Segment Information

6 Months Ended

Jun. 30, 2020

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

We have organized our operations into three segments: North America, International, and AWS. We allocate to segment results the operating expenses “Fulfillment,” “Technology and content,” “Marketing,” 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 is as follows (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2020		2019		2020
North America
Net sales	$	38,653	$	55,436	$	74,465	$	101,563
Operating expenses	37,089		53,295		70,614		98,111
Operating income	$	1,564	$	2,141	$	3,851	$	3,452
International
Net sales	$	16,370	$	22,668	$	32,563	$	41,774
Operating expenses	16,971		22,323		33,253		41,826
Operating income (loss)	$	(601)	$	345	$	(690)	$	(52)
AWS
Net sales	$	8,381	$	10,808	$	16,076	$	21,027
Operating expenses	6,260		7,451		11,733		14,595
Operating income	$	2,121	$	3,357	$	4,343	$	6,432
Consolidated
Net sales	$	63,404	$	88,912	$	123,104	$	164,364
Operating expenses	60,320		83,069		115,600		154,532
Operating income	3,084		5,843		7,504		9,832
Total non-operating income (expense)	(195)		378		(213)		(228)
Provision for income taxes	(257)		(984)		(1,094)		(1,729)
Equity-method investment activity, net of tax	(7)		6		(11)		(97)
Net income	$	2,625	$	5,243	$	6,186	$	7,778

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,
	2019		2020		2019		2020
Net Sales:
Online stores (1)	$	31,053	$	45,896	$	60,552	$	82,549
Physical stores (2)	4,330		3,774		8,636		8,414
Third-party seller services (3)	11,962		18,195		23,104		32,676
Subscription services (4)	4,676		6,018		9,018		11,574
AWS	8,381		10,808		16,076		21,027
Other (5)	3,002		4,221		5,718		8,124
Consolidated	$	63,404	$	88,912	$	123,104	$	164,364

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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. Sales from customers who order goods online for delivery or pickup at our physical stores are included in “Online stores.”

(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, digital music, e-book, and other non-AWS subscription services.

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