Amazon.com 2012 Annual Report Download - page 34

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Operating Expenses
Information about operating expenses with and without stock-based compensation is as follows (in
millions):
Year Ended December 31, 2012 Year Ended December 31, 2011 Year Ended December 31, 2010
As
Reported
Stock-Based
Compensation Net
As
Reported
Stock-Based
Compensation Net
As
Reported
Stock-Based
Compensation Net
Operating Expenses:
Cost of sales $45,971 $ — $45,971 $37,288 $ — $37,288 $26,561 $ — $26,561
Fulfillment 6,419 (212) 6,207 4,576 (133) 4,443 2,898 (90) 2,808
Marketing 2,408 (61) 2,347 1,630 (39) 1,591 1,029 (27) 1,002
Technology and content 4,564 (434) 4,130 2,909 (292) 2,617 1,734 (223) 1,511
General and administrative 896 (126) 770 658 (93) 565 470 (84) 386
Other operating expense
(income), net 159 — 159 154 — 154 106 — 106
Total operating expenses $60,417 $(833) $59,584 $47,215 $(557) $46,658 $32,798 $(424) $32,374
Year-over-year Percentage Growth:
Fulfillment 40% 40% 58% 58% 41% 42%
Marketing 48 47 58 59 51 52
Technology and content 57 58 68 73 40 43
General and administrative 36 36 40 46 44 45
Percent of Net Sales:
Fulfillment 10.5% 10.2% 9.5% 9.2% 8.5% 8.2%
Marketing 3.9 3.8 3.4 3.3 3.0 2.9
Technology and content 7.5 6.8 6.1 5.4 5.1 4.4
General and administrative 1.5 1.3 1.4 1.2 1.4 1.1
Operating expenses without stock-based compensation are non-GAAP financial measures. See “Non-GAAP
Financial Measures” and Item 8 of Part I, “Financial Statements and Supplementary Data—Note 1—Description
of Business and Accounting Policies—Stock-Based Compensation.”
Cost of Sales
Cost of sales consists of the purchase price of consumer products and digital content where we are the seller
of record, including Prime Instant Video, inbound and outbound shipping charges, and packaging supplies.
Shipping charges to receive products from our suppliers are included in our inventory, and recognized as cost of
sales upon sale of products to our customers.
The increase in cost of sales in absolute dollars in 2012, 2011, and 2010 compared to the comparable prior
year periods, is primarily due to increased product, digital content, and shipping costs resulting from increased
sales, as well as from expansion of digital offerings.
Consolidated gross profit and gross margin for each of the periods presented were as follows:
Year Ended December 31,
2012 2011 2010
Gross profit (in millions) $15,122 $10,789 $7,643
Gross margin 24.8% 22.4% 22.3%
Gross margin increased in 2012, compared to the comparable prior year periods, primarily due to services
sales increasing as a percentage of total sales. We believe that income from operations is a more meaningful
measure than gross profit and gross margin due to the diversity of our product categories and services.
27