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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 ____________________________________
FORM 10-Q
____________________________________ 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to             .
Commission File No. 000-22513
____________________________________
AMAZON.COM, INC.
(Exact name of registrant as specified in its charter)
 ____________________________________
Delaware 91-1646860
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
410 Terry Avenue North, Seattle, Washington 98109-5210
(206) 266-1000
(Address and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, par value $.01 per shareAMZNNasdaq Global Select Market
____________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
10,406,627,415 shares of common stock, par value $0.01 per share, outstanding as of April 24, 2024


AMAZON.COM, INC.
FORM 10-Q
For the Quarterly Period Ended March 31, 2024
INDEX
 
2

PART I. FINANCIAL INFORMATION
Item 1.Financial Statements
AMAZON.COM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
  Three Months Ended
March 31,
Twelve Months Ended
March 31,
2023202420232024
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD$54,253 $73,890 $36,599 $49,734 
OPERATING ACTIVITIES:
Net income3,172 10,431 4,294 37,684 
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization of property and equipment and capitalized content costs, operating lease assets, and other11,123 11,684 43,851 49,224 
Stock-based compensation4,748 4,961 21,119 24,236 
Non-operating expense (income), net534 2,734 8,811 1,452 
Deferred income taxes(472)(938)(6,619)(6,342)
Changes in operating assets and liabilities:
Inventories371 1,776 393 2,854 
Accounts receivable, net and other4,724 3,684 (4,361)(9,388)
Other assets(3,203)(2,701)(14,499)(11,763)
Accounts payable(11,264)(11,282)1,061 5,455 
Accrued expenses and other(5,763)(2,928)(1,418)407 
Unearned revenue818 1,568 1,698 5,328 
Net cash provided by (used in) operating activities4,788 18,989 54,330 99,147 
INVESTING ACTIVITIES:
Purchases of property and equipment(14,207)(14,925)(62,901)(53,447)
Proceeds from property and equipment sales and incentives1,137 990 5,252 4,449 
Acquisitions, net of cash acquired, non-marketable investments, and other(3,513)(3,354)(5,488)(5,680)
Sales and maturities of marketable securities1,115 1,392 9,963 5,904 
Purchases of marketable securities(338)(1,965)(1,139)(3,115)
Net cash provided by (used in) investing activities(15,806)(17,862)(54,313)(51,889)
FINANCING ACTIVITIES:
Common stock repurchased  (3,334) 
Proceeds from short-term debt, and other12,780 338 40,590 5,687 
Repayments of short-term debt, and other(3,603)(404)(34,926)(22,478)
Proceeds from long-term debt  21,166  
Repayments of long-term debt(1,386)(330)(2,644)(2,620)
Principal repayments of finance leases(1,380)(770)(6,544)(3,774)
Principal repayments of financing obligations(57)(90)(226)(304)
Net cash provided by (used in) financing activities6,354 (1,256)14,082 (23,489)
Foreign currency effect on cash, cash equivalents, and restricted cash145 (429)(964)(171)
Net increase (decrease) in cash, cash equivalents, and restricted cash(4,519)(558)13,135 23,598 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD$49,734 $73,332 $49,734 $73,332 
See accompanying notes to consolidated financial statements.
3

AMAZON.COM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
  
Three Months Ended
March 31,
20232024
Net product sales$56,981 $60,915 
Net service sales70,377 82,398 
Total net sales127,358 143,313 
Operating expenses:
Cost of sales67,791 72,633 
Fulfillment20,905 22,317 
Technology and infrastructure20,450 20,424 
Sales and marketing10,172 9,662 
General and administrative3,043 2,742 
Other operating expense (income), net223 228 
Total operating expenses122,584 128,006 
Operating income4,774 15,307 
Interest income611 993 
Interest expense(823)(644)
Other income (expense), net(443)(2,673)
Total non-operating expense(655)(2,324)
Income before income taxes4,119 12,983 
Provision for income taxes(948)(2,467)
Equity-method investment activity, net of tax1 (85)
Net income$3,172 $10,431 
Basic earnings per share$0.31 $1.00 
Diluted earnings per share$0.31 $0.98 
Weighted-average shares used in computation of earnings per share:
Basic10,250 10,393 
Diluted10,347 10,670 
See accompanying notes to consolidated financial statements.
4

AMAZON.COM, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited) 
  
Three Months Ended
March 31,
20232024
Net income$3,172 $10,431 
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax of $(10) and $30
386 (1,096)
Available-for-sale debt securities:
Change in net unrealized gains (losses), net of tax of $(29) and $(158)
95 536 
Less: reclassification adjustment for losses (gains) included in “Other income (expense), net,” net of tax of $(10) and $0
33 1 
Net change128 537 
Other, net of tax of $0 and $(1)
 1 
Total other comprehensive income (loss)514 (558)
Comprehensive income$3,686 $9,873 
See accompanying notes to consolidated financial statements.
5

AMAZON.COM, INC.
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data) 
December 31, 2023March 31, 2024
 (unaudited)
ASSETS
Current assets:
Cash and cash equivalents$73,387 $72,852 
Marketable securities13,393 12,222 
Inventories33,318 31,147 
Accounts receivable, net and other52,253 47,768 
Total current assets172,351 163,989 
Property and equipment, net204,177 209,950 
Operating leases72,513 73,313 
Goodwill22,789 22,770 
Other assets56,024 60,947 
Total assets$527,854 $530,969 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$84,981 $73,068 
Accrued expenses and other64,709 63,970 
Unearned revenue15,227 15,927 
Total current liabilities164,917 152,965 
Long-term lease liabilities77,297 77,052 
Long-term debt58,314 57,634 
Other long-term liabilities25,451 26,657 
Commitments and contingencies (Note 4)
Stockholders’ equity:
Preferred stock ($0.01 par value; 500 shares authorized; no shares issued or outstanding)
  
Common stock ($0.01 par value; 100,000 shares authorized; 10,898 and 10,918 shares issued; 10,383 and 10,403 shares outstanding)
109 109 
Treasury stock, at cost(7,837)(7,837)
Additional paid-in capital99,025 103,938 
Accumulated other comprehensive income (loss)(3,040)(3,598)
Retained earnings113,618 124,049 
Total stockholders’ equity201,875 216,661 
Total liabilities and stockholders’ equity$527,854 $530,969 
See accompanying notes to consolidated financial statements.
6

AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 — ACCOUNTING POLICIES AND SUPPLEMENTAL DISCLOSURES
Unaudited Interim Financial Information
We have prepared the accompanying consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These consolidated financial statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of our consolidated cash flows, operating results, and balance sheets for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for 2024 due to seasonal and other factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with the rules and regulations of the SEC. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in Item 8 of Part II, “Financial Statements and Supplementary Data,” of our 2023 Annual Report on Form 10-K.
Prior Period Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation. “Other assets” were reclassified out of “Accounts receivable, net and other” on our consolidated statements of cash flows.
Principles of Consolidation
The consolidated financial statements include the accounts of Amazon.com, Inc. and its consolidated entities (collectively, the “Company”), consisting of its wholly-owned subsidiaries and those entities in which we have a variable interest and of which we are the primary beneficiary, including certain entities in India and certain entities that support our health care services and seller lending financing activities. Intercompany balances and transactions between consolidated entities are eliminated.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, income taxes, useful lives of equipment, commitments and contingencies, valuation of acquired intangibles and goodwill, stock-based compensation forfeiture rates, vendor funding, inventory valuation, collectability of receivables, impairment of property and equipment and operating leases, valuation and impairment of investments, self-insurance liabilities, and viewing patterns of capitalized video content. Actual results could differ materially from these estimates.
We review the useful lives of equipment on an ongoing basis, and effective January 1, 2024 we changed our estimate of the useful lives for our servers from five to six years. The longer useful lives are due to continuous improvements in our hardware, software, and data center designs. The effect of this change in estimate for Q1 2024, based on servers that were included in “Property and equipment, net” as of December 31, 2023 and those acquired during the three months ended March 31, 2024, was a reduction in depreciation and amortization expense of $897 million and a benefit to net income of $695 million, or $0.07 per basic share and $0.07 per diluted share.
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Supplemental Cash Flow Information
The following table shows supplemental cash flow information (in millions):
Three Months Ended
March 31,
Twelve Months Ended
March 31,
2023202420232024
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest on debt, net of capitalized interest$402 $269 $1,684 $2,475 
Cash paid for operating leases2,467 3,332 8,733 11,318 
Cash paid for interest on finance leases81 74 348 301 
Cash paid for interest on financing obligations59 64 208 201 
Cash paid for income taxes, net of refunds619 458 6,201 11,018 
Assets acquired under operating leases3,626 3,753 20,251 14,179 
Property and equipment acquired under finance leases, net of remeasurements and modifications8 42 517 676 
Property and equipment recognized during the construction period of build-to-suit lease arrangements131 37 1,953 263 
Property and equipment derecognized after the construction period of build-to-suit lease arrangements, with the associated leases recognized as operating
720  5,845 654 
Earnings Per Share
Basic earnings per share is calculated using our weighted-average outstanding common shares. Diluted earnings per share is calculated using our weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method. In periods when we have a net loss, stock awards are excluded from our calculation of earnings per share as their inclusion would have an antidilutive effect.
The following table shows the calculation of diluted shares (in millions):
Three Months Ended
March 31,
20232024
Shares used in computation of basic earnings per share10,250 10,393 
Total dilutive effect of outstanding stock awards97 277 
Shares used in computation of diluted earnings per share10,347 10,670 
Other Income (Expense), Net
Other income (expense), net” is as follows (in millions):
Three Months Ended
March 31,
20232024
Marketable equity securities valuation gains (losses)$(480)$(2,126)
Equity warrant valuation gains (losses)59 (230)
Upward adjustments relating to equity investments in private companies16 5 
Foreign currency gains (losses)70 (74)
Other, net(108)(248)
Total other income (expense), net(443)(2,673)
Included in “Other income (expense), net” is a marketable equity securities valuation gain (loss) of $(467) million and $(2.0) billion in Q1 2023 and Q1 2024, from our equity investment in Rivian Automotive, Inc. (“Rivian”). As of March 31, 2024, we held 158 million shares of Rivian’s Class A common stock, representing an approximate 16% ownership interest, and an approximate 15% voting interest. We determined that we have the ability to exercise significant influence over Rivian through our equity investment, our commercial arrangement for the purchase of electric vehicles and jointly-owned intellectual property, and one of our employees serving on Rivian’s board of directors. We elected the fair value option to account for our equity investment in Rivian, which is included in “Marketable securities” on our consolidated balance sheets, and had a fair value of $3.7 billion and $1.7 billion as of December 31, 2023 and March 31, 2024.
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Required summarized financial information of Rivian as disclosed in its most recent SEC filings is as follows (in millions):
Twelve Months Ended December 31,
20222023
Revenues$1,658 $4,434 
Gross profit(3,123)(2,030)
Loss from operations(6,856)(5,739)
Net loss(6,752)(5,432)
Inventories
Inventories, consisting of products available for sale, are primarily accounted for using the first-in, first-out method, and are valued at the lower of cost and net realizable value. This valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable values of each disposition category. The inventory valuation allowance, representing a write-down of inventory, was $3.0 billion and $2.6 billion as of December 31, 2023 and March 31, 2024.
Accounts Receivable, Net and Other
Included in “Accounts receivable, net and other” on our consolidated balance sheets are receivables primarily related to customers, vendors, and sellers, as well as prepaid expenses and other current assets. As of December 31, 2023 and March 31, 2024, customer receivables, net, were $34.1 billion and $31.8 billion, vendor receivables, net, were $8.5 billion and $6.7 billion, seller receivables, net, were $1.0 billion and $0.6 billion, and other receivables, net, were $3.3 billion and $3.1 billion. Seller receivables are amounts due from sellers related to our seller lending program, which provides funding to sellers primarily to procure inventory. Prepaid expenses and other current assets were $5.4 billion and $5.6 billion as of December 31, 2023 and March 31, 2024.
We estimate losses on receivables based on expected losses, including our historical experience of actual losses. The allowance for doubtful accounts was $1.7 billion as of December 31, 2023 and March 31, 2024.
Digital Video and Music Content
The total capitalized costs of video, which is primarily released content, and music as of December 31, 2023 and March 31, 2024 were $17.4 billion and $17.9 billion. Total video and music expense was $4.0 billion and $4.6 billion in Q1 2023 and Q1 2024.
Unearned Revenue
Unearned revenue is recorded when payments are received or due in advance of performing our service obligations and is recognized over the service period. Unearned revenue primarily relates to prepayments of AWS services and Amazon Prime memberships. Our total unearned revenue as of December 31, 2023 was $20.9 billion, of which $6.1 billion was recognized as revenue during the three months ended March 31, 2024. Included in “Other long-term liabilities” on our consolidated balance sheets was $5.7 billion and $6.4 billion of unearned revenue as of December 31, 2023 and March 31, 2024.
Additionally, we have performance obligations, primarily related to AWS, associated with commitments in customer contracts for future services that have not yet been recognized in our consolidated financial statements. For contracts with original terms that exceed one year, those commitments not yet recognized were $157.7 billion as of March 31, 2024. The weighted-average remaining life of our long-term contracts is 4.1 years. However, the amount and timing of revenue recognition is largely driven by customer usage, which can extend beyond the original contractual term.
Accounting Pronouncements Not Yet Adopted
In December 2023, the Financial Accounting Standards Board issued an Accounting Standards Update (“ASU”) amending existing income tax disclosure guidance, primarily requiring more detailed disclosure for income taxes paid and the effective tax rate reconciliation. The ASU is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted, and can be applied on either a prospective or retroactive basis. We are currently evaluating the ASU to determine its impact on our income tax disclosures.
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Note 2 — FINANCIAL INSTRUMENTS
Cash, Cash Equivalents, Restricted Cash, and Marketable Securities
As of December 31, 2023 and March 31, 2024, our cash, cash equivalents, restricted cash, and marketable securities primarily consisted of cash, AAA-rated money market funds, U.S. and foreign government and agency securities, other investment grade securities, and marketable equity securities. Cash equivalents and marketable securities are recorded at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:
Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
We measure the fair value of money market funds and certain marketable equity securities based on quoted prices in active markets for identical assets or liabilities. Other marketable securities were valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data.
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The following table summarizes, by major security type, our cash, cash equivalents, restricted cash, and marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in millions):
 December 31, 2023March 31, 2024
  
Total
Estimated
Fair Value
Cost or
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Total
Estimated
Fair Value
Cash$11,706 $11,633 $— $— $11,633 
Level 1 securities:
Money market funds39,160 28,676 — — 28,676 
Equity securities (1)4,658 2,575 
Level 2 securities:
Foreign government and agency securities505 19   19 
U.S. government and agency securities1,699 2,641 1 (89)2,553 
Corporate debt securities27,805 38,636  (146)38,490 
Asset-backed securities1,646 1,554  (45)1,509 
Other debt securities104 102  (3)99 
$87,283 $83,261 $1 $(283)$85,554 
Less: Restricted cash, cash equivalents, and marketable securities (2)(503)(480)
Total cash, cash equivalents, and marketable securities$86,780 $85,074 
___________________
(1)The related unrealized gain (loss) recorded in “Other income (expense), net” was $(479) million and $(2.1) billion in Q1 2023 and Q1 2024.
(2)We are required to pledge or otherwise restrict a portion of our cash, cash equivalents, and marketable debt securities primarily as collateral for real estate, amounts due to third-party sellers in certain jurisdictions, debt, and standby and trade letters of credit. We classify cash, cash equivalents, and marketable debt securities with use restrictions of less than twelve months as “Accounts receivable, net and other” and of twelve months or longer as non-current “Other assets” on our consolidated balance sheets. See “Note 4 — Commitments and Contingencies.”
The following table summarizes the remaining contractual maturities of our cash equivalents and marketable debt securities as of March 31, 2024 (in millions):
Amortized
Cost
Estimated
Fair Value
Due within one year$66,539 $66,481 
Due after one year through five years3,810 3,652 
Due after five years through ten years404 389 
Due after ten years875 824 
Total$71,628 $71,346 
Actual maturities may differ from the contractual maturities because borrowers may have certain prepayment conditions.
Non-Marketable Investments
We hold equity warrants giving us the right to acquire stock of other companies. As of December 31, 2023 and March 31, 2024, these warrants had a fair value of $2.2 billion and $2.1 billion, with gains and losses recognized in “Other income (expense), net” on our consolidated statements of operations. These warrants are classified as Level 2 and 3 assets.
As of December 31, 2023 and March 31, 2024, equity investments not accounted for under the equity-method and without readily determinable fair values had a carrying value of $754 million and $801 million, with adjustments recognized in “Other income (expense), net” on our consolidated statements of operations.
In Q3 2023, we invested in a $1.25 billion note from Anthropic, PBC, which is convertible to equity. In Q1 2024, we invested $2.75 billion in a second convertible note. The notes are classified as available for sale and reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive income (loss).” The notes are classified as Level 3 assets. We also have a commercial arrangement primarily for the provision of AWS cloud services, which includes the use of AWS chips.
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All non-marketable investments are recorded within “Other assets” on our consolidated balance sheets.
Consolidated Statements of Cash Flows Reconciliation
The following table provides a reconciliation of the amount of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets to the total of the same such amounts shown in the consolidated statements of cash flows (in millions):
December 31, 2023March 31, 2024
Cash and cash equivalents$73,387 $72,852 
Restricted cash included in accounts receivable, net and other497 474 
Restricted cash included in other assets6 6 
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows$73,890 $73,332 
Note 3 — LEASES
We have entered into non-cancellable operating and finance leases for fulfillment network, data center, office, and physical store facilities as well as server and networking equipment, aircraft, and vehicles. Gross assets acquired under finance leases, including those where title transfers at the end of the lease, are recorded in “Property and equipment, net” and were $62.5 billion and $60.9 billion as of December 31, 2023 and March 31, 2024. Accumulated amortization associated with finance leases was $44.7 billion and $44.0 billion as of December 31, 2023 and March 31, 2024.
Lease cost recognized in our consolidated statements of operations is summarized as follows (in millions):
Three Months Ended March 31,
20232024
Operating lease cost$2,512 $2,829 
Finance lease cost:
Amortization of lease assets1,546 941 
Interest on lease liabilities80 73 
Finance lease cost1,626 1,014 
Variable lease cost518 635 
Total lease cost$4,656 $4,478 
Other information about lease amounts recognized in our consolidated financial statements is as follows:
 December 31, 2023March 31, 2024
Weighted-average remaining lease term – operating leases11.3 years11.2 years
Weighted-average remaining lease term – finance leases11.9 years12.0 years
Weighted-average discount rate – operating leases3.3 %3.3 %
Weighted-average discount rate – finance leases2.7 %2.8 %
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Our lease liabilities were as follows (in millions):
December 31, 2023
 Operating LeasesFinance LeasesTotal
Gross lease liabilities$90,777 $14,106 $104,883 
Less: imputed interest(15,138)(1,997)(17,135)
Present value of lease liabilities75,639 12,109 87,748 
Less: current portion of lease liabilities(8,419)(2,032)(10,451)
Total long-term lease liabilities$67,220 $10,077 $77,297 
March 31, 2024
 Operating LeasesFinance LeasesTotal
Gross lease liabilities$91,419 $13,262 $104,681 
Less: imputed interest(15,400)(2,022)(17,422)
Present value of lease liabilities76,019 11,240 87,259 
Less: current portion of lease liabilities(8,581)(1,626)(10,207)
Total long-term lease liabilities$67,438 $9,614 $77,052 
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Note 4 — COMMITMENTS AND CONTINGENCIES
Commitments
The following summarizes our principal contractual commitments, excluding open orders for purchases that support normal operations and are generally cancellable, as of March 31, 2024 (in millions): 
 Nine Months Ended December 31,Year Ended December 31,  
 20242025202620272028ThereafterTotal
Long-term debt principal and interest$10,335 $7,011 $4,679 $10,403 $3,644 $60,176 $96,248 
Operating lease liabilities8,202 10,276 9,531 8,708 7,908 46,794 91,419 
Finance lease liabilities, including interest1,478 1,460 1,376 1,156 1,024 6,768 13,262 
Financing obligations, including interest (1)319 466 473 481 488 6,330 8,557 
Leases not yet commenced1,692 2,579 2,712 2,759 2,893 24,187 36,822 
Unconditional purchase obligations (2)7,322 8,278 6,336 4,862 2,341 10,730 39,869 
Other commitments (3)2,690 1,634 1,168 767 689 9,436 16,384 
Total commitments$32,038 $31,704 $26,275 $29,136 $18,987 $164,421 $302,561 
___________________
(1)Includes non-cancellable financing obligations for fulfillment network and data center facilities. Excluding interest, current financing obligations of $271 million and $269 million are recorded within “Accrued expenses and other” and $6.6 billion and $6.5 billion are recorded within “Other long-term liabilities” as of December 31, 2023 and March 31, 2024. The weighted-average remaining term of the financing obligations was 17.0 years and 16.7 years and the weighted-average imputed interest rate was 3.1% as of December 31, 2023 and March 31, 2024.
(2)Includes unconditional purchase obligations related to long-term agreements to acquire and license digital media content that are not reflected on the consolidated balance sheets, and certain products offered in our Whole Foods Market stores. For those digital media content agreements with variable terms, we do not estimate the total obligation beyond any minimum quantities and/or pricing as of the reporting date. Purchase obligations associated with renewal provisions solely at the option of the content provider are included to the extent such commitments are fixed or a minimum amount is specified. Renewable energy agreements based on actual generation without a fixed or minimum volume commitment are not included. These agreements also provide the right to receive renewable energy certificates for no additional consideration.
(3)Includes asset retirement obligations, liabilities associated with digital media content agreements with initial terms greater than one year, and the estimated timing and amounts of payments for rent and tenant improvements associated with build-to-suit lease arrangements that are under construction. Excludes approximately $5.5 billion of income tax contingencies for which we cannot make a reasonably reliable estimate of the amount and period of payment, if any.
Other Contingencies
We are disputing claims and denials of refunds or credits, and monitoring or evaluating potential claims, related to various non-income taxes (such as sales, value added, consumption, service, and similar taxes), including in jurisdictions in which we already collect and remit these taxes. These non-income tax controversies typically include (i) the taxability of products and services, including cross-border intercompany transactions, (ii) collection and withholding on transactions with third parties, including as a result of evolving requirements imposed on marketplaces with respect to third-party sellers, and (iii) the adequacy of compliance with reporting obligations, including evolving documentation requirements. Due to the inherent complexity and uncertainty of these matters and the judicial and regulatory processes in certain jurisdictions, the final outcome of any such controversies may be materially different from our expectations.
Legal Proceedings
The Company is involved from time to time in claims, proceedings, and litigation, including the matters described in Item 8 of Part II, “Financial Statements and Supplementary Data — Note 7 — Commitments and Contingencies — Legal Proceedings” of our 2023 Annual Report on Form 10-K, as supplemented by the following:
In May 2018, Rensselaer Polytechnic Institute and CF Dynamic Advances LLC filed a complaint against Amazon.com, Inc. in the United States District Court for the Northern District of New York. The complaint alleged, among other things, that “Alexa Voice Software and Alexa enabled devices” infringe U.S. Patent No. 7,177,798, entitled “Natural Language Interface Using Constrained Intermediate Dictionary of Results.” The complaint sought an injunction, an unspecified amount of damages, enhanced damages, an ongoing royalty, interest, attorneys’ fees, and costs. In March 2023, the plaintiffs alleged in
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their damages report that in the event of a finding of liability Amazon could be subject to $140 million to $267 million in damages. In March 2024, the district court granted summary judgment ruling that the patent is invalid and dismissed the case. In April 2024, the plaintiffs filed a notice of appeal. We dispute the allegations of wrongdoing and will continue to defend ourselves vigorously in this matter.
In December 2018, Kove IO, Inc. filed a complaint against Amazon Web Services, Inc. in the United States District Court for the Northern District of Illinois. The complaint alleged, among other things, that Amazon S3 and DynamoDB infringe U.S. Patent Nos. 7,814,170 and 7,103,640, each entitled “Network Distributed Tracking Wire Transfer Protocol”; and 7,233,978, entitled “Method and Apparatus for Managing Location Information in a Network Separate from the Data to Which the Location Information Pertains.” The complaint sought an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, interest, and injunctive relief. In April 2024, a jury found that Amazon infringed the asserted patents and awarded Kove $525 million in damages. We disagree with the jury’s findings, intend to appeal the jury verdict, and will continue to defend ourselves vigorously in this matter.
In addition, we are regularly subject to claims, litigation, and other proceedings, including potential regulatory proceedings, involving patent and other intellectual property matters, taxes, labor and employment, competition and antitrust, privacy and data protection, consumer protection, commercial disputes, goods and services offered by us and by third parties, and other matters.
The outcomes of our legal proceedings and other contingencies are inherently unpredictable, subject to significant uncertainties, and could be material to our operating results and cash flows for a particular period. We evaluate, on a regular basis, developments in our legal proceedings and other contingencies that could affect the amount of liability, including amounts in excess of any previous accruals and reasonably possible losses disclosed, and make adjustments and changes to our accruals and disclosures as appropriate. For the matters we disclose that do not include an estimate of the amount of loss or range of losses, such an estimate is not possible or is immaterial, and we may be unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies. Until the final resolution of such matters, if any of our estimates and assumptions change or prove to have been incorrect, we may experience losses in excess of the amounts recorded, which could have a material effect on our business, consolidated financial position, results of operations, or cash flows.
See also “Note 7 — Income Taxes.”
Note 5 — DEBT
As of March 31, 2024, we had $66.5 billion of unsecured senior notes outstanding (the “Notes”) and $352 million of borrowings under our secured revolving credit facility. Our total long-term debt obligations are as follows (in millions):
Maturities (1)Stated Interest RatesEffective Interest RatesDecember 31, 2023March 31, 2024
2014 Notes issuance of $6.0 billion
2024 - 2044
3.80% - 4.95%
3.90% - 5.12%
4,000 4,000 
2017 Notes issuance of $17.0 billion
2024 - 2057
2.80% - 5.20%
2.95% - 4.33%
15,000 15,000 
2020 Notes issuance of $10.0 billion
2025 - 2060
0.80% - 2.70%
0.88% - 2.77%
9,000 9,000 
2021 Notes issuance of $18.5 billion
2024 - 2061
0.45% - 3.25%
0.57% - 3.31%
17,500 17,500 
April 2022 Notes issuance of $12.8 billion
2024 - 2062
2.73% - 4.10%
2.83% - 4.15%
12,750 12,750 
December 2022 Notes issuance of $8.3 billion
2024 - 2032
4.55% - 4.70%
4.61% - 4.83%
8,250 8,250 
Credit Facility682 352 
Total face value of long-term debt67,182 66,852 
Unamortized discount and issuance costs, net(374)(370)
Less: current portion of long-term debt(8,494)(8,848)
Long-term debt$58,314 $57,634 
___________________
(1) The weighted-average remaining lives of the 2014, 2017, 2020, 2021, April 2022, and December 2022 Notes were 11.3, 13.9, 17.3, 12.8, 12.0, and 4.6 years as of March 31, 2024. The combined weighted-average remaining life of the Notes was 12.4 years as of March 31, 2024.
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Interest on the Notes is payable semi-annually in arrears. We may redeem the Notes at any time in whole, or from time to time, in part at specified redemption prices. We are not subject to any financial covenants under the Notes. The estimated fair value of the Notes was approximately $60.6 billion and $59.4 billion as of December 31, 2023 and March 31, 2024, which is based on quoted prices for our debt as of those dates.
We have a $352 million secured revolving credit facility with a lender that is secured by certain seller receivables, which we decreased from $1.5 billion to $352 million in March 2024 and we may from time to time increase in the future subject to lender approval (the “Credit Facility”). The Credit Facility is available until August 2025, bears interest based on the daily Secured Overnight Financing Rate plus 1.25%, and has a commitment fee of up to 0.45% on the undrawn portion. There were $682 million and $352 million of borrowings outstanding under the Credit Facility as of December 31, 2023 and March 31, 2024, which had an interest rate of 6.6%. We reclassified all of the $352 million outstanding as of March 31, 2024 to be included with the current portion of long-term debt within “Accrued expenses and other” on our consolidated balance sheets. As of December 31, 2023 and March 31, 2024, we have pledged $806 million and $466 million of our cash and seller receivables as collateral for debt related to our Credit Facility. The estimated fair value of the Credit Facility, which is based on Level 2 inputs, approximated its carrying value as of December 31, 2023 and March 31, 2024.
In January 2023, we entered into an $8.0 billion unsecured 364-day term loan with a syndicate of lenders (the “Term Loan”), maturing in January 2024 and bearing interest at the Secured Overnight Financing Rate specified in the Term Loan plus 0.75%. The Term Loan was classified as short-term debt and included within “Accrued expenses and other” on our consolidated balance sheets. As of December 31, 2023, the entire amount of the Term Loan had been repaid.
We have U.S. Dollar and Euro commercial paper programs (the “Commercial Paper Programs”) under which we may from time to time issue unsecured commercial paper up to a total of $20.0 billion (including up to €3.0 billion) at the date of issue, with individual maturities that may vary but will not exceed 397 days from the date of issue. There were no borrowings outstanding under the Commercial Paper Programs as of December 31, 2023 and March 31, 2024. We use the net proceeds from the issuance of commercial paper for general corporate purposes.
We have a $15.0 billion unsecured revolving credit facility with a syndicate of lenders (the “Credit Agreement”), with a term that extends to November 2028 and may be extended for one or more additional one-year terms if approved by the lenders. The interest rate applicable to outstanding balances under the Credit Agreement is the applicable benchmark rate specified in the Credit Agreement plus 0.45%, with a commitment fee of 0.03% on the undrawn portion of the credit facility. There were no borrowings outstanding under the Credit Agreement as of December 31, 2023 and March 31, 2024.
We have a $5.0 billion unsecured 364-day revolving credit facility with a syndicate of lenders (the “Short-Term Credit Agreement”), which matures in October 2024 and may be extended for one additional period of 364 days if approved by the lenders. The interest rate applicable to outstanding balances under the Short-Term Credit Agreement is the Secured Overnight Financing Rate specified in the Short-Term Credit Agreement plus 0.45%, with a commitment fee of 0.03% on the undrawn portion. There were no borrowings outstanding under the Short-Term Credit Agreement as of December 31, 2023 and March 31, 2024.
We also utilize other short-term credit facilities for working capital purposes. There were $147 million and $50 million of borrowings outstanding under these facilities as of December 31, 2023 and March 31, 2024, which were included in “Accrued expenses and other” on our consolidated balance sheets. In addition, we had $8.5 billion of unused letters of credit as of March 31, 2024.
Note 6 — STOCKHOLDERS’ EQUITY
Stock Repurchase Activity
In March 2022, the Board of Directors authorized a program to repurchase up to $10.0 billion of our common stock, with no fixed expiration. There were no repurchases of our common stock during the three months ended March 31, 2023 or 2024. As of March 31, 2024, we have $6.1 billion remaining under the repurchase program.
Stock Award Plans
Employees vest in restricted stock unit awards over the corresponding service term, generally between two and five years. The majority of restricted stock unit awards are granted at the date of hire or in Q2 as part of the annual compensation review and primarily vest semi-annually in Q2 and Q4 of the relevant compensation year.
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Stock Award Activity
Common shares outstanding plus shares underlying outstanding stock awards totaled 10.8 billion as of December 31, 2023 and March 31, 2024. These totals include all vested and unvested stock awards outstanding, including those awards we estimate will be forfeited. Stock-based compensation expense is as follows (in millions):
Three Months Ended
March 31,
20232024
Cost of sales$165 $174 
Fulfillment603 636 
Technology and infrastructure2,574 2,772 
Sales and marketing993 932 
General and administrative413 447 
Total stock-based compensation expense$4,748 $4,961 
The following table summarizes our restricted stock unit activity for the three months ended March 31, 2024 (in millions):
Number of UnitsWeighted-Average
Grant-Date
Fair Value
Outstanding as of December 31, 2023405.8 $125 
Units granted10.7 166 
Units vested(20.0)140 
Units forfeited(11.6)126 
Outstanding as of March 31, 2024384.9 126 
Scheduled vesting for outstanding restricted stock units as of March 31, 2024, is as follows (in millions):
 Nine Months Ended December 31,Year Ended December 31,  
 20242025202620272028ThereafterTotal
Scheduled vesting — restricted stock units195.0 122.0 50.1 14.0 2.1 1.7 384.9 
As of March 31, 2024, there was $14.7 billion of net unrecognized compensation cost related to unvested stock-based compensation arrangements. This compensation is recognized on an accelerated basis with more than half of the compensation expected to be expensed in the next twelve months, and has a remaining weighted-average recognition period of 0.9 years. The estimated forfeiture rate as of December 31, 2023 and March 31, 2024 was 26.1%.
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Changes in Stockholders’ Equity
The following table shows changes in stockholders’ equity (in millions):
Three Months Ended
March 31,
20232024
Total beginning stockholders’ equity$146,043 $201,875 
Beginning and ending common stock108 109 
Beginning and ending treasury stock(7,837)(7,837)
Beginning additional paid-in capital75,066 99,025 
Stock-based compensation and issuance of employee benefit plan stock4,797 4,913 
Ending additional paid-in capital79,863 103,938 
Beginning accumulated other comprehensive income (loss)(4,487)(3,040)
Other comprehensive income (loss)514 (558)
Ending accumulated other comprehensive income (loss)(3,973)(3,598)
Beginning retained earnings83,193 113,618 
Net income3,172 10,431 
Ending retained earnings86,365 124,049 
Total ending stockholders’ equity$154,526 $216,661 
Note 7 — INCOME TAXES
Our tax provision or benefit from income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.
Our quarterly tax provision, and our quarterly estimate of our annual effective tax rate, is subject to significant variation due to several factors, including variability in accurately predicting our pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, intercompany transactions, the applicability of special tax regimes, changes in how we do business, acquisitions, investments, developments in tax controversies, changes in our stock price, changes in our deferred tax assets and liabilities and their valuation, foreign currency gains (losses), changes in statutes, regulations, case law, and administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions, and relative changes of expenses or losses for which tax benefits are not recognized. Our effective tax rate can be more or less volatile based on the amount of pre-tax income or loss. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower. In addition, we record valuation allowances against deferred tax assets when there is uncertainty about our ability to generate future income in relevant jurisdictions.
For 2024, we estimate that our effective tax rate will be favorably impacted by the U.S. federal research and development credit and foreign income deduction and adversely affected by state income taxes. In addition, valuation gains and losses from our equity investment in Rivian impact our pre-tax income and may cause variability in our effective tax rate.
Our income tax provision for the three months ended March 31, 2023 was $948 million, which included $48 million of net discrete tax expense. Our income tax provision for the three months ended March 31, 2024 was $2.5 billion, which included $558 million of net discrete tax benefits.
Cash paid for income taxes, net of refunds was $619 million and $458 million in Q1 2023 and Q1 2024.
As of December 31, 2023 and March 31, 2024, income tax contingencies were approximately $5.2 billion and $5.5 billion. Changes in tax laws, regulations, administrative practices, principles, and interpretations may impact our tax contingencies. Due to various factors, including the inherent complexities and uncertainties of the judicial, administrative, and regulatory processes in certain jurisdictions, the timing of the resolution of income tax controversies is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts
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accrued. It is reasonably possible that within the next twelve months we will receive additional assessments by various tax authorities or possibly reach resolution of income tax controversies in one or more jurisdictions. These assessments or settlements could result in changes to our contingencies related to positions on prior years’ tax filings.
We are under examination, or may be subject to examination, by the Internal Revenue Service for the calendar year 2016 and thereafter. These examinations may lead to ordinary course adjustments or proposed adjustments to our taxes or our net operating losses with respect to years under examination as well as subsequent periods.
We are also subject to taxation in various states and other foreign jurisdictions including China, France, Germany, India, Japan, Luxembourg, and the United Kingdom. We are under, or may be subject to, audit or examination and additional assessments by the relevant authorities in respect of these particular jurisdictions primarily for 2011 and thereafter. We are currently disputing tax assessments in multiple jurisdictions, including with respect to the allocation and characterization of income.
In September 2022, the Luxembourg tax authority (“LTA”) denied the tax basis of certain intangible assets that we distributed from Luxembourg to the U.S. in 2021. When we are assessed by the LTA, we will need to remit taxes related to this matter. We believe the LTA’s position is without merit, we intend to defend ourselves vigorously in this matter, and we expect to recoup taxes paid.
The Indian tax authority (“ITA”) has asserted that tax applies to cloud services fees paid to Amazon in the U.S. We will need to remit taxes related to this matter until it is resolved, which payments could be significant in the aggregate. We believe the ITA’s position is without merit, we are defending our position vigorously, and we expect to recoup taxes paid. If this matter is adversely resolved, we could recognize significant additional tax expense, including for taxes previously paid. 
Note 8 — SEGMENT INFORMATION
We have organized our operations into three segments: North America, International, and AWS. We allocate to segment results the operating expenses “Fulfillment,” “Technology and infrastructure,” “Sales and marketing,” and “General and administrative” based on usage, which is generally reflected in the segment in which the costs are incurred. The majority of technology costs recorded in “Technology and infrastructure” are incurred in the U.S. and are included in our North America and AWS segments. The majority of infrastructure costs recorded in “Technology and infrastructure” are allocated to the AWS segment based on usage. There are no internal revenue transactions between our reportable segments. Our chief operating decision maker (“CODM”) regularly reviews consolidated net sales, consolidated operating expenses, and consolidated operating income (loss) by segment. Amounts included in consolidated operating expenses include “Cost of sales,” “Fulfillment,” “Technology and infrastructure,” “Sales and marketing,” “General and administrative,” and “Other operating expense (income), net.” Our CODM manages our business by reviewing annual forecasts and consolidated results by segment on a quarterly basis.
North America
The North America segment primarily consists of amounts earned from retail sales of consumer products (including from sellers) and advertising and subscription services through North America-focused online and physical stores. This segment includes export sales from these online stores.
International
The International segment primarily consists of amounts earned from retail sales of consumer products (including from sellers) and advertising and subscription services through internationally-focused online stores. This segment includes export sales from these internationally-focused online stores (including export sales from these online stores to customers in the U.S., Mexico, and Canada), but excludes export sales from our North America-focused online stores.
AWS
The AWS segment consists of amounts earned from global sales of compute, storage, database, and other services for start-ups, enterprises, government agencies, and academic institutions.
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Information on reportable segments and reconciliation to consolidated net income is as follows (in millions):
Three Months Ended
March 31,
20232024
North America
Net sales$76,881 $86,341 
Operating expenses75,983 81,358 
Operating income$898 $4,983 
International
Net sales$29,123 $31,935 
Operating expenses30,370 31,032 
Operating income (loss)$(1,247)$903 
AWS
Net sales$21,354 $25,037 
Operating expenses16,231 15,616 
Operating income$5,123 $9,421 
Consolidated
Net sales$127,358 $143,313 
Operating expenses122,584 128,006 
Operating income4,774 15,307 
Total non-operating expense(655)(2,324)
Provision for income taxes(948)(2,467)
Equity-method investment activity, net of tax1 (85)
Net income$3,172 $10,431 
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Net sales by groups of similar products and services, which also have similar economic characteristics, is as follows (in millions):    
Three Months Ended
March 31,
20232024
Net Sales:
Online stores (1)$51,096 $54,670 
Physical stores (2)4,895 5,202 
Third-party seller services (3)29,820 34,596 
Advertising services (4)9,509 11,824 
Subscription services (5)9,657 10,722 
AWS21,354 25,037 
Other (6)1,027 1,262 
Consolidated$127,358 $143,313 
____________________________
(1)Includes product sales and digital media content where we record revenue gross. We leverage our retail infrastructure to offer a wide selection of consumable and durable goods that includes media products available in both a physical and digital format, such as books, videos, games, music, and software. These product sales include digital products sold on a transactional basis. Digital media content subscriptions that provide unlimited viewing or usage rights are included in “Subscription services.”
(2)Includes product sales where our customers physically select items in a store. Sales to customers who order goods online for delivery or pickup at our physical stores are included in “Online stores.”
(3)Includes commissions and any related fulfillment and shipping fees, and other third-party seller services.
(4)Includes sales of advertising services to sellers, vendors, publishers, authors, and others, through programs such as sponsored ads, display, and video advertising.
(5)Includes annual and monthly fees associated with Amazon Prime memberships, as well as digital video, audiobook, digital music, e-book, and other non-AWS subscription services.
(6)Includes sales related to various other offerings, such as health care services, certain licensing and distribution of video content, and shipping services, and our co-branded credit card agreements.
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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding guidance, industry prospects, or future results of operations or financial position, made in this Quarterly Report on Form 10-Q are forward-looking. We use words such as anticipates, believes, expects, future, intends, and similar expressions to identify forward-looking statements. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Actual results and outcomes could differ materially for a variety of reasons, including, among others, fluctuations in foreign exchange rates, changes in global economic conditions and customer demand and spending, inflation, interest rates, regional labor market constraints, world events, the rate of growth of the internet, online commerce, cloud services, and new and emerging technologies, the amount that Amazon.com invests in new business opportunities and the timing of those investments, the mix of products and services sold to customers, the mix of net sales derived from products as compared with services, the extent to which we owe income or other taxes, competition, management of growth, potential fluctuations in operating results, international growth and expansion, the outcomes of claims, litigation, government investigations, and other proceedings, fulfillment, sortation, delivery, and data center optimization, risks of inventory management, variability in demand, the degree to which we enter into, maintain, and develop commercial agreements, proposed and completed acquisitions and strategic transactions, payments risks, and risks of fulfillment throughput and productivity. In addition, global economic and geopolitical conditions and additional or unforeseen circumstances, developments, or events may give rise to or amplify many of these risks. These risks and uncertainties, as well as other risks and uncertainties that could cause our actual results or outcomes to differ significantly from management’s expectations, are described in greater detail in Item 1A of Part II, “Risk Factors.”
For additional information, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” of our 2023 Annual Report on Form 10-K.
Critical Accounting Estimates
The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes. Critical accounting estimates are those estimates made in accordance with GAAP that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations of the Company. Based on this definition, we have identified the critical accounting estimates addressed below. We also have other key accounting policies, which involve the use of estimates, judgments, and assumptions that are significant to understanding our results. For additional information, see Item 8 of Part II, “Financial Statements and Supplementary Data — Note 1 — Description of Business, Accounting Policies, and Supplemental Disclosures” of our 2023 Annual Report on Form 10-K and Item 1 of Part I, “Financial Statements — Note 1 — Accounting Policies and Supplemental Disclosures,” of this Form 10-Q. Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions.
Inventories
Inventories, consisting of products available for sale, are primarily accounted for using the first-in first-out method, and are valued at the lower of cost and net realizable value. This valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable values of each disposition category. These assumptions about future disposition of inventory are inherently uncertain and changes in our estimates and assumptions may cause us to realize material write-downs in the future. As a measure of sensitivity, for every 1% of additional inventory valuation allowance as of March 31, 2024, we would have recorded an additional cost of sales of approximately $330 million.
In addition, we enter into supplier commitments for certain electronic device components and certain products. These commitments are based on forecasted customer demand. If we reduce these commitments, we may incur additional costs.
Income Taxes
We are subject to income taxes in the U.S. (federal and state) and numerous foreign jurisdictions. Tax laws, regulations, administrative practices, principles, and interpretations in various jurisdictions may be subject to significant change, with or without notice, due to economic, political, and other conditions, and significant judgment is required in evaluating and estimating our provision and accruals for these taxes. There are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain. In addition, our actual and forecasted earnings are subject to
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change due to economic, political, and other conditions and significant judgment is required in determining our ability to use our deferred tax assets.
Our effective tax rates could be affected by numerous factors, such as changes in our business operations, acquisitions, investments, entry into new businesses and geographies, intercompany transactions, the relative amount of our foreign earnings, including earnings being lower than anticipated in jurisdictions where we have lower statutory rates and higher than anticipated in jurisdictions where we have higher statutory rates, losses incurred in jurisdictions for which we are not able to realize related tax benefits, the applicability of special tax regimes, changes in foreign exchange rates, changes in our stock price, changes to our forecasts of income and loss and the mix of jurisdictions to which they relate, changes in our deferred tax assets and liabilities and their valuation, changes in the laws, regulations, administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions. In addition, a number of countries have enacted or are actively pursuing changes to their tax laws applicable to corporate multinationals.
We are also currently subject to tax controversies in various jurisdictions, and these jurisdictions may assess additional income tax liabilities against us. Developments in an audit, investigation, or other tax controversy could have a material effect on our operating results or cash flows in the period or periods for which that development occurs, as well as for prior and subsequent periods. We regularly assess the likelihood of an adverse outcome resulting from these proceedings to determine the adequacy of our tax accruals. Although we believe our tax estimates are reasonable, the final outcome of audits, investigations, and any other tax controversies could be materially different from our historical income tax provisions and accruals.
Liquidity and Capital Resources
Cash flow information is as follows (in millions):
Three Months Ended
March 31,
Twelve Months Ended
March 31,
2023202420232024
Cash provided by (used in):
Operating activities$4,788 $18,989 $54,330 $99,147 
Investing activities(15,806)(17,862)(54,313)(51,889)
Financing activities6,354 (1,256)14,082 (23,489)
Our principal sources of liquidity are cash flows generated from operations and our cash, cash equivalents, and marketable securities balances, which, at fair value, were $86.8 billion and $85.1 billion as of December 31, 2023 and March 31, 2024. Amounts held in foreign currencies were $23.5 billion and $16.7 billion as of December 31, 2023 and March 31, 2024. Our foreign currency balances include British Pounds, Canadian Dollars, Euros, Indian Rupees, and Japanese Yen.
Cash provided by (used in) operating activities was $4.8 billion and $19.0 billion for Q1 2023 and Q1 2024. Our operating cash flows result primarily from cash received from our consumer, seller, developer, enterprise, and content creator customers, and advertisers, offset by cash payments we make for products and services, employee compensation, payment processing and related transaction costs, operating leases, and interest payments. Cash received from our customers and other activities generally corresponds to our net sales. The increase in operating cash flow for the trailing twelve months ended March 31, 2024, compared to the comparable prior year period, was due to an increase in net income, excluding non-cash expenses, and changes in working capital. Working capital at any specific point in time is subject to many variables, including variability in demand, inventory management and category expansion, the timing of cash receipts and payments, customer and vendor payment terms, and fluctuations in foreign exchange rates.
Cash provided by (used in) investing activities corresponds with cash capital expenditures, including leasehold improvements, incentives received from property and equipment vendors, proceeds from asset sales, cash outlays for acquisitions, investments in other companies and intellectual property rights, and purchases, sales, and maturities of marketable securities. Cash provided by (used in) investing activities was $(15.8) billion and $(17.9) billion for Q1 2023 and Q1 2024, with the variability caused primarily by purchases, sales, and maturities of marketable securities and cash capital expenditures. Cash capital expenditures were $13.1 billion and $13.9 billion during Q1 2023 and Q1 2024, which primarily reflect investments in technology infrastructure (the majority of which is to support AWS business growth) and in additional capacity to support our fulfillment network. We expect cash capital expenditures to meaningfully increase in 2024, primarily driven by investments in technology infrastructure. We made cash payments, net of acquired cash, related to acquisition and other investment activity of $3.5 billion and $3.4 billion during Q1 2023 and Q1 2024. We funded the acquisition of 1Life Healthcare, Inc. (One Medical) in 2023 with cash on hand. In Q3 2023, we invested $1.25 billion in a note from Anthropic, which is convertible to equity. In Q1 2024, we invested $2.75 billion in a second convertible note.
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Cash provided by (used in) financing activities was $6.4 billion and $(1.3) billion for Q1 2023 and Q1 2024. Cash inflows from financing activities resulted from proceeds from short-term debt, and other and long-term debt of $12.8 billion and $338 million for Q1 2023 and Q1 2024. Cash outflows from financing activities resulted from payments of short-term debt, and other, long-term debt, finance leases, and financing obligations of $6.4 billion and $1.6 billion in Q1 2023 and Q1 2024. Property and equipment acquired under finance leases was $8 million and $42 million during Q1 2023 and Q1 2024.
We had no borrowings outstanding under the two unsecured revolving credit facilities or the commercial paper programs, and we had $352 million of borrowings outstanding under our Credit Facility as of March 31, 2024. See Item 1 of Part I, “Financial Statements — Note 5 — Debt” for additional information.
Certain foreign subsidiary earnings and losses are subject to current U.S. taxation and the subsequent repatriation of those earnings is not subject to tax in the U.S. We intend to invest substantially all of our foreign subsidiary earnings, as well as our capital in our foreign subsidiaries, indefinitely outside of the U.S. in those jurisdictions in which we would incur significant, additional costs upon repatriation of such amounts.
Our U.S. taxable income is reduced by accelerated depreciation deductions and increased by the impact of capitalized research and development expenses. U.S. tax rules provide for enhanced accelerated depreciation deductions by allowing us to expense a portion of qualified property, primarily equipment. These enhanced deductions are scheduled to phase out annually from 2023 through 2026. Additionally, effective January 1, 2022, research and development expenses are required to be capitalized and amortized for U.S. tax purposes, which delays the deductibility of these expenses. Cash paid for U.S. (federal and state) and foreign income taxes (net of refunds) totaled $619 million and $458 million for Q1 2023 and Q1 2024.
As of December 31, 2023 and March 31, 2024, restricted cash, cash equivalents, and marketable securities were $503 million and $480 million. See Item 1 of Part I, “Financial Statements — Note 4 — Commitments and Contingencies” and “Financial Statements — Note 5 — Debt” for additional discussion of our principal contractual commitments, as well as our pledged assets. Additionally, we have purchase obligations and open purchase orders, including for inventory and capital expenditures, that support normal operations and are primarily due in the next twelve months. These purchase obligations and open purchase orders are generally cancellable in full or in part through the contractual provisions.
We believe that cash flows generated from operations and our cash, cash equivalents, and marketable securities balances, as well as our borrowing arrangements, will be sufficient to meet our anticipated operating cash needs for at least the next twelve months. However, any projections of future cash needs and cash flows are subject to substantial uncertainty. See Item 1A of Part II, “Risk Factors.” We continually evaluate opportunities to sell additional equity or debt securities, obtain credit facilities, obtain finance and operating lease arrangements, enter into financing obligations, repurchase common stock, pay dividends, or repurchase, refinance, or otherwise restructure our debt for strategic reasons or to further strengthen our financial position.
The sale of additional equity or convertible debt securities would be dilutive to our shareholders. In addition, we will, from time to time, consider the acquisition of, or investment in, complementary businesses, products, services, capital infrastructure, and technologies, which might affect our liquidity requirements or cause us to secure additional financing, or issue additional equity or debt securities. There can be no assurance that additional credit lines or financing instruments will be available in amounts or on terms acceptable to us, if at all. In addition, economic conditions and actions by policymaking bodies are contributing to changing interest rates and significant capital market volatility, which, along with any increases in our borrowing levels, could increase our future borrowing costs.
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Results of Operations
We have organized our operations into three segments: North America, International, and AWS. These segments reflect the way the Company evaluates its business performance and manages its operations. See Item 1 of Part I, “Financial Statements — Note 8 — Segment Information.”
Overview
Macroeconomic factors, including inflation, increased interest rates, significant capital market and supply chain volatility, and global economic and geopolitical developments, have direct and indirect impacts on our results of operations that are difficult to isolate and quantify. In addition, changes in fuel, utility, and food costs, interest rates, and economic outlook may impact customer demand and our ability to forecast consumer spending patterns. We expect some or all of these factors to continue to impact our operations into Q2 2024.
Net Sales
Net sales include product and service sales. Product sales represent revenue from the sale of products and related shipping fees and digital media content where we record revenue gross. Service sales primarily represent third-party seller fees, which includes commissions and any related fulfillment and shipping fees, AWS sales, advertising services, Amazon Prime membership fees, and certain digital media content subscriptions. Net sales information is as follows (in millions):
  
Three Months Ended
March 31,
20232024
Net Sales:
North America$76,881 $86,341 
International29,123 31,935 
AWS21,354 25,037 
Consolidated$127,358 $143,313 
Year-over-year Percentage Growth:
North America11 %12 %
International10 
AWS16 17 
Consolidated13 
Year-over-year Percentage Growth, excluding the effect of foreign exchange rates:
North America11 %12 %
International11 
AWS16 17 
Consolidated11 13 
Net Sales Mix:
North America60 %60 %
International23 22 
AWS17 18 
Consolidated100 %100 %
Sales increased 13% in Q1 2024 compared to the comparable prior year period. Changes in foreign exchange rates reduced net sales by $164 million for Q1 2024. For a discussion of the effect of foreign exchange rates on sales growth, see “Effect of Foreign Exchange Rates” below.
North America sales increased 12% in Q1 2024 compared to the comparable prior year period. The sales growth primarily reflects increased unit sales, including sales by third-party sellers, advertising sales, and subscription services. Increased unit sales were driven largely by our continued focus on price, selection, and convenience for our customers, including from our fast shipping offers.
International sales increased 10% in Q1 2024 compared to the comparable prior year period. The sales growth primarily reflects increased unit sales, including sales by third-party sellers, advertising sales, and subscription services. Increased unit sales
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were driven largely by our continued focus on price, selection, and convenience for our customers, including from our fast shipping offers. Changes in foreign exchange rates reduced International net sales by $248 million for Q1 2024.
AWS sales increased 17% in Q1 2024 compared to the comparable prior year period. The sales growth primarily reflects increased customer usage, partially offset by pricing changes primarily driven by long-term customer contracts.
Operating Income (Loss)
Operating income (loss) by segment is as follows (in millions):
Three Months Ended
March 31,
20232024
Operating Income (Loss)
North America$898 $4,983 
International (1,247)903 
AWS5,123 9,421 
Consolidated$4,774 $15,307 
Operating income increased from $4.8 billion in Q1 2023 to $15.3 billion in Q1 2024. We believe that operating income is a more meaningful measure than gross profit and gross margin due to the diversity of our product categories and services.
The increase in North America operating income in Q1 2024, compared to the comparable prior year period, is primarily due to increased unit sales and increased advertising sales, partially offset by increased shipping and fulfillment costs and increased technology and infrastructure costs.
The International operating income in Q1 2024, as compared to the operating loss in the comparable prior year period, is primarily due to increased unit sales and increased advertising sales, partially offset by increased shipping and fulfillment costs. Changes in foreign exchange rates did not significantly impact operating income for Q1 2024.
The increase in AWS operating income in Q1 2024, compared to the comparable prior year period, is primarily due to increased sales, decreased payroll and related expenses, and a reduction in depreciation and amortization expense from our change in the estimated useful lives of our servers, partially offset by spending on technology infrastructure that was primarily driven by additional investments to support AWS business growth. Changes in foreign exchange rates positively impacted operating income by $67 million for Q1 2024.
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Operating Expenses
Information about operating expenses is as follows (in millions):
Three Months Ended
March 31,
20232024
Operating Expenses:
Cost of sales$67,791 $72,633 
Fulfillment20,905 22,317 
Technology and infrastructure20,450 20,424 
Sales and marketing10,172 9,662 
General and administrative3,043 2,742 
Other operating expense (income), net223 228 
Total operating expenses$122,584 $128,006 
Year-over-year Percentage Growth (Decline):
Cost of sales%%
Fulfillment
Technology and infrastructure38 
Sales and marketing22 (5)
General and administrative17 (10)
Other operating expense (income), net(11)
Percent of Net Sales:
Cost of sales53.2 %50.7 %
Fulfillment16.4 15.6 
Technology and infrastructure16.1 14.3 
Sales and marketing8.0 6.7 
General and administrative2.4 1.9 
Other operating expense (income), net0.2 0.2 
Cost of Sales
Cost of sales primarily consists of the purchase price of consumer products, inbound and outbound shipping costs, including costs related to sortation and delivery centers and where we are the transportation service provider, and digital media content costs where we record revenue gross, including video and music.
The increase in cost of sales in Q1 2024, compared to the comparable prior year period, is primarily due to increased product and shipping costs resulting from increased sales, partially offset by fulfillment network efficiencies, including lower transportation costs. Changes in foreign exchange rates reduced cost of sales by $190 million for Q1 2024.
Shipping costs were $19.9 billion and $21.8 billion in Q1 2023 and Q1 2024. Shipping costs to receive products from our suppliers are included in our inventory and recognized as cost of sales upon sale of products to our customers. We expect our cost of shipping to continue to increase to the extent our customers accept and use our shipping offers at an increasing rate, we use more expensive shipping methods, and we offer additional services. We seek to mitigate costs of shipping over time in part through achieving higher sales volumes, optimizing our fulfillment network, negotiating better terms with our suppliers, and achieving better operating efficiencies. We believe that offering low prices to our customers is fundamental to our future success, and one way we offer lower prices is through shipping offers.
Costs to operate our AWS segment are primarily classified as “Technology and infrastructure” as we leverage a shared infrastructure that supports both our internal technology requirements and external sales to AWS customers.
Fulfillment
Fulfillment costs primarily consist of those costs incurred in operating and staffing our North America and International fulfillment centers, physical stores, and customer service centers and payment processing costs. While AWS payment processing and related transaction costs are included in “Fulfillment,” AWS costs are primarily classified as “Technology and infrastructure.” Fulfillment costs as a percentage of net sales may vary due to several factors, such as payment processing and related transaction
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costs, our level of productivity and accuracy, changes in volume, size, and weight of units received and fulfilled, the extent to which third-party sellers utilize Fulfillment by Amazon services, timing of fulfillment network and physical store expansion, the extent we utilize fulfillment services provided by third parties, mix of products and services sold, and our ability to affect customer service contacts per unit by implementing improvements in our operations and enhancements to our customer self-service features. Additionally, sales by our sellers have higher payment processing and related transaction costs as a percentage of net sales compared to our retail sales because payment processing costs are based on the gross purchase price of underlying transactions.
The increase in fulfillment costs in Q1 2024, compared to the comparable prior year period, is primarily due to increased sales and investments in our fulfillment network, partially offset by fulfillment network efficiencies. Changes in foreign exchange rates increased fulfillment costs by $14 million for Q1 2024.
We seek to expand our fulfillment network to accommodate a greater selection and in-stock inventory levels and to meet anticipated shipment volumes from sales of our own products as well as sales by third parties for which we provide the fulfillment services. We regularly evaluate our facility requirements.
Technology and Infrastructure
Technology and infrastructure costs include payroll and related expenses for employees involved in the research and development of new and existing products and services, development, design, and maintenance of our stores, curation and display of products and services made available in our online stores, and infrastructure costs. Infrastructure costs include servers, networking equipment, and data center related depreciation and amortization, rent, utilities, and other expenses necessary to support AWS and other Amazon businesses. Collectively, these costs reflect the investments we make in order to offer a wide variety of products and services to our customers, including expenditures related to initiatives to build and deploy innovative and efficient software and electronic devices and the development of a satellite network for global broadband service and autonomous vehicles for ride-hailing services.
We seek to invest efficiently in numerous areas of technology and infrastructure so we may continue to enhance the customer experience and improve our process efficiency through rapid technology developments, while operating at an ever increasing scale. Our technology and infrastructure investment and capital spending projects often support a variety of product and service offerings due to geographic expansion and the cross-functionality of our systems and operations. We expect spending in technology and infrastructure to increase over time as we continue to add employees and infrastructure. These costs are allocated to segments based on usage. The decrease in technology and infrastructure costs in Q1 2024, compared to the comparable prior year period, is primarily due to a reduction in depreciation and amortization expense from our change in the estimated useful life of our servers and decreased payroll and related costs associated with technical teams responsible for expanding our existing products and services and initiatives to introduce new products and service offerings, partially offset by an increase in spending on infrastructure. See Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” of our 2023 Annual Report on Form 10-K for a discussion of how management views advances in technology and the importance of innovation.
Sales and Marketing
Sales and marketing costs include advertising and payroll and related expenses for personnel engaged in marketing and selling activities, including sales commissions related to AWS. We direct customers to our stores primarily through a number of marketing channels, such as our sponsored search, third-party customer referrals, social and online advertising, television advertising, and other initiatives. Our marketing costs are largely variable, based on growth in sales and changes in rates. To the extent there is increased or decreased competition for these traffic sources, or to the extent our mix of these channels shifts, we would expect to see a corresponding change in our marketing costs.
The decrease in sales and marketing costs in Q1 2024, compared to the comparable prior year period, is primarily due to decreased payroll and related expenses for personnel engaged in marketing and selling activities, and decreased advertising expenses.
While costs associated with Amazon Prime membership benefits and other shipping offers are not included in sales and marketing expense, we view these offers as effective worldwide marketing tools, and intend to continue offering them indefinitely.
General and Administrative
The decrease in general and administrative costs in Q1 2024, compared to the comparable prior year period, is primarily due to a decrease in payroll and related expenses.
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Other Operating Expense (Income), Net
Other operating expense (income), net was $223 million and $228 million for Q1 2023 and Q1 2024, and was primarily related to asset impairments and the amortization of intangible assets.
Interest Income and Expense
Our interest income was $611 million and $993 million during Q1 2023 and Q1 2024, primarily due to an increase in prevailing rates. We generally invest our excess cash in AAA-rated money market funds and investment grade short- to intermediate-term marketable debt securities. Our interest income corresponds with the average balance of invested funds based on the prevailing rates, which vary depending on the geographies and currencies in which they are invested.
Interest expense was $823 million and $644 million during Q1 2023 and Q1 2024, and was primarily related to debt and finance leases. See Item 1 of Part I, “Financial Statements — Note 3 — Leases and Note 5 — Debt” for additional information.
Other Income (Expense), Net
Other income (expense), net was $(443) million and $(2.7) billion during Q1 2023 and Q1 2024. The primary components of other income (expense), net are related to equity securities valuations and adjustments, equity warrant valuations, and foreign currency. Included in other income (expense), net is a marketable equity securities valuation gain (loss) of $(467) million and $(2.0) billion in Q1 2023 and Q1 2024, from our equity investment in Rivian.
Income Taxes
Our income tax provision for the three months ended March 31, 2023 was $948 million, which included $48 million of net discrete tax expense. Our income tax provision for the three months ended March 31, 2024 was $2.5 billion, which included $558 million of net discrete tax benefits. See Item 1 of Part I, “Financial Statements — Note 7 — Income Taxes” for additional information.
Non-GAAP Financial Measures
Regulation G, Conditions for Use of Non-GAAP Financial Measures, and other SEC regulations define and prescribe the conditions for use of certain non-GAAP financial information. Our measures of free cash flows and the effect of foreign exchange rates on our consolidated statements of operations meet the definition of non-GAAP financial measures.
We provide multiple measures of free cash flows because we believe these measures provide additional perspective on the impact of acquiring property and equipment with cash and through finance leases and financing obligations.
Free Cash Flow
Free cash flow is cash flow from operations reduced by “Purchases of property and equipment, net of proceeds from sales and incentives.” The following is a reconciliation of free cash flow to the most comparable GAAP cash flow measure, “Net cash provided by (used in) operating activities,” for the trailing twelve months ended March 31, 2023 and 2024 (in millions):
 Twelve Months Ended
March 31,
 20232024
Net cash provided by (used in) operating activities$54,330 $99,147 
Purchases of property and equipment, net of proceeds from sales and incentives(57,649)(48,998)
Free cash flow$(3,319)$50,149 
Net cash provided by (used in) investing activities$(54,313)$(51,889)
Net cash provided by (used in) financing activities$14,082 $(23,489)
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Free Cash Flow Less Principal Repayments of Finance Leases and Financing Obligations
Free cash flow less principal repayments of finance leases and financing obligations is free cash flow reduced by “Principal repayments of finance leases” and “Principal repayments of financing obligations.” Principal repayments of finance leases and financing obligations approximates the actual payments of cash for our finance leases and financing obligations. The following is a reconciliation of free cash flow less principal repayments of finance leases and financing obligations to the most comparable GAAP cash flow measure, “Net cash provided by (used in) operating activities,” for the trailing twelve months ended March 31, 2023 and 2024 (in millions):
 Twelve Months Ended
March 31,
 20232024
Net cash provided by (used in) operating activities$54,330 $99,147 
Purchases of property and equipment, net of proceeds from sales and incentives(57,649)(48,998)
Free cash flow(3,319)50,149 
Principal repayments of finance leases(6,544)(3,774)
Principal repayments of financing obligations(226)(304)
Free cash flow less principal repayments of finance leases and financing obligations$(10,089)46,071 
Net cash provided by (used in) investing activities$(54,313)$(51,889)
Net cash provided by (used in) financing activities$14,082 $(23,489)
Free Cash Flow Less Equipment Finance Leases and Principal Repayments of All Other Finance Leases and Financing Obligations
Free cash flow less equipment finance leases and principal repayments of all other finance leases and financing obligations is free cash flow reduced by equipment acquired under finance leases, which is included in “Property and equipment acquired under finance leases, net of remeasurements and modifications,” principal repayments of all other finance lease liabilities, which is included in “Principal repayments of finance leases,” and “Principal repayments of financing obligations.” All other finance lease liabilities and financing obligations consists of property. In this measure, equipment acquired under finance leases is reflected as if these assets had been purchased with cash, which is not the case as these assets have been leased. The following is a reconciliation of free cash flow less equipment finance leases and principal repayments of all other finance leases and financing obligations to the most comparable GAAP cash flow measure, “Net cash provided by (used in) operating activities,” for the trailing twelve months ended March 31, 2023 and 2024 (in millions):
 Twelve Months Ended
March 31,
 20232024
Net cash provided by (used in) operating activities$54,330 $99,147 
Purchases of property and equipment, net of proceeds from sales and incentives(57,649)(48,998)
Free cash flow(3,319)50,149 
Equipment acquired under finance leases (1)(285)(306)
Principal repayments of all other finance leases (2)(625)(761)
Principal repayments of financing obligations(226)(304)
Free cash flow less equipment finance leases and principal repayments of all other finance leases and financing obligations$(4,455)$48,778 
Net cash provided by (used in) investing activities$(54,313)$(51,889)
Net cash provided by (used in) financing activities$14,082 $(23,489)
___________________
(1)For the twelve months ended March 31, 2023 and 2024, this amount relates to equipment included in “Property and equipment acquired under finance leases, net of remeasurements and modifications” of $517 million and $676 million.
(2)For the twelve months ended March 31, 2023 and 2024, this amount relates to property included in “Principal repayments of finance leases” of $6,544 million and $3,774 million.
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All of these free cash flows measures have limitations as they omit certain components of the overall cash flow statement and do not represent the residual cash flow available for discretionary expenditures. For example, these measures of free cash flows do not incorporate the portion of payments representing principal reductions of debt or cash payments for business acquisitions. Additionally, our mix of property and equipment acquisitions with cash or other financing options may change over time. Therefore, we believe it is important to view free cash flows measures only as a complement to our entire consolidated statements of cash flows.
Effect of Foreign Exchange Rates
Information regarding the effect of foreign exchange rates, versus the U.S. Dollar, on our net sales, operating expenses, and operating income is provided to show reported period operating results had the foreign exchange rates remained the same as those in effect in the comparable prior year period. The effect on our net sales, operating expenses, and operating income from changes in our foreign exchange rates versus the U.S. Dollar is as follows (in millions):
 Three Months Ended March 31,
20232024
As
Reported
Exchange
Rate
Effect (1)
At Prior
Year
Rates (2)
As ReportedExchange
Rate
Effect (1)
At Prior
Year
Rates (2)
Net sales$127,358 $2,436 $129,794 $143,313 $164 $143,477 
Operating expenses122,584 2,575 125,159 128,006 236 128,242 
Operating income4,774 (139)4,635 15,307 (72)15,235 
___________________
(1)Represents the change in reported amounts resulting from changes in foreign exchange rates from those in effect in the comparable prior year period for operating results.
(2)Represents the outcome that would have resulted had foreign exchange rates in the reported period been the same as those in effect in the comparable prior year period for operating results.
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Guidance
We provided guidance on April 30, 2024, in our earnings release furnished on Form 8-K as set forth below. These forward-looking statements reflect Amazon.com’s expectations as of April 30, 2024, and are subject to substantial uncertainty. Our results are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic and geopolitical conditions and customer demand and spending (including the impact of recessionary fears), inflation, interest rates, regional labor market constraints, world events, the rate of growth of the internet, online commerce, cloud services, and new and emerging technologies, as well as those outlined in Item 1A of Part II, “Risk Factors.”
Second Quarter 2024 Guidance
Net sales are expected to be between $144.0 billion and $149.0 billion, or to grow between 7% and 11% compared with second quarter 2023. This guidance anticipates an unfavorable impact of approximately 60 basis points from foreign exchange rates. In first quarter 2024 the impact from Leap Year added approximately 120 basis points to the year-over-year net sales growth rate.
Operating income is expected to be between $10.0 billion and $14.0 billion, compared with $7.7 billion in second quarter 2023.
This guidance assumes, among other things, that no additional business acquisitions, restructurings, or legal settlements are concluded.
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Item 3.Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk for the effect of interest rate changes, foreign currency fluctuations, and changes in the market values of our investments. Information relating to quantitative and qualitative disclosures about market risk is set forth below and in Item 2 of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio and our debt. Our long-term debt is carried at amortized cost and fluctuations in interest rates do not impact our consolidated financial statements. However, the fair value of our long-term debt, which pays interest at a fixed rate, will generally fluctuate with movements of interest rates, increasing in periods of declining rates of interest and declining in periods of increasing rates of interest. We generally invest our excess cash in AAA-rated money market funds and investment grade short- to intermediate-term marketable debt securities. Marketable debt securities with fixed interest rates may have their fair market value adversely affected due to a rise in interest rates, and we may suffer losses in principal if forced to sell securities that have declined in market value due to changes in interest rates.
Foreign Exchange Risk
During Q1 2024, net sales from our International segment accounted for 22% of our consolidated revenues. Net sales and related expenses generated from our internationally-focused stores, including within Canada and Mexico (which are included in our North America segment), are primarily denominated in the functional currencies of the corresponding stores and primarily include Euros, British Pounds, and Japanese Yen. The results of operations of, and certain of our intercompany balances associated with, our internationally-focused stores and AWS are exposed to foreign exchange rate fluctuations. Upon consolidation, as foreign exchange rates vary, net sales and other operating results may differ materially from expectations, and we may record significant gains or losses on the remeasurement of intercompany balances. For example, as a result of fluctuations in foreign exchange rates throughout the period compared to rates in effect the prior year, International segment net sales in Q1 2024 decreased by $248 million in comparison with Q1 2023.
We have foreign exchange risk related to foreign-denominated cash, cash equivalents, and marketable securities (“foreign funds”). Based on the balance of foreign funds as of March 31, 2024, of $16.7 billion, an assumed 5%, 10%, and 20% adverse change to foreign exchange would result in declines of $835 million, $1.7 billion, and $3.3 billion.
We also have foreign exchange risk related to our intercompany balances denominated in various currencies. Based on the intercompany balances as of March 31, 2024, an assumed 5%, 10%, and 20% adverse change to foreign exchange rates would result in losses of $280 million, $560 million, and $1.1 billion, recorded to “Other income (expense), net.”
See Item 2 of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Effect of Foreign Exchange Rates” for additional information on the effect on reported results of changes in foreign exchange rates.
Equity Investment Risk
As of March 31, 2024, our recorded value in equity, equity warrant, and convertible debt investments in public and private companies was $10.7 billion. Our equity and equity warrant investments in publicly traded companies, which include our equity investment in Rivian, represent $3.4 billion of our investments as of March 31, 2024, and are recorded at fair value, which is subject to market price volatility. We record our equity warrant investments in private companies at fair value and adjust our equity investments in private companies for observable price changes or impairments. Valuations of private companies are inherently more complex due to the lack of readily available market data. The current global economic conditions provide additional uncertainty. As such, we believe that market sensitivities are not practicable.
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Item 4.Controls and Procedures
We carried out an evaluation required by the Securities Exchange Act of 1934 (the “1934 Act”), under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the 1934 Act, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the 1934 Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
During the most recent fiscal quarter, there has not occurred any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

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PART II. OTHER INFORMATION
Item 1.Legal Proceedings
See Item 1 of Part I, “Financial Statements — Note 4 — Commitments and Contingencies — Legal Proceedings.”
Item 1A.Risk Factors
Please carefully consider the following discussion of significant factors, events, and uncertainties that make an investment in our securities risky. The events and consequences discussed in these risk factors could, in circumstances we may or may not be able to accurately predict, recognize, or control, have a material adverse effect on our business, growth, reputation, prospects, financial condition, operating results (including components of our financial results), cash flows, liquidity, and stock price. These risk factors do not identify all risks that we face; our operations could also be affected by factors, events, or uncertainties that are not presently known to us or that we currently do not consider to present significant risks to our operations. In addition to the factors discussed in Item 2 of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in the risk factors below, global economic and geopolitical conditions and additional or unforeseen circumstances, developments, or events may give rise to or amplify many of the risks discussed below. Many of the risks discussed below also impact our customers, including third-party sellers, which could indirectly have a material adverse effect on us.
Business and Industry Risks
We Face Intense Competition
Our businesses are rapidly evolving and intensely competitive, and we have many competitors across geographies, including cross-border competition, and in different industries, including physical, e-commerce, and omnichannel retail, e-commerce services, web and infrastructure computing services, electronic devices, digital content, advertising, grocery, and transportation and logistics services. Some of our current and potential competitors have greater resources, longer histories, more customers, and/or greater brand recognition, particularly with our newly-launched products and services and in our newer geographic regions. They may secure better terms from vendors, adopt more aggressive pricing, and devote more resources to technology, infrastructure, fulfillment, and marketing.
Competition continues to intensify, including with the development of new business models and the entry of new and well-funded competitors, and as our competitors enter into business combinations or alliances and established companies in other market segments expand to become competitive with our business. In addition, new and enhanced technologies, including search, web and infrastructure computing services, practical applications of artificial intelligence and machine learning, digital content, and electronic devices continue to increase our competition. The internet facilitates competitive entry and comparison shopping, which enhances the ability of new, smaller, or lesser known businesses to compete against us. As a result of competition, our product and service offerings may not be successful, we may fail to gain or may lose business, and we may be required to increase our spending or lower prices, any of which could materially reduce our sales and profits.
Our Expansion into New Products, Services, Technologies, and Geographic Regions Subjects Us to Additional Risks
We may have limited or no experience in our newer market segments, and our customers may not adopt our product or service offerings. These offerings, which can present new and difficult technology challenges, may subject us to claims if customers of these offerings experience, or are otherwise impacted by, service disruptions, delays, setbacks, or failures or quality issues. In addition, profitability or other intended benefits, if any, in our newer activities may not meet our expectations, and we may not be successful enough in these newer activities to recoup our investments in them, which investments are often significant. Failure to realize the benefits of amounts we invest in new technologies, products, or services could result in the value of those investments being written down or written off. In addition, our sustainability initiatives may be unsuccessful for a variety of reasons, including if we are unable to realize the expected benefits of new technologies or if we do not successfully plan or execute new strategies, which could harm our business or damage our reputation.
Our International Operations Expose Us to a Number of Risks
Our international activities are significant to our revenues and profits, and we plan to further expand internationally. In certain international market segments, we have relatively little operating experience and may not benefit from any first-to-market advantages or otherwise succeed. It is costly to establish, develop, and maintain international operations and stores, and promote our brand internationally. Our international operations may not become profitable on a sustained basis.
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In addition to risks described elsewhere in this section, our international sales and operations are subject to a number of risks, including:
local economic and political conditions;
government regulation (such as regulation of our product and service offerings and of competition); restrictive governmental actions (such as trade protection measures, including export duties and quotas and custom duties and tariffs, and restrictions around the import and export of certain products, technologies, and components); nationalization; and restrictions on foreign ownership;
restrictions on sales or distribution of certain products or services and uncertainty regarding liability for products, services, and content, including uncertainty as a result of less internet-friendly legal systems, local laws, lack of legal precedent, and varying rules, regulations, and practices regarding the physical and digital distribution of media products and enforcement of intellectual property rights;
business licensing or certification requirements, such as for imports, exports, web services, and electronic devices;
limitations on the repatriation and investment of funds and foreign currency exchange restrictions;
limited fulfillment and technology infrastructure;
shorter payable and longer receivable cycles and the resultant negative impact on cash flow;
laws and regulations regarding privacy, data use, data protection, data security, data localization, network security, consumer protection, payments, advertising, and restrictions on pricing or discounts;
lower levels of use of the internet;
lower levels of consumer spending and fewer opportunities for growth compared to the U.S.;
lower levels of credit card usage and increased payment risk;
difficulty in staffing, developing, and managing foreign operations as a result of distance, language, and cultural differences;
different employee/employer relationships and the existence of works councils and labor unions;
compliance with the U.S. Foreign Corrupt Practices Act and other applicable U.S. and foreign laws prohibiting corrupt payments to government officials and other third parties;
laws and policies of the U.S. and other jurisdictions affecting trade, foreign investment, loans, and taxes; and