Good day, everyone, and welcome to the Amazon dotcom Q3 2015 Financial Results Teleconference. At this time, all participants are in a listen only mode. After the presentation, we will conduct a question and answer session. Today's call is being recorded. For opening remarks, I will be turning the call over to the Director of Investor Relations, Phil Hardin.
Please go ahead.
Hello, and welcome to our Q3 2015 financial results conference call. Joining us today is Brian Olsosky, our CFO. We will be available for questions after our prepared remarks. The following discussion and responses to your questions reflect management's views as of today, October 22, 2015 only and will include forward looking statements. Actual results may differ materially.
Additional information about factors that could potentially impact our financial results is included in today's press release and our filings with the SEC, including our most recent Annual Report on Form 10 ks. As you listen to today's conference call, we encourage you to have our press release in front of you, which includes our financial results as well as metrics and commentary on the quarter. During this call, we will discuss certain non GAAP financial measures. In our press release, slides accompanying this webcast and our filings with the SEC, each of which is posted on our IR website, you will find additional disclosures regarding these non GAAP measures, including reconciliations of these measures with comparable GAAP measures. Finally, unless otherwise stated, all comparisons in this call will be against our results for the comparable period of 2014.
Now I'll turn the
call over to Brian. Thanks, Phil. I'll begin with comments on our Q3 financial results. Trailing 12 month operating cash flow increased 72 percent to $9,800,000,000 Trailing 12 month free cash flow increased to 5.4 $1,000,000,000 up from $1,100,000,000 Trailing 12 month free cash flow less lease principal repayments was $3,100,000,000 up from an outflow of $99,000,000 Trailing 12 months free cash flow less finance lease principal repayments and capital acquired under capital leases was $637,000,000 up from an outflow of $2,300,000,000 Trailing 12 month capital expenditures were $4,400,000,000 Capital expenditures does not include the impact of property and equipment acquired under capital and finance lease obligations. These capital expenditures and capital leases reflect additional investments in support of continued business growth due to investments in technology infrastructure, the majority of which is to support AWS and additional capacity to support our fulfillment operations.
Combination of common stock and stock based awards outstanding was 489,000,000 shares compared with 4 81,000,000 1 year ago. Worldwide revenue grew 23 percent to $25,400,000,000 or 30% excluding the $1,300,000,000 unfavorable impact from year over year changes in foreign exchange. Worldwide paid unit growth was 26%. Worldwide active customer accounts was approximately 294,000,000 Excluding customers who only had free orders in the preceding 12 month period, worldwide active customers were approximately $272,000,000 up from approximately 244 $1,000,000 in the comparable prior year period. Worldwide seller units represented 46% of paid units, up from 42% in the comparable prior year period.
Now I'll discuss operating expenses excluding stock based compensation. Cost of sales $16,800,000,000 or 66.1 percent of revenue compared with 71.1%. Fulfillment, marketing, technology and content and G and A combined with $7,600,000,000 or 30.1 percent of sales, up approximately 50 basis points year over year. Fulfillment was $3,100,000,000 or 12.3 percent of revenue compared with 12.4 percent. Check-in content was $2,900,000,000 or 11.4 percent of revenue compared with 10.8%.
Marketing was 1 point $2,000,000,000 or 4.8 percent of revenue compared with 4.7%. Now I'll talk about our segment results. As a reminder, in the Q1, we changed our reportable segments to report North America, International and Amazon Web Services. Consistent with prior periods, we do not allocate to segments our stock based compensation or the other operating expense line item. In the North America segment, revenue grew 28 percent to $15,000,000,000 or 29% excluding foreign exchange.
Media revenue grew 8% to $3,000,000,000 or 9% excluding foreign exchange. EGM revenue grew 35 percent to $11,800,000,000 EGM now represents 79% of North America revenues. North America segment operating income was $528,000,000 a 3.5 percent operating margin compared to a loss of $60,000,000 in the prior year period. North America segment operating income includes $11,000,000 of favorable impact from foreign exchange. In the International segment, revenue increased 7 percent to $8,300,000,000 Excluding the $1,300,000,000 year over year unfavorable foreign exchange impact, revenue growth was 24%.
Media revenue decreased 8% to $2,300,000,000 or increased 6% excluding foreign exchange. EGM revenue grew 14% to 5,900,000,000 dollars or 32% excluding foreign exchange. EGM now represents 71% of international revenues. International segment operating loss was $56,000,000 compared to a loss of $174,000,000 in the prior year period. International segment operating loss includes $64,000,000 of unfavorable impact from foreign exchange.
In the Amazon Web Services segment, revenue grew 78 percent to $2,100,000,000 Amazon Web Services segment operating income was $521,000,000 a 25% operating margin compared to $98,000,000 in the prior year period. AWS segment operating income includes $78,000,000 of favorable impact from foreign exchange. Consolidated segment operating income was $993,000,000 or 3.9 percent of revenue, up approximately 460 basis points year over year. CSOI includes $25,000,000 of favorable impact from foreign exchange. Unlike CSOI, our GAAP operating income includes stock based compensation expense and other operating expense.
GAAP operating income was $406,000,000 compared to a loss of $544,000,000 in the prior year period. Our income tax expense was $161,000,000 GAAP net income was $79,000,000 or $0.17 per diluted share compared to the net loss of $437,000,000 or a loss of $0.95 per diluted share. Turning to the balance sheet. Cash and marketable securities increased $7,500,000,000 year over year to 14.4 $1,000,000,000 Inventory increased 23 percent to $9,000,000,000 and inventory turns were 8.6, down from 8 point 9 turns a year ago as we expanded selection, improved in stock levels and introduced new product categories. Accounts payable increased 22 percent to $14,400,000,000 and accounts payable days increased to 79 from 74 in the prior year.
I'll conclude my portion of today's call with guidance. Incorporated into our guidance are the order trends that we've seen to date and what we believe today to be appropriately conservative assumptions. Our results are inherently unpredictable and may be materially affected by many factors, including a high level of uncertainty surrounding exchange rate fluctuations as well as the global economy and customer spending. It's not possible to accurately predict demand and therefore our actual results could differ materially from our guidance. As we describe in more detail in our public filings, issues such as settling intercompany balances in foreign currencies among our subsidiaries, unfavorable resolution of legal matters and changes to our effective tax rate can all have material effects on guidance.
Our guidance further assumes that we don't conclude any additional business acquisitions, investments, restructurings or legal settlements, record any further revisions to stock based compensation estimates and that foreign exchange rates remain approximately where they've been recently. For Q4 2015, we expect net sales of between $33,500,000,000 $36,750,000,000 dollars or growth of between 14% 25%. This guidance anticipates approximately 3.40 basis points of unfavorable impact from foreign exchange rates. GAAP operating income to be between $80,000,000 $1,280,000,000 compared to $591,000,000 in the Q4 of 2014. This includes approximately $620,000,000 for stock based compensation amortization of intangible assets.
We anticipate consolidated segment operating income, which excludes stock based compensation and other operating expense, to be between $700,000,000 $1,900,000,000 compared to $1,040,000,000 in the Q4 of 2014. We remain heads down focused on driving a better customer experience through price selection and convenience. We believe putting customers first is the only reliable way to create lasting value for shareholders. Thanks. And with that, Phil, let's move on to questions.
Great. Thanks, Brian. Let's move on to the Q and A portion of the call. Operator, will you please remind our listeners how to initiate a question?
Certainly. At this time, we will now open the call up for questions. In the interest of time, we ask that you limit Our first question comes from Scott Devitt with Stifel Nicolaus. Please proceed. Your line is live.
Hi, thanks for taking my questions. The first question, Brian, international retail growth continues to improve and I was wondering if you can just talk through some of the dynamics there, understanding the consumption tax in Japan comp. You have some newer markets where you have physical infrastructure now in Europe and then also the dynamics in India and China as contributors? And then secondly, maybe if you could just given how profitable AWS has become, if you give a framework for thinking about the long term profitability of that business? Thank you.
Sure, Scott. Thanks for your questions. On the international, yes, you're right. The, first of all, the FX neutral growth of 24% year over year is up 2 basis points versus Q2 and up 1100 basis points year over year. Some of that is due to the comping of the JP consumption tax increase in April of last year, which we said last year impacted Q2 and Q3 and not really impacted Q4.
So we're seeing the last of that on the comp. But and the impact of Prime Day globally, we estimated about 200 basis points and we saw a pickup in both. I'll remind you that Prime Day was a global event. So we saw that as international as well. It was a great event for a great day for customers, Amazon and sellers alike.
But the VACE international growth is really being driven by Prime, Prime adoption, greater selection, greater Prime selection, including FBA. So it's essentially the same playbook as the U. S. The additional Prime features, we launched a Prime Now location in the U. K.
This quarter, not materially going to impact the entire continent, but it's a good start. So we like the trends in international, and they mirror many of the same things we see in North America. On AWS, I remember your question, the business model there. Yes, let me talk about margin, which was up sequentially from from 21.4 percent to 25%. We're continuing to see great acceleration in the pace of innovation.
We've launched 530 new significant features this year, which is more than last year already. We continue to lower prices. We've lowered prices 8 times since a rather large price cut in April of 2014. And the customers are really responding. They like the speed and agility that AWS provides them.
They like the new features that we launched, many of which are also enable them to lower their cost of infrastructure. Amazon Aurora, oneten the price of other high end commercial databases. A new storage class of Amazon S3, QuickSight also very effective and cost effective products for our customers. So like AWS, the model remains early days and we enjoy leading this business and customers responded well and we believe we are adding new services and features at a rate faster than many others. And we'll but the growth rates and margins will certainly remain lumpy and bumpy as we go forward.
But we're very encouraged by the business and so are customers.
Our next question comes from Mark May with Citi. Please proceed. Your line is live.
Hello? Can you hear me? Yes.
Okay, thanks. Question hopefully hasn't been asked already is around AWS. Margins were obviously quite strong in the quarter. Can you speak to the sustainability of the margin improvement that we've seen there? And sort of what is your long term expectations for profit margins for this business?
And if you can give us a sense of what CapEx for this segment of the business look like in the quarter and kind of the way of growth there would be helpful? And then secondly, your employee adds were fairly strong in the quarter as well. I wonder if you could call out any particular areas of within the business where you're sort of where you're strengthening your hiring efforts? Thanks.
So this is Phil. I'll take the AWS portion. So I'll sort of echo what Brian said earlier. This is a young and rapidly growing business. And as you've seen looking backwards, certainly growth rates and margins and capital expenditure timing can be bumpy.
We're taking a very long term view on this business. We're excited about the potential there. And really the team's focused on just keep their heads down and continue to accelerate the pace of innovation to try to continue to grow the functionality gap we think we offer. So a lot of hard work going on there. But again, we're taking a long term view on the business and interested in helping customers as as possible in that space.
On the CapEx, again, we're focused on the ability to drive efficiencies across all of Amazon, but we're also certainly investing in growth. And so on the AWS side, we've got investment going on around the world, certainly additional servers to support the strong growth we have. And some of the expense for things like data centers or new regions can be a little lumpy. And we've mentioned a couple of new regions we're working on throughout the world. So that's going on as well.
Mark, on your headcount question, you're right. The headcount was up 49 9% year over year, which is higher than Q2, we saw in Q2. This is going to be primarily our ops area. If you exclude is we've added 14 net fulfillment centers this year, bringing the total to 123 globally. We've added 4 sort centers in the U.
S, bringing the U. S. Footprint to 23. We're staffing earlier in those locations. We're in good shape for the holidays and ready to go.
The other issue is there the other reason is that we're also doing a lot of conversion of temp workers to full time workers purposefully. There's a metric, employment of full time hires. So, it is a little bit higher due to that program.
Our next question comes from Mark Mahaney with RBC Capital Markets.
I'm tempted to ask about the long term margins for AWS, but I won't. Could you talk about 2 areas? 1, the EGM growth in North America, it's accelerated really strongly. Any color behind what's in particular categories that are driving that? And secondly, there's been you've made some public comments in the last 8 months about some on the retail side about investments internationally, particularly in India.
Could you just refresh us on what kind of levels of spend you're interested in targeting in that market?
Sure. Sure. On EGM growth, I won't call out any particular categories, but it is a direct reflection of our efforts to gross selection, both our retail selection and also our 3rd party, particularly FBA, which is also prime eligible, and then just the responsiveness of our customers, especially our prime customers to the EGM product line. So we're very encouraged with the EGM growth. And on India, I will not excuse me, I won't give specific dollar numbers or on investment, but I can give you an update on India.
We're really encouraged with what we're seeing both on the customer side and the seller side. On the customer side, active customer accounts are up 2 30% year over year. We're in the middle of the Diwali season that is going really well. Sales are 4x what they were last year. So customers are responding greatly this year.
We continue to invest. We've been adding products at a rate of 40,000 products per day so far this year. And just as big as the number of sellers, the sellers number of sellers has grown more than 2 50% year over year, 90% of those sellers are using our logistics and warehouse services. And as a result, we've tripled our fulfillment capacity year over year. So we are very encouraged, as I said last quarter, in India, and continue to invest there heavily.
Mark, I think you asked about China as well. This is Phil. So we're continuing to work on some of the items we've been talking about for couple of quarters now. So the team has some interesting ideas, really focused on making Amazon a trusted conduit for Chinese customers to access authentic international branded products and things that customers can't get. I think Amazon Global Store continues to expand the selection there.
We added about another 4 100,000 items to that store this quarter and continue to focus on using our global network of vendors to be able to get those products to customers. We continue to test store on Tmall as well. And the team has some other ideas, but that's what we're talking
about so far.
Our next question comes from Eric Sheridan with UBS Investment Research.
Thanks for taking the question. Can you call out in terms of the 3P business, what you're seeing in terms of 3rd party sellers maybe needing to make more and more of their goods prime eligible? What the economics of that might be in terms of creating a tailwind for the business and how we should think about that evolving over the next couple of years? Thanks. Sure, Eric.
What I can tell you is the 3P percent of revenue continues to grow or now up to 46% of paid units, which is up 400 basis points year over year and 100 basis points sequentially off Q2. We feel that Prime and FBA are reinforced each other. They're inextricably linked. FBA adds Prime selection and prime growth attracts more FBA sellers. So we have seen growth in FBA.
It increases our prime Fast Track eligible selection, which we like and customers like. So
we like what we see on the 3rd party side.
Our next question comes from Justin Post with Bank of America Merrill Lynch.
Thank you. We did see the acceleration in EGM. I was just wondering if some of the local delivery and Prime Now is driving that acceleration. Is that having a big impact on your business? And down the road, do you think the delivery infrastructure will be valuable in maybe delivering 3rd party and other units?
Thank you.
This is Phil. So it's still pretty early for a lot of the really expedited delivery options. We've been working on our network for about 20 years to be able to enable some of the really fast delivery with things like Prime Now. But at this point, we're in a relatively small list of cities, but it's expanding pretty fast. I think we launched a couple more Prime Now cities just today.
So that brings us up to about 17 across the globe. On the next day or same day here in the U. S, we continue to expand that as well. But we think that those fast options add us to the consideration set of a customer's purchase on some purchases that we might not otherwise be included in. But at this point, we're still working on that and kind of getting it up to speed.
So nothing specific to call out on that. On the other part of your question, we continue to work on the network around the world, but can't respond to any of the rumors and speculation.
Our next question comes from Robert Peck with SunTrust.
Hi, thanks for letting me ask a question. This is Kunal for Bob. Quick question on India. Is there any change or any indication that there might be a change in the regulatory framework that would allow you to go direct?
This is Phil. I don't know that we have anything to comment on that.
Thanks.
Our next question comes from Douglas Anmuth with JPMorgan.
Thanks for taking the question. I just wanted to ask the most frequent investor question and concern that we get is when will Amazon flip back to its heavier spending and investment ways from 2014 and earlier. So I just wanted to ask, is that a legitimate Thanks. Yes. Thanks, Doug.
Thanks.
Yes. Thanks, Doug. Well, I will point out that this quarter showed a lot of innovation, a lot of new products and features and a lot of investment. We've already talked about India, but domestically, we are globally, we are investing very heavily in our Prime platform, both in North America and international, and that includes video content and original content, Prime Music. Phil just said the Prime Now has been expanded to 14 metro areas.
We've had same day delivery and now in 16 metro areas. We've built 14 new fulfillment centers. We've launched multiple devices, including e readers, tablets that are priced under $50 Echo, Dash Button. So there's a lot of investment going on. And there will be continued especially related to Prime.
And on the AWS side, as I said, we have 530 new features so far this year. So innovation and investment will continue and can be lumpy. I hate to use that word again, but it could be lumpy over time. The other dynamic in our company though is definitely working on cost reductions and efficiency. I think you see a lot of that in this quarter's P and L and in our capital efficiency, both in the warehouse world and also in infrastructure.
So we will continue to work on costs. The good thing about 30% revenue growth is it gives you a lot more cost to work on as well. So we will I would say it's not as much as a pendulum as maybe it's been portrayed. It's more of a constant. The investment will, it sometimes ebbs and flows, but the cost reductions will be a constant presence and the increase in customer experience and shortening the time to delivery and making the customer experience better.
Our next question comes from Brian Nowak with Morgan Stanley.
Thanks for taking my questions. You guys have the Kindle store in Brazil since December of 2012. Just curious about the learnings around that and kind of what benchmarks are you analyzing as you kind of try to determine whether or not to invest further in a larger Brazil store? And then the second one, just curious for comments on international prime sub growth. It sounds like subprime subs are growing really well.
I think a couple of quarters ago, you mentioned how they're growing over 50%. Is that still the case? And if so, what's driving that faster international prime sub growth?
So on the Brazil side, this is Phil. We've had the Kindle store in Brazil for a while. I think we look at all of our investments with an eye towards trying to maximize long term free cash flow at strong returns on invested capital. So that's across the board. That's kind of the criteria we're using, making sure we're building things that customers love that can have attractive financial returns over time, can persist for a long time, and if they work, be big.
And so that's kind of the metrics we're using. There's nothing specific to call out to Brazil, though.
And this is Brian. We're not going to update our Prime subscription growth beyond what we said last year or the end of last year, which last year in the year when we raised prices early in 2014, the global growth rate was 53% and North America growth rate was 50%. So by default, the international growth rate was higher. We like the adoption of Prime internationally. It's helped by additional selection that's available for fast track shipment, including FBA.
So that flywheel is working. We've also launched video benefits, most recently in Japan, but we have them in UK and Germany. Continue to launch other Prime benefits, Amazon Pantry in Japan and Germany this quarter. We launched Prime now in the UK. So it's very similar to the U.
S. Story, potentially time lagged a bit, but we are seeing the same customer adoption and impact on growth
Our next call is from Carlos Kirchner with Bernstein. Please proceed.
Thank you. I have two questions. So you have told us that you have tens of millions of Prime users that you are investing heavily in Prime. Now at this scale and with the 50% plus growth rates that you just mentioned, if you roll the clock 2 or 3 years, one can see prime penetration in markets like the U. S.
Starting to saturate as there are just so many homes in the country. How should we think about the level of investment in prime once you have reached full penetration? Are there components that are driven primarily to customer acquisition? And what's the right way to think about that? And secondly, what are the economic drivers that justify the business case for Prime Now?
I don't expect you to give us any numbers. I've learned that in the last few years. But what are the components of the customer life cycle value calculation or whatever calculation that you make to justify someone dropping a box with a $15 order to a customer? Thank you.
Sure. Thank you, Carlos. First on well, I'll classify as prime demographics. So yes, we still think there's a lot of people in the country who are not prime members and we're anxious to have them try it and sign up and join. The other thing that we see is that with our vast offering of selection and faster and faster shipping programs, we have a more competitive offering for many things that they buy.
So there's a share of wallet element to it as well over time that we're looking to be more useful to customers all the time. On your comment about the economic drivers of Prime Now, what I'll say is customers really value it. It's not our entire selection. It's tens of thousands of items that they may need on a daily basis. We think it's an interesting part of the selection offer for Prime.
And it's in many ways something that we can do that others can't because it's a natural evolution of our 20 year effort to grow our fulfillment center network and our scale quite frankly makes it possible to even offer this to customers.
Our next question comes from Neel Doshi with Mizuho Securities.
Great. Thanks, guys. Can you talk a little bit more about India and what's kind of the opportunity there that you see? There's tremendous amount of tremendous middle class there, but the distribution can be very last mile? And then there's been some reports about Amazon potentially trying to close the gap in terms of delivery and delivery over sooner.
On the grocery side, what's the impetus there? And can we see how the recent market's been trending on the grocery side that you've launched recently? Thank you.
I'll take the India question. So again, India is a different market and does not have a lot of the same ready fulfillment options that some other countries did. We see that as an opportunity, an opportunity that we can build and we can bring to sellers. And as I believe I already mentioned, we like what we see. We're very encouraged.
Customer accounts active customer accounts are up 2 30% year over year and sellers number of sellers is up 2 50% year over year. 90% of those sellers use our logistics and warehouse services, as you mentioned, which has caused us to triple our fulfillment capacity. And we're happy to do so. We like what we see in India. We think we have we're attractive both to customers and to sellers and we like our position.
This is Phil. So on the grocery side, for fresh, we're in a handful of metropolitan areas here in the U. S. It's been a relatively measured rollout by Amazon standards. We continue to work on the customer experience and making sure we're really delivering a quality experience for shoppers.
And we're also working on the economics. And so we've continued to work on that, but not much new to add right now.
Our next question is from Heath Terry with Goldman Sachs.
Great, thanks. I was wondering if you could give us a sense how some of the recent announcements from FedEx and UPS about pricing during the holidays and the structure of some of the 3rd party relationships, might impact you. And given the investments that you've made in your own fulfillment infrastructure, how much of a competitive advantage you feel like you've got during the holiday season as other retailers have to that are more directly exposed to these changes have to deal with it?
No comment on the pricing. I would say that we have 23 sort centers, which allows us to control a lot more of our shipments for longer. But we certainly value our relationships with USPS, FedEx, UPS and other global carriers. So and we're looking forward to a great holiday season.
Our next question comes from Aaron Kessler with Raymond James.
Yes. Hi, guys. Can you just quickly on, if you can talk about some of the more experimental projects you work on, I guess the travel business you're kind of in again for a few months and got out of. Also maybe just with restaurant, providing restaurant delivery. How do you view these services?
They're not necessarily core to what you do. Obviously, you can provide those services, but just how should we think about these types of investments longer term? Thanks.
So on destinations, we're constantly trying new things and testing and measuring and iterating here at Amazon. And we learned a lot, but we've discontinued that. On the restaurant delivery, we've had it for a couple of months here in Seattle and recently announced it in Portland, and it fits very well with Prime NOW. So at this point, it's pretty small, but something we're excited to do for customers. We think it will be helpful for them, and we're happy to take advantage of some of the competencies we've built with Prime Now with our fulfillment network so far.
Our next question comes from Brian Pitzer with Jefferies and Company.
Thanks. Some questions on video. Any color such as engagement on the recent launch of video products in Japan, including the Fire TV, the Fire TV Stick and Prime Video? And also any general updates on your video content strategy or view on standalone streaming separate from Prime? Thanks.
Yes, I'll take that one. This is Brian. So no specific callouts in Japan. I would say that we are still very bullish on our prime instant video. We especially our new original content we've created, we think it's been critically acclaimed and also a big hit with customers.
Man in the High Castle is coming out shortly, as is the 2nd season of Transparent, which won Emmys this year. So we're really excited about the creative team we've assembled and the products that they've been able to bring to Prime customers. And we still like the customer reaction. Free trial conversion rates are higher when Prime members stream and they also renew at a higher rate, their annual subscriptions. So again, that's very important to us as well and very happy with the results.
Our next question is from Ben Schachter with Macquarie Equities Research.
Hey, guys. So Prime has done remarkably well with folks willing to pay $99 upfront. But do you expect to have different offerings for different cohorts? In other words, right now Prime is sort of a one size fits all model. Could we see different pricing models for different demographics in the future?
And then separately, can you also talk about how shipping leverage changes during the holiday season when shoppers tend to order more items per transaction? Thanks.
So this is Phil. On the Prime pricing, we do have a few different programs for different demographics today with programs like Prime Student or Prime Family, which are parent, which we're very excited about. Can't speculate as to what we do in the future, but Prime is a program that's really important for us, and we're working hard every day to continue to build selection there and to continue to make Prime better. And so hopefully, you can see that in the list of things we've launched recently and the kind of continued cadence of making the services we have better. We just added a lot of new music in our Prime Music program.
And as Brian mentioned, some of the upcoming programming should be pretty good in the fall. The Man in the High Castle is actually our most watched pilot, so we're excited about that one as well. So continue to work on Prime. On the shipping side, now
I would say it's a difficult equation. Yes, order size can go up, but we ship a lot of toys and bigger items. So it's hard to predict what that looks like, but having the density, having the sort centers has certainly helped our cost structure in that area and having inventory closer to our customers.
Our next question is from Stephen Ju with Credit Suisse.
Thanks. So Brian, it seems like you guys are rolling out Prime now as well as product verticals internationally fairly quickly, especially if you measure it versus the pace of rollout for fresh or your other international older territories. So am I reading too much into this or have you guys put in place different processes to iterate more quickly? And second, I think you've disclosed that as of the end of 'fourteen, a little less than 10% of your fulfillment centers are outfitted with Kiva. So I guess are all of your other fulfillment centers on a go forward basis going to have Kiva?
If not, why not? And given the pickup and presumably the volume throughput there, does this mean you can slow down the pacing of your build out there? Thanks.
Yes, sure. On Prime Now, it is our intent to rollout benefits and functionality globally as quickly as possible. I think we're able to do that with Prime Now and get to the U. K. Faster.
We're happy with that. It's not necessarily a comment on Amazon Fresh, that's just they're different businesses. So we're happy with the launch in the UK and the team did a great job to get that launch in a timely manner. On Kiva, we are up to 30,000 bots at the end of Q3, which is in there in 13 fulfillment centers. At the end of 2014, we had 15,000 bots, so we've doubled that amount and they were in 10 warehouses.
So our intent is to use that more widely and stay tuned.
Our next question comes from Ron Josey with JMP Securities.
Great. Thanks for taking the question. Just real quickly on paid unit growth, accelerated 26% this year. I realize it's easier comps, but anything significantly higher or anything that happened this quarter? I know Prime Day could be it, but wondering if that was the reason.
And then on AWS usage, just wondering if you can update on usage. I believe last quarter you mentioned usage was growing faster than revenue. I wonder if that's the same case this quarter. Thank you.
So this is Phil. On the unit side, you did see units move at a rate that's kind of highly correlated with revenue there. Keep in mind, AWS and some of the other rental type offerings don't generate units, so we don't count those. But we did see certainly saw some additional units as a result of Prime Day. And on a longer term bigger basis, the continued growth of Prime, the continued selection expansion is helping with the units growth there.
Sorry, was there a second part of your question?
It was just on AWS unit growth. I think last quarter you said it was growing faster than revenue. I'm wondering if that's still the case here. And since it is We continue to
see really strong usage growth across the board and it's coming from customers of all sizes. We also have recently announced that Aurora, which is our new database software, is our fastest growing service ever. So for a long time, we talked about Redshift and Aurora has now outpaced that. So we're very excited about what we're seeing there.
Our next question comes from Youssef Squali with Cantor Fitzgerald.
Thank you very much. Two questions. First, with the court striking down the safe harbor provision between the U. S. And the EU, how do you see the changes to European data storage effect in AWS potentially?
And on the Kiva question asked earlier, can you just maybe help us understand the capital intensity of an FC using Kiva versus one that's not? Thank you.
So this is Phil. I'll take the Safe Harbor question with AWS. With our EU approved AWS data protection agreement and model clauses we have in place, AWS customers can keep running their global operations using AWS and be in compliance with the e law. I think your second question was about the capital intensity
of KeyBanc.
Yes, right. Yes, I'm going to be vague on the scale of it, but they are their capital intensity is offset by their density and throughput. So it's a bit of an investment that has implications for a lot of elements to your cost structure. But we're very happy with Kiva. We think it's a great pairing our associates with Kiva robots to do some of the hauling of products within the warehouse has been a great innovation for us.
And we think it makes the warehouse jobs better and I think it makes our warehouses more productive.
Thank you. Our last question comes from John Blackledge with Cowen and Company.
Great. Thanks. Two questions. So first, our data suggests that the U. S.
Prime sub growth is growing very rapidly at scale. Just wondering where you think the U. S. Prime sub base is right now on the adoption curve? And then the second question is North American EGM growth accelerating again this quarter.
We're assuming growth is being driven in part by categories like apparel and consumables versus perhaps a more mature category like electronics. So the questions are, with the vertical mix changing, how should we think about the impact to margins? Are some of the newer and faster growing categories structurally higher margin for Amazon than the more mature categories? Thank you.
Yes. I would just say, can't get into too much detail on the components of EGM profitability. I would say that we're seeing strong growth across all of our EGM categories. And
we have
great teams chasing a lot of different product lines and working with vendors to get more selection on the site, both retail and also third party. So still a lot of room there. On the Prime sub growth, we're not updating the statistics. We are very happy purchases and retention. And we had a very successful Prime Day in July that we're really happy.
It was a great event for customers and sellers. So that's all I have on that.
Quarter. We appreciate your interest in amazon.com and look forward to talking with you again next quarter.