| TICKER | AMZN |
| Company Name | Amazon.com, INC |
| Shariah Compliance | Compliant |
| DP RATIO | 4.34% |
Report Published as on 31st May 2024
We have conducted an extensive review of Amazon.com from a Shariah perspective to assess its adherence to Shariah principles based on its sources of income.
Amazon.com, Inc. aims to be the most customer-centric company globally, serving various customer segments, including consumers, sellers, developers, enterprises, and content creators. The company operates through multiple segments, catering to the diverse needs of its customers. It offers a wide range of products and services, both online and through physical stores, focusing on selection, price, and convenience to serve consumers effectively. Additionally, Amazon provides platforms and programs for sellers to grow their businesses, publish and sell content for authors, musicians, filmmakers, and app developers, and offers cloud computing services through Amazon Web Services (AWS) to developers and enterprises of all sizes.
As of 2023, Amazon.com stands as the world’s largest online retailer and marketplace, leading provider of smart speakers, dominant force in cloud computing services via AWS, and prominent player in live-streaming services through Twitch. The company’s revenue and market share surpass those of its competitors, with its paid subscription plan, Amazon Prime, boasting over 200 million subscribers globally. This remarkable growth has propelled Amazon to surpass Walmart as the world’s largest retailer outside of China.
In analyzing Amazon’s revenue streams, we will apply Shariah screens to its various operating segments to determine their compliance with Shariah principles.
Segment Breakup: (In millions of USD) For year ended 31st December 2023
| Segment | Revenue | Non-Permissible Revenue | % Non-Permissible Revenue | Non-Permissibility Classification | Comments |
| Online store | $ 231,872 | – | – | – | – |
| Physical store | $ 20,030 | $ 2,003 | 10% | Alcohol/Pork/Tobacco | Its whole food segment has sales from Alcohol/Pork/Tobacco |
| Third-party seller service | $ 140,053 | – | – | – | – |
| Subscription services | $ 40,209 | $20,104.5 | 50% | Entertainment/Music | 50-50 rule applied as per Shariah Board decision |
| Advertising services and others | $ 46,906 | – | – | – | Primarily includes sales of advertising services. Seems to be compliant |
| AWS | $ 90,757 | – | – | – | – |
| Other | $ 4,958 | – | – | – | – |
| Total | $ 574,785 | $ 22,107 | 3.84% | – | – |
Area of Concern From Shariah Perspective
In the initial table analysis, it becomes apparent that certain business segments of Amazon engage in non-permissible activities. Notably, the physical stores segment includes non-permissible activities due to sales from alcohol, pork, and tobacco products, particularly within its Whole Foods segment. A Shariah compliance concern arises regarding the revenue derived from the subscription services segment, which includes fees associated with Amazon Prime memberships granting access to various digital content, including video, audiobooks, music, and e-books, alongside faster delivery services.
The subscription services segment is multifaceted, comprising two key components: access to expedited delivery of goods, deemed permissible, and access to entertainment content, which poses Shariah compliance challenges, albeit not all content offered being non-permissible. The pivotal question arises: do Amazon Prime subscribers primarily pay for access to entertainment content or for expedited delivery services? While the company’s perspective emphasizes the latter, the lack of disclosure regarding revenue bifurcation complicates the assessment.
In such scenarios lacking clear revenue segregation, the Shariah Board applies the 50-50 rule, assuming half of the subscription revenue as non-permissible. With subscription services accounting for $40.2 billion, representing 6.99% of total revenue, the application of this rule deems 3.49% of the subscription revenue as non-permissible, within the permissible threshold. Consequently, the Shariah Board concludes that Amazon Inc. complies with the business sector screening criteria, factoring in the peculiarities of its subscription services revenue.
It is essential to highlight the Shariah Board’s acknowledgment of the unique nature of Amazon Inc.’s subscription services revenue. Moving forward, a scrutiny of the non-operating segments’ revenue sources will be conducted to assess their adherence to Shariah principles.
Non-operating Revenue: (In millions of USD) For year ended 31st December 2023
| Segment Description | Segment Revenue | Shariah Non-Permissible Revenue | % Non-Permissible Revenue | Shariah Non-Permissibility Classification | Comments |
| Interest Income | $ 2,949 | $2,949 | 100% | Interest income | – |
| Marketable equity securities valuation gains | $ 984 | – | – | – | – |
| Equity warrant valuation gains | $ 26 | $ 26 | 100% | Non-permissible income | – |
| Foreign currency gains | $ 65 | – | – | – | – |
| Total | $ 4,024 | $ 2,975 | 73.93% | – | – |
It is clear from the table above that the non-operating income of the company includes interest income which is Shariah not compliant. This amount is included for the calculation of the Sector Compliance and Dividend Purification.
Sector Compliance Calculation:
| Total Revenue | $ 578,809 |
| Non-permissible operating revenue | $ 22,107 |
| Interest Income | $ 2,949 |
| % of non-permissible revenue | 4.32% |
| Sector Compliance | PASS |
Dividend Purification Calculation:
| Revenue Description | Non permissible Revenue (millions of USD) |
| Shariah Non-permissible operating revenue | $ 22,107 |
| Shariah Non-permissible non-operating revenue | $ 2,975 |
| Total Shariah Non-permissible revenue | $ 25,082 |
| Total Revenue Of The Company | $ 578,809 |
| Dividend Purification Ratio | 4.34% |
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 year ended 31st March 2024)
| Particulars | Amount | Remarks |
| 3 years Average Market | $ 1424223 | – |
| Total Debt | $ 57,634 | – |
| Debt Ratio | 0.040467 | – |
Source: All the above information is based on the website of the company and the annual report for the year ended 31st December 2023.
Conclusion
Given the above information, we at Islamicly believe that Amazon.com Inc. is a Shariah-compliant company as per the Shariah screening criteria.
