SEGMENT INFORMATION

We have organized our operations into three segments: North America, International, and AWS. We allocate to segment results the operating expenses “Fulfillment,” “Marketing,” “Technology and content,” and “General and administrative” based on usage, which is generally reflected in the segment in which the costs are incurred. The majority of technology infrastructure costs are allocated to the AWS segment based on usage. The majority of the remaining non-infrastructure technology costs are incurred in the U.S. and are allocated to our North America segment. In Q1 2017, we combined stock-based compensation and “Other operating expense, net” with operating expenses in our presentation of segment results. There are no internal revenue transactions between our reportable segments. These segments reflect the way our chief operating decision maker evaluates the Company’s business performance and manages its operations.

North America

The North America segment primarily consists 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.

International

The International segment primarily consists 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 our North American websites.

AWS

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

Information on reportable segments and reconciliation to consolidated net income is as follows (in millions):



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2017			2016			2017
North America
Net sales	$	17,674		$	22,370		$	34,670		$	43,362
Operating expenses	16,972			21,934			33,380			42,330
Operating income	$	702		$	436		$	1,290		$	1,032

International
Net sales	$	9,844		$	11,485		$	19,410		$	22,546
Operating expenses	9,979			12,209			19,665			23,752
Operating income (loss)	$	(135	)	$	(724	)	$	(255	)	$	(1,206	)

AWS
Net sales	$	2,886		$	4,100		$	5,452		$	7,761
Operating expenses	2,168			3,184			4,131			5,955
Operating income	$	718		$	916		$	1,321		$	1,806

Consolidated
Net sales	$	30,404		$	37,955		$	59,532		$	73,669
Operating expenses	29,119			37,327			57,176			72,037
Operating income	1,285			628			2,356			1,632
Total non-operating income (expense)	(106		)	38			(122		)	(14		)
Provision for income taxes	(307		)	(467		)	(782		)	(695		)
Equity-method investment activity, net of tax	(15		)	(2		)	(82		)	(2		)
Net income	$	857		$	197		$	1,370		$	921

Net sales by groups of similar products and services is as follows (in millions):



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2017		2016		2017
Net Sales:
Retail products (1)	$	20,378	$	23,754	$	40,293	$	46,580
Retail third-party seller services (2)	5,083		6,991		9,885		13,429
Retail subscription services (3)	1,431		2,165		2,732		4,104
AWS	2,886		4,100		5,452		7,761
Other (4)	626		945		1,170		1,795
Consolidated	$	30,404	$	37,955	$	59,532	$	73,669

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(1)

Includes product sales and digital media content where we record revenue gross. We leverage our retail infrastructure to offer 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. These product sales include digital products sold on a transactional basis; digital product subscriptions that provide unlimited viewing or usage rights are included in Retail subscription services.


(2)	Includes commissions, related fulfillment and shipping fees, and other third-party seller services.


(3)	Includes annual and monthly fees associated with Amazon Prime membership, as well as audiobook, e-book, digital video, digital music, and other subscription services.


(4)	Includes sales not otherwise included above, such as certain advertising services and our co-branded credit card agreements.