Amazon.com Inc.’s third quarter was busy—and profitable.
North America’s largest online retailer generated North American net sales of $25.45 billion in the period ended Sept. 30, up 34.9% from $18.87 billion.
International sales rose 29.2% and the Amazon Web Services (AWS) unit grew 41.8%. Sales by marketplace merchants accounted for 50% of unit sales globally, the same as a year ago.
Amazon generated $256 million in net income versus $252 million in the third quarter of 2016, with the positive income derived largely from the company’s AWS unit. Amazon’s North America segment, which includes the retail business, closed the quarter with $112 million in operating income; the international segment generated a $936 million loss. AWS generated $1.17 billion in operating income.
Amazon had an exceedingly busy quarter—the third quarter included the third iteration of Amazon Prime Day (held July 11), the now-30-hour sales day that offers special discounts to members of Amazon Prime. Amazon had 90 million Prime members as of Sept. 30, the end of the retailer’s fiscal third quarter, according to securities research firm Consumer Intelligence Research Partners, up 25 million from a year earlier. Internet Retailer estimates Amazon generated $2.41 billion in sales on Prime Day. Amazon also closed its acquisition of Whole Foods Market Inc. during the quarter and began adding Whole Foods products to Amazon.com. On the investor call reviewing the earnings, Amazon chief financial officer Brian Olsavsky said consumers can expect to see more development on the integration of Amazon services with Whole Foods, particularly for Amazon Fresh, Amazon Prime Now, Amazon Lockers and Whole Foods goods. “Whole Foods gives us a vast head start on [developing additional store formats],” Olsavsky said.
The company also announced a request for proposals for a second headquarters, leading to 238 bids from municipalities across North America. Amazon promises to invest $5 billion in construction and to bring 50,000 high-paying jobs spread out over the next 20 years to the headquarters city; Amazon will announce its selection in 2018.
Beyond these market-shifting activities, the retailer also announced or opened 10 additional fulfillment centers in the U.S.; added a host of new voice-controlled, Alexa-infused consumer electronics; and made additional investments in its high-margin AWS division.
For the fourth quarter, Amazon projects net sales of $56.0 billion to $60.5 billion. In Q4 2016, Amazon generated $43.74 billion net sales.
For the third quarter ended Sept. 30, Amazon reported:
- Net sales of $43.74 billion, up 33.7% from $32.71 billion in Q3 2016.
- North American net sales of $25.45 billion, up 34.9% from $18.87 billion.
- International net sales of $13.71 billion, an increase of 29.2% from $10.61 billion.
- Revenue from the sale of goods online was $26.39 billion. Revenue from third-party seller services was $7.93 billion, up 40.4% from $5.65 billion. This includes commissions paid to Amazon from marketplace sellers, revenue from Fulfillment by Amazon and other services. Revenue from subscriptions, including Prime fees, was $2.44 billion up 59.5% from $1.53 billion. AWS contributed $4.58 billion in revenue, up 41.8% from $3.23 billion a year ago.
- The percentage of unit sales by marketplace sellers on Amazon sites was 50% of units sold, the same as in Q3 2016.
- Worldwide shipping costs increased 38.5% to $5.40 billion from $$3.90 billion.
- Fulfillment costs increased 47.9% to $6.42 billion from $4.34 billion.
- Marketing costs increased 42.5% to $2.48 billion from $1.74 billion.
- Technology and content costs increased 43.7% to $5.940 billion from $4.135 billion.
- General and administrative costs increased 50.2% to $960 million from $639 million.
- Net income of $256 million up 1.6% from $252 million a year earlier.
For the nine months ended Sept. 30, Amazon reported:
- Net sales of $117.41 billion up 27.3% from $92.25 billion in the first nine months of 2016.
- North American net sales of $68.81 billion, up 28.5% from $53.54 billion.
- Net income of $1.17 billion, down from $1.62 billion.
Amazon is the No. 1 retailer in the Internet Retailer Top 500 Guide.