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How Do Amazon’s Margins Look in the First Half of 2018?

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What drove Amazon’s margins in H1 2018?

Amazon’s (AMZN) net sales increased by 41.0% to $103.9 billion in the first half of 2018. North America drove this growth, followed by international and AWS. Online stores, physical stores, third-party seller services, subscription services, AWS, and others recorded strong momentum in the first half of 2018.

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A look into Amazon’s operating and net margins

Amazon’s cost of sales rose by 34.0% to $61.4 billion during the first half of 2018. Higher costs associated with its incremental sales drove its increase in prices. However, the cost of sales margin decreased from 62.0% in the first half of 2017 to 59.0% in the first half of 2018.

Higher sales and controlled costs translated into a gross profit growth of 53.0% in the first half of 2018 at $42.6 billion. The gross margin also improved from 38.0% in the first half of 2017 to 41.0% in the first half of 2018.

The company’s operating expenses increased by 44.0% to $37.7 billion in the first half of 2018. Higher fulfillment, marketing, technology and content, general and administrative, and other operating expenses associated with incremental sales drove these expenditures. The company’s operating expenses margin increased slightly from 35.0% in the first half of 2017 to 36.0% in the first half of 2018.

Higher sales, gross profit, and control of costs and expenses led to Amazon’s 201.0% growth in operating income in the first half of 2018. Its operating income totaled $4.9 billion in the first half of 2018. Its operating margin improved from 2.0% in the first half of 2017 to 5.0% in the first half of 2018.

Amazon’s non-operating expenses were insignificant in proportion to its revenues for the first half of 2018. These factors translated into net income growth of 352.0% in the first half of 2018.

The company’s net income totaled $4.2 billion in the first half of 2018. Its net margin improved from 1.0% in the first half of 2017 to 4.0% in the first half of 2018. Its EPS spiked by 346.0% to $8.30 in the first half of 2018.

Facebook (FB), Alphabet (GOOG), and Netflix (NFLX) had operating margins of 45.0%, 15.0%, and 9.0% respectively, in the first half of 2018. Apple (AAPL) had an operating margin of 27.0% in the nine months ended June 30.

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