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. The results of Whole Foods Market are included 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 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. 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 America-focused 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,
	2017			2018			2017			2018
North America
Net sales	$	22,370		$	32,169		$	43,362		$	62,894
Operating expenses	21,934			30,334			42,330			59,910
Operating income	$	436		$	1,835		$	1,032		$	2,984

International
Net sales	$	11,485		$	14,612		$	22,546		$	29,487
Operating expenses	12,209			15,106			23,752			30,603
Operating income (loss)	$	(724	)	$	(494	)	$	(1,206	)	$	(1,116	)

AWS
Net sales	$	4,100		$	6,105		$	7,761		$	11,547
Operating expenses	3,184			4,463			5,955			8,504
Operating income	$	916		$	1,642		$	1,806		$	3,043

Consolidated
Net sales	$	37,955		$	52,886		$	73,669		$	103,928
Operating expenses	37,327			49,903			72,037			99,017
Operating income	628			2,983			1,632			4,911
Total non-operating income (expense)	38			(378		)	(14		)	(391		)
Provision for income taxes	(467		)	(74		)	(695		)	(361		)
Equity-method investment activity, net of tax	(2		)	3			(2		)	4
Net income	$	197		$	2,534		$	921		$	4,163

Net sales by groups of similar products and services, which also have similar economic characteristics, is as follows (in millions):



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2018		2017		2018
Net Sales:
Online stores (1)	$	23,754	$	27,165	$	46,580	$	54,105
Physical stores (2)	—		4,312		—		8,575
Third-party seller services (3)	6,991		9,702		13,429		18,966
Subscription services (4)	2,165		3,408		4,104		6,510
AWS	4,100		6,105		7,761		11,547
Other (5)	945		2,194		1,795		4,225
Consolidated	$	37,955	$	52,886	$	73,669	$	103,928

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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 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 and any 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)	Primarily includes sales of advertising services, as well as sales related to our other service offerings.