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. While we continue to evaluate the integration of Whole Foods Market within our segments, we have included Whole Foods Market in our North America and International segments based on physical location. 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, and physical stores. 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 September 30,						Nine Months Ended September 30,
	2016			2017			2016			2017
North America
Net sales	$	18,874		$	25,446		$	53,544		$	68,808
Operating expenses	18,619			25,334			51,999			67,664
Operating income	$	255		$	112		$	1,545		$	1,144

International
Net sales	$	10,609		$	13,714		$	30,019		$	36,259
Operating expenses	11,150			14,650			30,815			38,401
Operating income (loss)	$	(541	)	$	(936	)	$	(796	)	$	(2,142	)

AWS
Net sales	$	3,231		$	4,584		$	8,683		$	12,346
Operating expenses	2,370			3,413			6,501			9,369
Operating income	$	861		$	1,171		$	2,182		$	2,977

Consolidated
Net sales	$	32,714		$	43,744		$	92,246		$	117,413
Operating expenses	32,139			43,397			89,315			115,434
Operating income	575			347			2,931			1,979
Total non-operating income (expense)	(84		)	(31		)	(205		)	(44		)
Provision for income taxes	(229		)	(58		)	(1,012		)	(755		)
Equity-method investment activity, net of tax	(10		)	(2		)	(92		)	(4		)
Net income	$	252		$	256		$	1,622		$	1,176

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2017		2016		2017
Net Sales:
Online stores (1)	$	21,590	$	26,392	$	61,883	$	72,971
Physical stores (2)	—		1,276		—		1,276
Third-party seller services (3)	5,652		7,928		15,537		21,357
Subscription services (4)	1,532		2,441		4,264		6,544
AWS	3,231		4,584		8,683		12,346
Other (5)	709		1,123		1,879		2,919
Consolidated	$	32,714	$	43,744	$	92,246	$	117,413

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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, videos, 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 Subscription services.


(2)	Includes product sales where our customers physically select items in a store.


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


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


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