3 billion, 1.7% of the total, from Other.

Of the $44.0 billion of net sales from International segment in 2016, Amazon generated

  • $10.6 billion, 24.2% of the total, from Media.
  • $33.1 billion, 75.3% of the total, from Electronics and Other General Merchandise.
  • $0.2 billion, 0.6% of the total, from Other.

Of the $136.0 billion of total net sales in 2016, Amazon generated:

  • $24.2 billion, 17.8% of the total, from Media.
  • $98.0 billion, 72.1% of the total, from Electronics and Other General Merchandise.
  • $1.6 billion, 1.1% of the total, from Other.
  • $12.2 billion, 9.0% of the total, from AWS.

Amazon Product Groups Revenue 2016

Amazon also reports revenues as per product groups. Amazon has the following product groups: Retail products, Retail third-party seller services, Retail subscription services, AWS, and Other. Here is a brief description of these product groups:

Retail Products. It includes product sales and digital media content sold on a transactional basis. Amazon offers a wide selection of consumable and durable goods that includes electronics and general merchandise as well as media products available in both a physical and digital format, such as books, music, video, games, and software.

Retail third-party seller services. It includes commissions, related fulfillment and shipping fees, and other third-party seller services.

Retail subscription services. It includes annual and monthly fees associated with Amazon Prime membership, as well as audiobook, e-book, digital video, digital music, and other subscription services.

AWS. It refers to Amazon Web Services segment.

Other. It includes sales not otherwise included above, such as certain advertising services and Amazon co-branded credit card agreements.

Of the $136.0 billion of net sales in 2016, Amazon generated:

  • $91.4 billion, 67.2% of the total, from the Retail Products group;
  • $23.0 billion, 16.9% of the total, from the Retail Third-party Seller Services;
  • $6.4 billion, 4.7% of the total, from the Retail Subscription Services;
  • $12.2 billion, 9.0% of the total, from AWS; and
  • $3.0 billion, 2.2% of the total, from Other.

Amazon 2016 Net Sales by Country

Of the $136.0 billion of net sales in 2016, Amazon generated:

  • $90.3 billion, 66.4% of the total, from the United States;
  • $14.1 billion, 10.4% of the total, from Germany;
  • $9.5 billion, 7.0% of the total, from the United Kingdom;
  • $11.0 billion, 7.9% of the total, from Japan; and
  • $11.1 billion, 8.2% of the total, from Rest of the World.

Amazon Revenues by Category Product Group and Country 2016

Amazon Key Cost Elements and Profit Margins 2016

Amazon Cost of Sales and Gross Profit Margin 2016

Amazon had $136.0 billion of total net sales in 2016.

Amazon Cost of Sales during 2016 were $88.3 billion. Cost of sales primarily consists of the purchase price of consumer products, digital media content costs, including Prime Video and Prime Music, packaging supplies, sortation and delivery centers and related equipment costs, and inbound and outbound shipping costs, including where Amazon is the transportation service provider.

Amazon gross profit was $47.7 billion and Amazon gross profit margin was 35.1% in 2016.

Amazon Other Operating Costs and Operating Profit Margin 2016

Amazon other operating costs consist of fulfillment costs, marketing costs, technology and content costs, and general and administrative expenses.

Amazon Fulfillment costs during 2016 were $17.6 billion. Fulfillment costs primarily consist of those costs incurred in operating and staffing North America and International fulfillment and customer service centers and payment processing costs.

Amazon Marketing costs during 2016 were $7.2 billion. Marketing costs primarily consists of spend on a number of targeted online marketing channels, such as Amazon Associates program, sponsored search, portal advertising, email marketing campaigns, direct sales, and other initiatives.

Amazon Technology and Content costs during 2016 were $16.1 billion. Technology costs consist principally of research and development activities including payroll and related expenses for employees involved in application, production, maintenance, operation, and platform development for new and existing products and services, as well as AWS and other technology infrastructure expenses. Content costs consist principally of payroll and related expenses for employees involved in category expansion, editorial content, buying, and merchandising selection.

Amazon General and Administrative expenses during 2016 were $2.4 billion. General and administrative expenses primarily consist of payroll and related expenses; facilities and equipment, such as depreciation expense and rent; professional fees and litigation costs; and other general corporate costs for corporate functions, including accounting, finance, tax, legal, and human resources, among others.

Amazon operating profit was $4.2 billion and Amazon operating profit margin was 3.1% in 2016.

Amazon Net Profit Margin 2016

After interest and other income/expenses and income taxes, Amazon reported a net profit of $2.4 billion and a net profit margin of 1.7% during 2016.

Amazon Costs and Profits Margins 2016