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NASDAQ :: 16th September 2021

AMAZON.COM Inc :: USA :: NASDAQ :: 16th September 2021 Source: blog.islamicly.com

Company Name Amazon.com, INC
Shariah Compliance COMPLIANT
DP RATIO 4.23%

Business sector screening:

Amazon seeks to be Earth's most customer-centric company. In each of their segments, they serve their primary customer sets, consisting of consumers, sellers, developers, enterprises, and content creators. They serve consumers through online and physical stores and focus on selection, price, and convenience. They offer programs that enable sellers to grow their businesses, sell their products in their stores, and fulfill orders through them, and programs that allow authors, musicians, filmmakers, skill and app developers, and others to publish and sell content. They serve developers and enterprises of all sizes through AWS, which offers a broad set of on-demand technology services, including compute, storage, database, analytics, and machine learning, and other services. They also manufacture and sell electronic devices. In addition, they provide services, such as advertising to sellers, vendors, publishers, authors, and others, through programs such as sponsored ads, display, and video advertising.

Let’s have a look at the operating segments from which the company derives its revenue from and apply Shariah screens on them:

Segment break up (In millions of USD)

For year ended 31st December 2020

Segment Description Segment Revenue Shariah Non-permissible Revenue % Non-permissible Revenue Shariah Non-permissibility classification Comments
Online stores $197,346
Physical stores $16,227 $811.35 5% Alcohol/Pork/Tobacco Its whole food segment has sales from Alcohol/Pork/Tobacco
Third Party Seller services $80,461
Subscription services $25,207 $12,603.5 50% Entertainment/Music 50-50 rule applied as per Shariah Board decision
AWS $45,370
Advertising services and others $21,453 Primarily includes sales of advertising services. Seems to be compliant.
TOTAL $ 386,064 $13,415

Non permissible operating revenue (In millions of USD)

For year ended 31st December 2020

Total Revenue $386,064
Non-permissible Operating revenue $13,415
% of non-permissible revenue 3.47%
Sector Compliance PASS

Area of Concern from Shariah Perspective:

As you can see in the first table, two of the business segments are engaged in non-permissible activities. Physical stores consist of non-permissible activities because its whole foods segment has sales from alcohol/pork/tobacco. The tricky area from a Shariah point of view in this company is the revenue derived from the subscription services segment. The company had mentioned in the annual report that the subscription sales includes fees associated with Amazon Prime members and access to content including digital video, audiobooks, digital music, e-books, and other non-AWS subscription services.

Subscription services comprise of two parts:

  1. Access to faster delivery of goods. This seems to be permissible.
  2. Access to entertainment content. This however does not seem to be permissible even though not all the content offered on prime is non-permissible.

The question that needs to be assessed is, do all users of Amazon prime subscription pay for it to use the entertainment content service? Or they buy it for the faster delivery service?

From the company’s perspective, subscription fee is sold so that consumers can get faster delivery and special offers on e-commerce goods. So this seems to be the primary reason for revenue from subscription services and not getting access to digital content, although some consumers would.

The company does not disclose the bifurcation between revenue attributable to faster delivery and entertainment content.

Upon reviewing this, the Shariah Board concluded that in such cases where the revenue cannot be bifurcated into permissible and non-permissible revenue, the rule of 50-50 would be applied to this subscription revenue. Subscription services were $25.2 billion for the year which accounts for 6.5% of the company’s revenue. This would make 3.25% of the 6.5% subscription revenue non-permissible, but within the allowed threshold of tolerance. With this rule applied, the Shariah Board concluded that Amazon Inc. would pass the business sector screening criteria.

It is worthy to note that the peculiarity of the subscription services revenue of Amazon Inc was also considered by the Shariah board.

Let’s have a look at the non-operating segments from which the company derives its revenue from and apply Shariah screens on them:

Non-operating Revenue: (in Millions of USD)

For year ended 31st December 2020

Segment Description Segment Revenue Shariah Non-permissible Revenue % non-permissible revenue Shariah Non-permissibility classification Comments
Interest Income $555 $555 100% Interest Income Non-operating Income
Other income $2,371
TOTAL $2,926 $555

Now let’s compute the Dividend purification which a Shariah sensitive user needs to apply on the dividends received from Amazon Inc.

Dividend Purification calculation

Revenue Description Non permissible Revenue (millions of USD)
Shariah Non-permissible operating revenue $13,415
Shariah Non-permissible non-operating revenue $2,926
Total Shariah Non-permissible revenue $16,341
Total Revenue Of The Company $386,064
Dividend purification ratio 4.23%

The second level of screening is to ensure that the company passes the Shariah Financial Ratio screens.

Shariah Financial Ratio Screening:

(All figures in millions of USD for the quarter ended 30th June 2021)

Particulars Amount Remarks
3 years Average Market 1,214,089.472 As on 15-09-2021
Total Debt 67,665
Islamic Debts 0
Adjusted Debts 67,665
LC1 Ratio 5.57%
Cash 89,894
CC2 Ratio 7.40%
Accounts Receivables 26,835
CC1 Ratio 2.21%


All the above information is based on the website of the company and the interim report for the quarter ended 30th June 2021.


Given the above information, we at Islamicly believe that Amazon Inc. is a Shariah-compliant company as per the Shariah screening criteria.

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