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Amazon Earnings Out, Sales up 22%

Amazon just announced its earnings for Q4 with sales up 22% to $35.7 billion. Operating cash flow was up 74% to $11.9 billion over the year with free cash flow up to $7.3 billion. EPS was $1, which wa...
Amazon Earnings Out, Sales up 22%
Written by Chris Crum
Thursday, January 28, 2016

    • Amazon just announced its earnings for Q4 with sales up 22% to $35.7 billion.

    Operating cash flow was up 74% to $11.9 billion over the year with free cash flow up to $7.3 billion.

    EPS was $1, which was significantly lower than Wall Street expectations.

    CEO Jeff Bezos said, “Twenty years ago, I was driving the packages to the post office myself and hoping we might one day afford a forklift. This year, we pass $100 billion in annual sales and serve 300 million customers. And still, measured by the dynamism we see everywhere in the marketplace and by the ever-expanding opportunities we see to invent on behalf of customers, it feels every bit like Day 1.”

    Here’s the release in its entirety:

    SEATTLE–(BUSINESS WIRE)–Jan. 28, 2016– Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its fourth quarter ended December 31, 2015.

    Operating cash flow increased 74% to $11.9 billion for the trailing twelve months, compared with $6.8 billion for the trailing twelve months ended December 31, 2014. Free cash flow increased to $7.3 billion for the trailing twelve months, compared with $1.9 billion for the trailing twelve months ended December 31, 2014. Free cash flow less lease principal repayments increased to $4.7 billion for the trailing twelve months, compared with $529 million for the trailing twelve months ended December 31, 2014. Free cash flow less finance lease principal repayments and assets acquired under capital leases increased to $2.5 billion for the trailing twelve months, compared with an outflow of $2.2 billion for the trailing twelve months ended December 31, 2014.

    Common shares outstanding plus shares underlying stock-based awards totaled 490 million on December 31, 2015, compared with 483 million one year ago.

    Fourth Quarter 2015

    Net sales increased 22% to $35.7 billion in the fourth quarter, compared with $29.3 billion in fourth quarter 2014. Excluding the $1.2 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 26% compared with fourth quarter 2014.

    Operating income increased 88% to $1.1 billion in the fourth quarter, compared with operating income of $591 million in fourth quarter 2014.

    Net income was $482 million in the fourth quarter, or $1.00 per diluted share, compared with net income of $214 million, or$0.45 per diluted share, in fourth quarter 2014.

    Full Year 2015

    Net sales increased 20% to $107.0 billion, compared with $89.0 billion in 2014. Excluding the $5.2 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the year, net sales increased 26% compared with 2014.

    Operating income was $2.2 billion, compared with operating income of $178 million in 2014.

    Net income was $596 million, or $1.25 per diluted share, compared with net loss of $241 million, or $0.52 per diluted share, in 2014.

    “Twenty years ago, I was driving the packages to the post office myself and hoping we might one day afford a forklift. This year, we pass $100 billion in annual sales and serve 300 million customers,” said Jeff Bezos, founder and CEO of Amazon.com. “And still, measured by the dynamism we see everywhere in the marketplace and by the ever-expanding opportunities we see to invent on behalf of customers, it feels every bit like Day 1.”

    Highlights

    • Fire TV remains the #1 best-selling streaming media player in the U.S., having added over 1,000 new apps, channels, and games since September, including NBC, NBC Sports, Watch HGTV, Watch Food Network, and Watch Travel Channel.
    • The $50 Fire tablet has been the #1 best-selling, most gifted, and most wished-for product across all items available on Amazon.com since its introduction 19 weeks ago.
    • The Alexa Skills Kit and Alexa Voice Service continue to attract innovative companies, with Ford, Invoxia, Vivint,Alarm.com, and Ooma announcing plans to integrate their products and services with Alexa. In addition, Alexa continues to get smarter with new features, including local search from Yelp, news sources from CNN andBloomberg, enhanced IFTTT support, new alarm tones, and customized sports updates.
    • Last quarter, developers added over 100 new capabilities to Alexa-enabled devices. Amazon Echo and Fire TV customers can now play Jeopardy!, get stock quotes with Fidelity, hear headlines from The Huffington Post, exercise with a seven-minute workout, and test their Star Wars knowledge with a trivia quiz from Disney.
    • Amazon announced the first devices available with Amazon Dash Replenishment Service, including products from Brother, GE, and Gmate. Additionally, new brands and devices have joined the Dash Replenishment program, including Purell and Whirlpool.
    • In 2015, worldwide paid Prime memberships increased 51% — 47% in the U.S. and even faster outside the U.S.
    • Prime Video continues to grow internationally with nearly double the streaming customers compared with fourth quarter 2014.
    • The Prime-exclusive Original Series Mozart in the Jungle received two Golden Globes for Best Television Series – Musical or Comedy and Best Performance by an Actor in a Television Series – Musical or Comedy (Gael García Bernal).
    • Over the holidays Prime members made The Man in The High Castle the most watched series on Prime Video by 4.5x. The Amazon Original Series received outstanding critical acclaim, including USA Today calling it the “best new drama of the season.”
    • The second season of hit show Transparent was named as one of the top television series of 2015 by The New York Times, Variety, IndieWire, and The New Yorker.
    • Amazon Studios released its first Original Movie Chi-Raq, directed by Spike Lee, to rave reviews. The film has been included in 2015 “Best Films” lists from LA Weekly, The New Yorker, The Washington Post, Los Angeles Times, Slant, and Vulture.
    • Amazon launched the Streaming Partners Program, an over-the-top streaming subscription program that gives Prime members the option to add SHOWTIME, STARZ, and dozens more video subscriptions to their Prime membership.
    • In the fourth quarter, Prime Music streaming hours more than tripled in the U.S. compared with fourth quarter 2014.
    • Prime Music launched in Germany and Japan, offering Prime members more than one million songs and hundreds of playlists at no additional cost to their membership.
    • Since launching in December 2014 with one location, Prime Now has grown to more than 25 metropolitan areas across the U.S., U.K., Italy, and Japan.
    • Prime Same Day launched in the U.K. and Germany, offering Prime members unlimited free same-day delivery on a million items.
    • Amazon Pantry launched in the U.K., allowing Prime members to purchase daily essentials in everyday sizes and have items delivered for a low, flat-rate fee.
    • In 2015, Fulfillment by Amazon (FBA) shipped over one billion units on behalf of sellers. The number of active sellers using FBA grew more than 50%.
    • In the fourth quarter, FBA units represented nearly 50% of total third-party units.
    • Payment volume from Pay with Amazon grew more than 150% year-over-year in 2015, giving Amazon shoppers a secure way to pay on thousands of websites using information already stored in their Amazon accounts.
    • Amazon China launched the Amazon Global Store (AGS) 2.0 customer experience, which provides customers an easier and more convenient shopping experience through single login, unified shopping cart, and local payment. Additionally, AGS selection has grown to over nine million items.
    • Amazon.in was the top e-commerce site in India throughout the fourth quarter, including the busy Diwali shopping season, according to global analytics firm comScore.
    • Downloads of the Amazon.in mobile shopping app grew faster in the fourth quarter than any other e-commerce app in India, according to app analytics firm App Annie.
    • Sellers on Amazon.in sold more in the fourth quarter than in all four quarters combined in 2014.
    • Amazon Fashion, East Dane, and MyHabit return as the lead sponsor for the second season of New York Fashion Week: Men’s, hosted by The Council of Fashion Designers of America.
    • Amazon Launchpad, a program that helps startups launch, market, and distribute their products, has worked with leading venture capital firms, startup accelerators, and crowd-funding platforms to help more than 500 startups launch over 750 products in the U.S., U.K., and China.
    • Amazon entered into an agreement to support the construction and operation of Amazon Wind Farm U.S. Central, which is expected to generate approximately 320,000 megawatt hours (MWh) of wind energy on an annual basis. Amazon Wind Farm U.S. Central, combined with Amazon’s previously announced projects, Amazon Wind Farm Fowler Ridge, Amazon Solar Farm U.S. East in Virginia, and Amazon Wind Farm U.S. East in North Carolina, will be responsible for delivering more than 1.6 million MWh of additional renewable energy annually, roughly equivalent to the amount of energy required to power 150,000 U.S. homes for a year.
    • Only eight months after launch, Amazon Business, a marketplace with features and benefits tailored to businesses, serves more than 200,000 businesses ranging from small businesses to Fortune 500 companies.
    • Amazon Web Services (AWS) announced the launch of its Asia Pacific (Seoul) Region in Korea and its plans to open a new region in Canada. The AWS Cloud is now available from 32 Availability Zones across 12 geographic regions worldwide, with another five AWS Regions (and 11 Availability Zones) in Canada, China, India, Ohio, and the U.K. expected to be available in the coming year.
    • AWS announced the general availability of Amazon WorkMail, a secure, managed business email and calendaring service with support for existing desktop and mobile email clients.
    • AWS announced the general availability of AWS IoT, a managed cloud platform that lets billions of connected devices — such as mobile phones, cars, factory floors, aircraft engines, sensor grids, and more — easily and securely interact with cloud applications and other devices. AWS IoT can support trillions of messages, and can process, route, and keep track of those messages to AWS endpoints and other devices reliably and securely, even when the devices aren’t connected.
    • AWS announced AWS Certificate Manager (ACM), a new service that enables customers to easily provision, manage, and deploy Secure Sockets Layer/Transport Layer Security (SSL/TLS) certificates for use with AWS services. SSL/TLS certificates are used to secure network communications and establish the identity of websites over the Internet. Certificates, which typically cost between $45 and $499, are provided to AWS customers free of charge through ACM and are verified by Amazon’s certificate authority, Amazon Trust Services.
    • AWS launched EC2 Scheduled Reserved Instances, allowing customers to reserve capacity for their applications that run on a part-time, recurring basis with a daily, weekly, or monthly schedule over the course of a one-year term.
    • AWS announced 722 significant new services and features in 2015, a 40% increase over 2014.

    Financial Guidance

    The following forward-looking statements reflect Amazon.com’s expectations as of January 28, 2016, 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 and online commerce, and the various factors detailed below.

    First Quarter 2016 Guidance

    • Net sales are expected to be between $26.5 billion and $29.0 billion, or to grow between 17% and 28% compared with first quarter 2015.
    • Operating income is expected to be between $100 million and $700 million, compared with $255 million in first quarter 2015.
    • This guidance includes approximately $600 million for stock-based compensation and other operating expense (income), net. It assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded and that there are no further revisions to stock-based compensation estimates.

    A conference call will be webcast live today at 2:00 p.m. PT/5:00 p.m. ET, and will be available for at least three months atwww.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 sold to customers, the mix of net sales derived from products as compared with services, the extent to which we owe income 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, 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 theSEC, 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.com opened on the World Wide Web in July 1995. The company 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 byAmazon. For more information, visit www.amazon.com/about.

    AMAZON.COM, INC.
    Consolidated Statements of Cash Flows
    (in millions)
    Three Months Ended Twelve Months Ended
    December 31, December 31,
    2015 2014 2015

    2014
    (unaudited)
    CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 10,709 $ 5,258 $ 14,557 $ 8,658
    OPERATING ACTIVITIES:
    Net income (loss) 482 214 596 (241 )
    Adjustments to reconcile net income (loss) to net cash from operating activities:
    Depreciation of property and equipment, including internal-use software and website development, and other amortization, including capitalized content costs 1,752 1,379 6,281 4,746
    Stock-based compensation 606 408 2,119 1,497
    Other operating expense (income), net 35 36 155 129
    Losses (gains) on sales of marketable securities, net 1 — 5 (3 )
    Other expense (income), net 79 78 245 62
    Deferred income taxes 190 185 81 (316 )
    Excess tax benefits from stock-based compensation 93 115 (119 ) (6 )
    Changes in operating assets and liabilities:
    Inventories (1,343 ) (1,139 ) (2,187 ) (1,193 )
    Accounts receivable, net and other (1,178 ) (1,104 ) (1,755 ) (1,039 )
    Accounts payable 6,140 5,053 4,294 1,759
    Accrued expenses and other 1,836 1,451 913 706
    Additions to unearned revenue 2,422 1,378 7,401 4,433
    Amortization of previously unearned revenue (2,303 ) (1,339 ) (6,109 ) (3,692 )
    Net cash provided by (used in) operating activities 8,812 6,715 11,920 6,842
    INVESTING ACTIVITIES:
    Purchases of property and equipment, including internal-use software and website development, net (1,309 ) (1,144 ) (4,589 ) (4,893 )
    Acquisitions, net of cash acquired, and other (317 ) (53 ) (795 ) (979 )
    Sales and maturities of marketable securities 1,135 355 3,025 3,349
    Purchases of marketable securities (1,359 ) (1,623 ) (4,091 ) (2,542 )
    Net cash provided by (used in) investing activities (1,850 ) (2,465 ) (6,450 ) (5,065 )
    FINANCING ACTIVITIES:
    Excess tax benefits from stock-based compensation (93 ) (115 ) 119 6
    Proceeds from long-term debt and other 93 5,981 353 6,359
    Repayments of long-term debt and other (940 ) (183 ) (1,652 ) (513 )
    Principal repayments of capital lease obligations (724 ) (406 ) (2,462 ) (1,285 )
    Principal repayments of finance lease obligations (26 ) (68 ) (121 ) (135 )
    Net cash provided by (used in) financing activities (1,690 ) 5,209 (3,763 ) 4,432
    Foreign-currency effect on cash and cash equivalents (91 ) (160 ) (374 ) (310 )
    Net increase (decrease) in cash and cash equivalents 5,181 9,299 1,333 5,899
    CASH AND CASH EQUIVALENTS, END OF PERIOD $ 15,890 $ 14,557 $ 15,890 $ 14,557
    SUPPLEMENTAL CASH FLOW INFORMATION:
    Cash paid for interest on long-term debt $ 148 $ 36 $ 325 $ 91
    Cash paid for interest on capital and finance lease obligations 44 29 153 86
    Cash paid for income taxes (net of refunds) 73 30 273 177
    Property and equipment acquired under capital leases 1,332 1,214 4,717 4,008
    Property and equipment acquired under build-to-suit leases 163 214 544 920
    AMAZON.COM, INC.
    Consolidated Statements of Operations
    (in millions, except per share data)
    Three Months Ended Twelve Months Ended
    December 31, December 31,
    2015 2014 2015 2014
    (unaudited)
    Net product sales $ 26,618 $ 23,102 $ 79,268 $ 70,080
    Net service sales 9,129 6,226 27,738 18,908
    Total net sales 35,747 29,328 107,006 88,988
    Operating expenses (1):
    Cost of sales 24,341 20,671 71,651 62,752
    Fulfillment 4,546 3,424 13,410 10,766
    Marketing 1,755 1,526 5,254 4,332
    Technology and content 3,571 2,635 12,540 9,275
    General and administrative 390 442 1,747 1,552
    Other operating expense (income), net 36 39 171 133
    Total operating expenses 34,639 28,737 104,773 88,810
    Income from operations 1,108 591 2,233 178
    Interest income 13 8 50 39
    Interest expense (115 ) (74 ) (459 ) (210 )
    Other income (expense), net (68 ) (96 ) (256 ) (118 )
    Total non-operating income (expense) (170 ) (162 ) (665 ) (289 )
    Income (loss) before income taxes 938 429 1,568 (111 )
    Provision for income taxes (453 ) (205 ) (950 ) (167 )
    Equity-method investment activity, net of tax (3 ) (10 ) (22 ) 37
    Net income (loss) $ 482 $ 214 $ 596 $ (241 )
    Basic earnings per share $ 1.03 $ 0.46 $ 1.28 $ (0.52 )
    Diluted earnings per share $ 1.00 $ 0.45 $ 1.25 $ (0.52 )
    Weighted-average shares used in computation of earnings per share:
    Basic 470 464 467 462

    Diluted

    		 481 472 477 462

    ______________________________
    (1) Includes stock-based compensation as follows:
    Fulfillment $ 137 $ 97 $ 482 $ 375
    Marketing 57 34 190 125
    Technology and content 364 226 1,224 804
    General and administrative 48 51 223 193
    AMAZON.COM, INC.
    Consolidated Statements of Comprehensive Income (Loss)
    (in millions)

    Three Months Ended

    		 Twelve Months Ended
    December 31, December 31,
    2015 2014 2015 2014
    (unaudited)
    Net income (loss) $ 482 $ 214 $ 596 $ (241 )
    Other comprehensive income (loss):
    Foreign currency translation adjustments, net of tax of $7, $(3), $10, and $(3) (40 ) (116 ) (210 ) (325 )
    Net change in unrealized gains (losses) on available-for-sale securities:
    Unrealized gains (losses), net of tax of $1, $1, $(5), and $1 (9 ) 2 (7 ) 2
    Reclassification adjustment for losses (gains) included in “Other income (expense), net,” net of tax of $0, $(1), $0, and $(1) 1 (2 ) 5 (3 )
    Net unrealized gains (losses) on available-for-sale securities (8 ) — (2 ) (1 )
    Total other comprehensive income (loss) (48 ) (116 ) (212 ) (326 )
    Comprehensive income (loss) $ 434 $ 98 $ 384 $ (567 )
    AMAZON.COM, INC.
    Segment Information
    (in millions)
    Three Months Ended Twelve Months Ended
    December 31, December 31,
    2015 2014 2015 2014
    (unaudited)
    North America
    Net sales $ 21,501 $ 17,333 $ 63,708 $ 50,834
    Segment operating expenses (1) 20,498 16,600 60,957 49,542
    Segment operating income (loss) $ 1,003 $ 733 $ 2,751 $ 1,292
    International
    Net sales $ 11,841 $ 10,575 $ 35,418 $ 33,510
    Segment operating expenses (1) 11,781 10,510 35,509 33,654
    Segment operating income (loss) $ 60 $ 65 $ (91 ) $ (144 )
    AWS
    Net sales $ 2,405 $ 1,420 $ 7,880 $ 4,644
    Segment operating expenses (1) 1,718 1,180 6,017 3,984
    Segment operating income (loss) $ 687 $ 240 $ 1,863 $ 660
    Consolidated
    Net sales $ 35,747 $ 29,328 $ 107,006 $ 88,988
    Segment operating expenses (1) 33,997 28,290 102,483 87,180
    Segment operating income (loss) 1,750 1,038 4,523 1,808
    Stock-based compensation (606 ) (408 ) (2,119 ) (1,497 )
    Other operating income (expense), net (36 ) (39 ) (171 ) (133 )
    Income from operations 1,108 591 2,233 178
    Total non-operating income (expense) (170 ) (162 ) (665 ) (289 )
    Provision for income taxes (453 ) (205 ) (950 ) (167 )
    Equity-method investment activity, net of tax (3 ) (10 ) (22 ) 37
    Net income (loss) $ 482 $ 214 $ 596 $ (241 )
    Segment Highlights:
    Y/Y net sales growth:
    North America 24 % 21 % 25 % 23 %
    International 12 3 6 12
    AWS 69 47 70 49
    Consolidated 22 15 20 20
    Net sales mix:
    North America 60 % 59 % 60 % 57 %
    International 33 36 33 38
    AWS 7 5 7 5
    Consolidated 100 % 100 % 100 % 100 %

    ______________________________

    (1) Excludes stock-based compensation and “Other operating expense (income), net,” which are not allocated to segments.
    AMAZON.COM, INC.
    Supplemental Net Sales Information
    (in millions)
    Three Months Ended Twelve Months Ended
    December 31, December 31,
    2015 2014 2015 2014
    (unaudited)
    Net Sales:
    North America
    Media $ 3,931 $ 3,544 $ 12,483 $ 11,567
    Electronics and other general merchandise 17,325 13,529 50,401 38,517
    Other (1) 245 260 824 750
    Total North America $ 21,501 $ 17,333 $ 63,708 $ 50,834
    International
    Media $ 3,292 $ 3,406 $ 10,026 $ 10,938
    Electronics and other general merchandise 8,491 7,109 25,196 22,369
    Other (1) 58 60 196 203
    Total International $ 11,841 $ 10,575 $ 35,418 $ 33,510
    Year-over-year Percentage Growth:
    North America
    Media 11 % 1 % 8 % 7 %
    Electronics and other general merchandise 28 27 31 28
    Other (6 ) 28 10 22
    Total North America 24 21 25 23
    International
    Media (3 )% (8 )% (8 )% — %
    Electronics and other general merchandise 19 10 13 19
    Other (3 ) (6 ) (3 ) (3 )
    Total International 12 3 6 12
    Year-over-year Percentage Growth, excluding the effect of foreign exchange rates:
    North America
    Media 12 % 1 % 8 % 7 %
    Electronics and other general merchandise 28 27 31 29
    Other (6 ) 28 10 22
    Total North America 24 21 26 23
    International
    Media 5 % (1 )% 4 % 2 %
    Electronics and other general merchandise 31 19 29 21
    Other 5 1 10 (3 )
    Total International 22 12 21 14

    ______________________________

    (1) Includes sales from non-retail activities, such as certain advertising services and our co-branded credit card agreements.
    AMAZON.COM, INC.
    Consolidated Balance Sheets
    (in millions, except per share data)
    December 31, 2015 December 31, 2014
    ASSETS
    Current assets:
    Cash and cash equivalents $ 15,890 $ 14,557
    Marketable securities 3,918 2,859
    Inventories 10,243 8,299
    Accounts receivable, net and other 6,423 5,612
    Total current assets 36,474 31,327
    Property and equipment, net 21,838 16,967
    Goodwill 3,759 3,319
    Other assets 3,373 2,892
    Total assets $ 65,444 $ 54,505
    LIABILITIES AND STOCKHOLDERS’ EQUITY
    Current liabilities:
    Accounts payable $ 20,397 $ 16,459
    Accrued expenses and other 10,384 9,807
    Unearned revenue 3,118 1,823
    Total current liabilities 33,899 28,089
    Long-term debt 8,235 8,265
    Other long-term liabilities 9,926 7,410
    Commitments and contingencies
    Stockholders’ equity:
    Preferred stock, $0.01 par value:
    Authorized shares — 500
    Issued and outstanding shares — none — —
    Common stock, $0.01 par value:
    Authorized shares — 5,000
    Issued shares — 494 and 488
    Outstanding shares — 471 and 465 5 5
    Treasury stock, at cost (1,837 ) (1,837 )
    Additional paid-in capital 13,394 11,135
    Accumulated other comprehensive loss (723 ) (511 )
    Retained earnings 2,545 1,949
    Total stockholders’ equity 13,384 10,741
    Total liabilities and stockholders’ equity $ 65,444 $ 54,505
    AMAZON.COM, INC.
    Supplemental Financial Information and Business Metrics
    (in millions, except per share data)
    (unaudited)

    		Y/Y %
    Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Change
    Cash Flows and Shares
    Operating cash flow — trailing twelve months (TTM) $ 6,842 $ 7,845 $ 8,980 $ 9,823 $ 11,920 74 %
    Operating cash flow — TTM Y/Y growth (decline) 25 % 47 % 69 % 72 % 74 % N/A
    Purchases of property and equipment, including internal-use software and website development, net — TTM $ 4,893 $ 4,684 $ 4,607 $ 4,424 $ 4,589

    (6

    )%
    Principal repayments of capital lease obligations — TTM $ 1,285 $ 1,537 $ 1,832 $ 2,144 $ 2,462 92 %
    Principal repayments of finance lease obligations — TTM $ 135 $ 132 $ 155 $ 163 $ 121 (11 )%
    Property and equipment acquired under capital leases — TTM $ 4,008 $ 4,246 $ 4,710 $ 4,599 $ 4,717 18 %
    Free cash flow — TTM (1) $ 1,949 $ 3,161 $ 4,373 $ 5,399 $ 7,331 276 %
    Invested capital (2) $ 21,021 $ 23,090 $ 25,289 $ 27,425 $ 29,694 41 %
    Free cash flow less lease principal repayments — TTM (3) $ 529 $ 1,492 $ 2,386 $ 3,092 $ 4,748 797 %
    Free cash flow less finance lease principal repayments and assets acquired under capital leases — TTM (4) $ (2,194 ) $ (1,217 ) $ (492 ) $ 637 $ 2,493 N/A
    Common shares and stock-based awards outstanding 483 483 488 489 490 1 %
    Common shares outstanding 465 466 468 469 471 1 %
    Stock-based awards outstanding 18 17 20 20 19 7 %
    Stock-based awards outstanding — % of common shares outstanding 3.8 % 3.8 % 4.4 % 4.3 % 4.1 % N/A
    Results of Operations
    Worldwide (WW) net sales $ 29,328 $ 22,717 $ 23,185 $ 25,358 $ 35,747 22 %
    WW net sales — Y/Y growth, excluding F/X 18 % 22 % 27 % 30 % 26 % N/A
    WW net sales — TTM $ 88,988 $ 91,963 $ 95,808 $ 100,588 $ 107,006 20 %
    WW net sales — TTM Y/Y growth, excluding F/X 20 % 20 % 22 % 24 % 26 % N/A
    Operating income (loss) $ 591 $ 255 $ 464 $ 406 $ 1,108 88 %
    Operating income/loss — Y/Y growth (decline), excluding F/X 22 % 90 % N/A N/A 84 % N/A
    Operating margin — % of WW net sales 2.0 % 1.1 % 2.0 % 1.6 % 3.1 % N/A
    Operating income (loss) — TTM $ 178 $ 287 $ 765 $ 1,715 $ 2,233 N/A
    Operating income/loss — TTM Y/Y growth (decline), excluding F/X (79 )% (56 )% 35 % N/A N/A N/A
    Operating margin — TTM % of WW net sales 0.2 % 0.3 % 0.8 % 1.7 % 2.1 % N/A
    Net income (loss) $ 214 $ (57 ) $ 92 $ 79 $ 482 125 %
    Net income (loss) per diluted share $ 0.45 $ (0.12 ) $ 0.19 $ 0.17 $ 1.00 121 %
    Net income (loss) — TTM $ (241 ) $ (405 ) $ (188 ) $ 328 $ 596 N/A
    Net income (loss) per diluted share — TTM $ (0.52 ) $ (0.88 ) $ (0.41 ) $ 0.69 $ 1.25 N/A

    ______________________________

    (1) Free cash flow is cash flow from operations reduced by “Purchases of property and equipment, including internal-use software and website development, net” which is included in cash flow from investing activities.

    (2) Average Total Assets minus Current Liabilities (excluding current portion of Long-Term Debt) over five quarter ends.

    (3) Free cash flow less lease principal repayments is free cash flow reduced by “Principal repayments of capital lease obligations,” and “Principal repayments of finance lease obligations,” which are included in cash flow from financing activities.

    (4) Free cash flow less finance lease principal repayments and assets acquired under capital leases is free cash flow reduced by “Principal repayments of finance lease obligations,” which are included in cash flow from financing activities, and property and equipment acquired under capital leases. In this measure, property and equipment acquired under capital leases is reflected as if these assets had been purchased with cash, which is not the case as these assets have been leased.
    AMAZON.COM, INC.
    Supplemental Financial Information and Business Metrics
    (in millions)
    (unaudited)
    Y/Y %
    Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Change
    Segments
    North America Segment:
    Net sales $ 17,333 $ 13,406 $ 13,796 $ 15,006 $ 21,501 24 %
    Net sales — Y/Y growth, excluding F/X 21 % 24 % 26 % 29 % 24 % N/A
    Net sales — TTM $ 50,834 $ 53,432 $ 56,233 $ 59,540 $ 63,708 25 %
    Operating income (loss) $ 733 $ 517 $ 703 $ 528 $ 1,003 37 %
    Operating income/loss — Y/Y growth (decline), excluding F/X 77 % 111 % N/A 36 % N/A
    Operating margin — % of North America net sales 4.2 % 3.9 % 5.1 % 3.5 % 4.7 % N/A
    Operating income (loss) — TTM $ 1,292 $ 1,520 $ 1,893 $ 2,480 $ 2,751 113 %
    Operating margin — TTM % of North America net sales 2.5 % 2.8 % 3.4 % 4.2 % 4.3 % N/A
    International Segment:
    Net sales $ 10,575 $ 7,745 $ 7,565 $ 8,267 $ 11,841 12 %
    Net sales — Y/Y growth, excluding F/X 12 % 14 % 22 % 24 % 22 % N/A
    Net sales — TTM $ 33,510 $ 33,371 $ 33,598 $ 34,154 $ 35,418 6 %
    Net sales — TTM % of WW net sales 38 % 36 % 35 % 34 % 33 % N/A
    Operating income (loss) $ 65 $ (76 ) $ (19 ) $ (56 ) $ 60 (7 )%
    Operating income/loss — Y/Y growth (decline), excluding F/X N/A N/A N/A 65 % N/A
    Operating margin — % of International net sales 0.6 % (1.0 )% (0.2 )% (0.7 )% 0.5 % N/A
    Operating income (loss) — TTM $ (144 ) $ (188 ) $ (205 ) $ (86 ) $ (91 ) (36 )%
    Operating margin — TTM % of International net sales (0.4 )% (0.6 )% (0.6 )% (0.3 )% (0.3 )% N/A
    AWS Segment:
    Net sales $ 1,420 $ 1,566 $ 1,824 $ 2,085 $ 2,405 69 %
    Net sales — Y/Y growth, excluding F/X 47 % 49 % 81 % 78 % 69 % N/A
    Net sales — TTM $ 4,644 $ 5,160 $ 5,977 $ 6,894 $ 7,880 70 %
    Net sales — TTM % of WW net sales 5 % 6 % 6 % 7 % 7 % N/A
    Operating income (loss) $ 240 $ 265 $ 391 $ 521 $ 687 186 %
    Operating income/loss — Y/Y growth (decline), excluding F/X (13 )% 314 % 353 % 161 % N/A
    Operating margin — % of AWS net sales 16.9 % 16.9 % 21.4 % 25.0 % 28.5 % N/A
    Operating income (loss) — TTM $ 660 $ 680 $ 993 $ 1,417 $ 1,863 182 %
    Operating margin — TTM % of AWS net sales 14.2 % 13.2 % 16.6 % 20.6 % 23.6 % N/A
    Consolidated Segments:
    Operating expenses (5) $ 28,290 $ 22,011 $ 22,110 $ 24,365 $ 33,997 20 %
    Operating expenses — TTM (5) $ 87,180 $ 89,951 $ 93,126 $ 96,777 $ 102,483 18 %
    Operating income (loss) $ 1,038 $ 706 $ 1,075 $ 993 $ 1,750 69 %
    Operating income/loss — Y/Y growth (decline), excluding F/X 22 % 45 % 168 % N/A 67 % N/A
    Operating margin — % of Consolidated sales 3.5 % 3.1 % 4.6 % 3.9 % 4.9 % N/A
    Operating income (loss) — TTM $ 1,808 $ 2,012 $ 2,682 $ 3,811 $ 4,523 150 %
    Operating income/loss — TTM Y/Y growth (decline), excluding F/X (10 )% (1 )% 34 % 134 % 149 % N/A
    Operating margin — TTM % of Consolidated net sales 2.0 % 2.2 % 2.8 % 3.8 % 4.2 % N/A

    ______________________________

    (5) Represents cost of sales, fulfillment, marketing, technology and content, and general and administrative operating expenses, excluding stock-based compensation.
    AMAZON.COM, INC.
    Supplemental Financial Information and Business Metrics
    (in millions, except inventory turnover, accounts payable days and employee data)
    (unaudited)
    Y/Y %
    Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Change
    Supplemental
    Supplemental North America Segment Net Sales:
    Media $ 3,544 $ 2,969 $ 2,620 $ 2,963 $ 3,931 11 %
    Media — Y/Y growth, excluding F/X 1 % 5 % 7 % 9 % 12 % N/A
    Media — TTM $ 11,567 $ 11,711 $ 11,867 $ 12,096 $ 12,483 8 %
    Electronics and other general merchandise $ 13,529 $ 10,250 $ 10,987 $ 11,840 $ 17,325 28 %
    Electronics and other general merchandise — Y/Y growth, excluding F/X 27 % 31 % 32 % 35 % 28 % N/A
    Electronics and other general merchandise — TTM $ 38,517 $ 40,938 $ 43,559 $ 46,606 $ 50,401 31 %
    Electronics and other general merchandise — TTM % of North America net sales 76 % 77 % 77 % 78 % 79 % N/A
    Other $ 260 $ 187 $ 189 $ 203 $ 245 (6 )%
    Supplemental International Segment Net Sales:
    Media $ 3,406 $ 2,320 $ 2,094 $ 2,320 $ 3,292 (3 )%
    Media — Y/Y growth, excluding F/X (1 )% 2 % 3 % 6 % 5 % N/A
    Media — TTM $ 10,938 $ 10,615 $ 10,329 $ 10,140 $ 10,026 (8 )%
    Electronics and other general merchandise $ 7,109 $ 5,378 $ 5,425 $ 5,901 $ 8,491 19 %
    Electronics and other general merchandise — Y/Y growth, excluding F/X 19 % 21 % 31 % 32 % 31 % N/A
    Electronics and other general merchandise — TTM $ 22,369 $ 22,559 $ 23,072 $ 23,814 $ 25,196 13 %
    Electronics and other general merchandise — TTM % of International net sales 67 % 68 % 69 % 70 % 71 % N/A
    Other $ 60 $ 47 $ 46 $ 46 $ 58 (3 )%
    Balance Sheet
    Cash and marketable securities — ending $ 17,416 $ 13,781 $ 14,001 $ 14,428 $ 19,808 14 %
    Inventory, net — ending $ 8,299 $ 7,369 $ 7,470 $ 8,981 $ 10,243 23 %
    Inventory turnover, average — TTM 8.6 8.8 8.9 8.6 8.5 (2 )%
    Property and equipment, net — ending $ 16,967 $ 17,736 $ 19,479 $ 20,636 $ 21,838 29 %
    Accounts payable — ending $ 16,459 $ 11,917 $ 12,391 $ 14,437 $ 20,397 24 %
    Accounts payable days — ending 73 70 74 79 77 5 %
    Other
    WW shipping revenue $ 1,701 $ 1,299 $ 1,399 $ 1,494 $ 2,328 37 %
    WW shipping revenue – % of net sales (6) 6.1 % 6.1 % 6.6 % 6.4 % 7.0 % N/A
    WW shipping costs $ 3,049 $ 2,309 $ 2,340 $ 2,720 $ 4,170 37 %
    WW shipping costs – % of net sales (6) 10.9 % 10.9 % 11.0 % 11.7 % 12.5 % N/A
    WW net shipping costs $ 1,348 $ 1,010 $ 941 $ 1,226 $ 1,842 37 %
    WW net shipping costs — % of WW net sales (6) 4.8 % 4.8 % 4.4 % 5.3 % 5.5 % N/A
    WW paid units — Y/Y growth 20 % 20 % 22 % 26 % 26 % N/A
    WW seller unit mix — % of WW paid units 43 % 44 % 45 % 46 % 47 % N/A
    Employees (full-time and part-time; excludes contractors & temporary personnel) 154,100 165,000 183,100 222,400 230,800 50 %

    ______________________________

    (6) Includes North America and International segment net sales.

    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 e-mail addresses that are eligible to use AWS services. This includes AWS accounts in the AWS free tier. Multiple users accessing AWS services via one account are counted as a single account. Customers are considered active when they have had AWS usage activity during the preceding one-month period.

    Units

    Source: Amazon.com, Inc.

    Image via Amazon

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