Amazon(US:AMZN)2025-10-30 22:18Cash Flow and Investments - Operating cash flow for Q3 2025 was $35.5 billion, an increase from $26.0 billion in Q3 2024, driven by higher net income and improved working capital management [111]. - Cash capital expenditures for Q3 2025 were $34.2 billion, up from $21.3 billion in Q3 2024, primarily reflecting investments in technology infrastructure and fulfillment network capacity [112]. - The company expects to invest an additional $1.4 billion in a convertible note in Q4 2025, following a $1.3 billion investment in Q2 2025 [113]. - Cash provided by investing activities was $(26.1) billion for Q3 2025, compared to $(16.9) billion in Q3 2024, with significant variability due to marketable securities transactions [112]. - As of September 30, 2025, cash, cash equivalents, and marketable securities totaled $94.2 billion, with $20.4 billion held in foreign currencies [110]. - The company anticipates using cash on hand to settle the FTC lawsuit, indicating potential future cash flow impacts [111]. - The company has no outstanding borrowings under its unsecured revolving credit facilities as of September 30, 2025, indicating strong liquidity [115]. Tax and Regulatory Environment - The effective tax rate is expected to decrease significantly in 2025 due to the 2025 Tax Act, which reinstates 100% accelerated depreciation deductions [117]. - The company is subject to various tax controversies that could materially affect operating results or cash flows [109]. Sales and Revenue - Net sales for Q3 2025 reached $180.2 billion, a 13% increase year-over-year, with North America contributing $106.3 billion and AWS $33.0 billion [123][124][127]. - International sales grew by 14% in Q3 2025, totaling $40.9 billion, with foreign exchange rates contributing an increase of $1.5 billion [126]. - Changes in foreign exchange rates increased net sales by $1.5 billion for Q3 2025 and $1.6 billion for the nine months ended September 30, 2025 [123][126]. - International segment net sales accounted for 23% of consolidated revenues in Q3 2025, with a positive impact of $1.5 billion from foreign exchange rate fluctuations compared to Q3 2024 [160]. Operating Expenses - Total operating expenses for Q3 2025 were $162.7 billion, reflecting a 15% increase year-over-year, with cost of sales rising by 10% [128]. - Fulfillment costs increased by 12% in Q3 2025, totaling $27.7 billion, influenced by sales growth and investments in the fulfillment network [134]. - Technology and infrastructure costs rose by 30% in Q3 2025, amounting to $29.0 billion, primarily due to increased infrastructure spending [136][137]. - Sales and marketing expenses increased by 10% in Q3 2025, totaling $11.7 billion, driven by higher advertising costs [140]. - General and administrative costs for Q3 2025 were $2.9 billion, reflecting an increase primarily due to severance costs [142]. Operating Income - Operating income for Q3 2025 was $17.4 billion, with a nine-month total of $55.0 billion, reflecting charges of $2.5 billion for a lawsuit settlement and $1.8 billion in severance costs [144]. - North America operating income decreased in Q3 2025 due to increased operating and shipping costs, despite higher unit and advertising sales; however, it increased for the nine months ended September 30, 2025, primarily due to increased unit sales [145]. - International operating income decreased in Q3 2025 due to higher shipping and fulfillment costs, but increased for the nine months ended September 30, 2025, driven by higher unit and advertising sales [146]. - AWS operating income increased in Q3 2025 due to higher sales, offset by technology infrastructure spending and severance costs; this trend continued for the nine months ended September 30, 2025 [147][148]. Other Income and Tax Provisions - Interest income was $1.1 billion in Q3 2025, with a nine-month total of $3.3 billion, primarily due to a higher average balance of invested funds [149]. - Other income increased to $10.2 billion in Q3 2025 and $14.1 billion for the nine months ended September 30, 2025, mainly from adjustments related to investments in Anthropic [151]. - The income tax provision for the nine months ended September 30, 2025, was $14.1 billion, including $354 million of net discrete tax expense related to gains from investments in Anthropic [152]. Cash Flow Forecast - Free cash flow for the trailing twelve months ended September 30, 2025, was $14.8 billion, down from $47.7 billion in the prior year, reflecting increased capital expenditures [154]. - Guidance for Q4 2025 anticipates net sales between $206.0 billion and $213.0 billion, representing a growth of 10% to 13% compared to Q4 2024, with expected operating income between $21.0 billion and $26.0 billion [157]. Investment Valuations - As of September 30, 2025, the recorded value in equity, equity warrant, and convertible debt investments in public and private companies was $46.9 billion [163]. - Equity and equity warrant investments in publicly traded companies amounted to $4.8 billion, including the investment in Rivian, and are recorded at fair value [163]. - Equity warrant investments in private companies are recorded at fair value, with adjustments made for observable price changes or impairments [163]. - The available-for-sale convertible debt investments in private companies, primarily related to Anthropic, are also recorded at fair value [163]. - Valuations of private companies are complex due to the lack of readily available market data [163]. - Current global economic conditions contribute to additional uncertainty in market valuations [163]. - Market sensitivities are considered impractical under the current economic conditions [163].