Amazon reported some big numbers for Q3 in its earnings release late last week, but as usual of late it was other services revenue really driving the gains, not so much its core ecommerce business, though there was some top line improvement there.
Amazon reported Q3 revenue of $143.1 billion in the quarter, up 13% from Q3 in 2022.
But its ecommerce business, which a couple of years ago it started to report as “on-line stores,” saw revenue gains of 7% versus the year prior, far from the heady days of 40+% growth and then 20+ percent increases after that, but better than the basically flat revenue seen on-line in a number of quarters over the past two years or so.
Other business segments, such as its AWS web services unit, are growing faster, with AWS seeing sales rise 12% in the quarter. However, that is off a much smaller base versus on-line stores, which saw Q3 revenue of $57.3 billion in the quarter, or 40% of the company’s total sales of $143.1 billion in Q3.
Net income and operating profit were also strong in Q3 for Amazon. Profit was $9.9 billion in the quarter, more than three times the $2.9 billion in net income seen by Amazon in Q3 2022.
Amazon’s operating income increased to $11.2 billion in the third quarter, compared with $2.5 billion in third quarter 2022. But again, AWS carrier much of the load, contributing $7 billion, or 62.5% of the total. Amazon does not report operating income from on-line stores.
In understanding Amazon the company, also consider this: net “product” sales were $61.1 billion Q3, much smaller than the $79.9 billion in ‘’services” revenue. Those services include commissions from its third-party marketplace sales, its Fulfillment by Amazon 3PL offering, advertising fees and more.
Fulfillment costs, which include expenses associated with building (and thus depreciation of those assets) its fulfillment centers and other logistics facilities, lease costs when renting space, and expenses associated with operating those facilities - but not shipping - came in at $22.3 billion in Q3.
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 That represents about $38.9% of on-line sales in the quarter, a hefty level. Fulfillment costs were also up 8.7% versus 7% growth in on-line sales, seeming to indicate fulfillment costs once again rose faster than ecommerce sales.
Global shipping costs were $21.8 billion, or 38.0% of on-line sales and up 9% versus 2022.
That means together fulfillment and shipping costs are an incredible 76.9% of on-line sales, though some of that shipping cost is offset by Amazon Prime subscription fees as well as some consumer paid shipping. Amazon used to report net shipping costs that factored in this revenue, but stopped doing so a few years back.
Still, that $9.9 billion in net income was 6.9% of Amazon’s revenue, a respectable ratio and one of its higher margin quarters in its history.
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