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. 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 online and physical stores. This segment includes export sales from these online stores.

International

The International segment primarily consists of amounts earned from retail sales of consumer products (including from sellers) and subscriptions through internationally-focused online stores. This segment includes export sales from these internationally-focused online stores (including export sales from these online stores to customers in the U.S., Mexico, and Canada), but excludes export sales from our North America-focused online stores.

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 (loss) is as follows (in millions):



	Year Ended December 31,
	2016			2017			2018
North America
Net sales	$	79,785		$	106,110		$	141,366
Operating expenses	77,424			103,273			134,099
Operating income	$	2,361		$	2,837		$	7,267
International
Net sales	$	43,983		$	54,297		$	65,866
Operating expenses	45,266			57,359			68,008
Operating income (loss)	$	(1,283	)	$	(3,062	)	$	(2,142	)
AWS
Net sales	$	12,219		$	17,459		$	25,655
Operating expenses	9,111			13,128			18,359
Operating income	$	3,108		$	4,331		$	7,296
Consolidated
Net sales	$	135,987		$	177,866		$	232,887
Operating expenses	131,801			173,760			220,466
Operating income	4,186			4,106			12,421
Total non-operating income (expense)	(294		)	(300		)	(1,160		)
Provision for income taxes	(1,425		)	(769		)	(1,197		)
Equity-method investment activity, net of tax	(96		)	(4		)	9
Net income	$	2,371		$	3,033		$	10,073

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



	Year Ended December 31,
	2016		2017		2018
Net Sales:
Online stores (1)	$	91,431	$	108,354	$	122,987
Physical stores (2)	—		5,798		17,224
Third-party seller services (3)	22,993		31,881		42,745
Subscription services (4)	6,394		9,721		14,168
AWS	12,219		17,459		25,655
Other (5)	2,950		4,653		10,108
Consolidated	$	135,987	$	177,866	$	232,887

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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 memberships, as well as audiobook, digital video, e-book, 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.

Net sales generated from our internationally-focused online stores are denominated in local functional currencies. Revenues are translated at average rates prevailing throughout the period. Net sales attributed to countries that represent a significant portion of consolidated net sales are as follows (in millions):



	Year Ended December 31,
	2016		2017		2018
United States	$	90,349	$	120,486	$	160,146
Germany	14,148		16,951		19,881
United Kingdom	9,547		11,372		14,524
Japan	10,797		11,907		13,829
Rest of world	11,146		17,150		24,507
Consolidated	$	135,987	$	177,866	$	232,887

Total segment assets exclude corporate assets, such as cash and cash equivalents, marketable securities, other long-term investments, corporate facilities, goodwill and other acquired intangible assets, and tax assets. Technology infrastructure assets are allocated among the segments based on usage, with the majority allocated to the AWS segment. Total segment assets reconciled to consolidated amounts are as follows (in millions):



	December 31,
	2016		2017		2018
North America (1)	$	22,225	$	35,844	$	47,251
International (1)	10,429		18,014		19,923
AWS (2)	12,698		18,660		26,340
Corporate	38,050		58,792		69,134
Consolidated	$	83,402	$	131,310	$	162,648

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(1)	North America and International segment assets primarily consist of property and equipment, inventory, and accounts receivable.


(2)	AWS segment assets primarily consist of property and equipment and accounts receivable.

Property and equipment, net by segment is as follows (in millions):



	December 31,
	2016		2017		2018
North America	$	10,143	$	20,401	$	27,052
International	3,448		7,425		8,552
AWS	10,300		14,885		18,851
Corporate	5,223		6,155		7,342
Consolidated	$	29,114	$	48,866	$	61,797

Total net additions to property and equipment by segment are as follows (in millions):



	Year Ended December 31,
	2016		2017		2018
North America (1)	$	5,132	$	13,200	$	10,749
International (1)	1,680		5,196		2,476
AWS (2)	5,193		9,190		9,783
Corporate	1,580		2,197		2,060
Consolidated	$	13,585	$	29,783	$	25,068

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(1)	Includes property and equipment added under capital leases of $1.5 billion, $2.9 billion, and $2.0 billion in 2016, 2017, and 2018, and under other financing arrangements of $849 million, $2.9 billion, and $3.0 billion in 2016, 2017, and 2018.


(2)	Includes property and equipment added under capital leases of $4.0 billion, $7.3 billion, and $8.4 billion in 2016, 2017, and 2018, and under finance leases of $75 million, $134 million, and $245 million in 2016, 2017, and 2018.

U.S. property and equipment, net was $22.0 billion, $35.5 billion, and $45.1 billion, in 2016, 2017, and 2018, and rest of world property and equipment, net was $7.1 billion, $13.4 billion, and $16.7 billion in 2016, 2017, and 2018. Except for the U.S., property and equipment, net, in any single country was less than 10% of consolidated property and equipment, net.

Depreciation expense, including other corporate property and equipment depreciation expense, are allocated to all segments based on usage. Total depreciation expense, by segment, is as follows (in millions):



	Year Ended December 31,
	2016		2017		2018
North America	$	1,971	$	3,029	$	4,415
International	930		1,278		1,628
AWS	3,461		4,524		6,095
Consolidated	$	6,362	$	8,831	$	12,138