Amazon.com, Inc.

ANNUAL REPORT

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Dear Shareholders:

Last year at this time, I shared my enthusiasm and optimism for Amazon’s future. Today, I have even more.

The reasons are many, but start with the progress we’ve made in our financial results and customer

experiences, and extend to our continued innovation and the remarkable opportunities in front of us.

In 2023, Amazon’s total revenue grew 12% year-over-year (“YoY”) from $514B to $575B. By segment, North

America revenue increased 12% YoY from $316B to $353B, International revenue grew 11% YoY from

$118B to $131B, and AWS revenue increased 13% YoY from $80B to $91B.

Further, Amazon’s operating income and Free Cash Flow (“FCF”) dramatically improved. Operating

income in 2023 improved 201% YoY from $12.2B (an operating margin of 2.4%) to $36.9B (an operating

margin of 6.4%). Trailing Twelve Month FCF adjusted for equipment finance leases improved from -$12.8B

in 2022 to $35.5B (up $48.3B).

While we’ve made meaningful progress on our financial measures, what we’re most pleased about is the

continued customer experience improvements across our businesses.

In our Stores business, customers have enthusiastically responded to our relentless focus on selection, price,

and convenience. We continue to have the broadest retail selection, with hundreds of millions of products

available, tens of millions added last year alone, and several premium brands starting to list on Amazon

(e.g. Coach, Victoria’s Secret, Pit Viper, Martha Stewart, Clinique, Lancôme, and Urban Decay).

Being sharp on price is always important, but particularly in an uncertain economy, where customers are

careful about how much they’re spending. As a result, in Q4 2023, we kicked off the holiday season with Prime

Big Deal Days, an exclusive event for Prime members to provide an early start on holiday shopping. This

was followed by our extended Black Friday and Cyber Monday holiday shopping event, open to all customers,

that became our largest revenue event ever. For all of 2023, customers saved nearly $24B across millions of

deals and coupons, almost 70% more than the prior year.

We also continue to improve delivery speeds, breaking multiple company records. In 2023, Amazon

delivered at the fastest speeds ever to Prime members, with more than 7 billion items arriving same or next

day, including more than 4 billion in the U.S. and more than 2 billion in Europe. In the U.S., this result is the

combination of two things. One is the benefit of regionalization, where we re-architected the network to

store items closer to customers. The other is the expansion of same-day facilities, where in 2023, we increased

the number of items delivered same day or overnight by nearly 70% YoY. As we get items to customers this

fast, customers choose Amazon to fulfill their shopping needs more frequently, and we can see the results in

various areas including how fast our everyday essentials business is growing (over 20% YoY in Q4 2023).

Our regionalization efforts have also trimmed transportation distances, helping lower our cost to serve. In

2023, for the first time since 2018, we reduced our cost to serve on a per unit basis globally. In the U.S. alone,

cost to serve was down by more than $0.45 per unit YoY. Decreasing cost to serve allows us both to invest

in speed improvements and afford adding more selection at lower Average Selling Prices (“ASPs”). More

selection at lower prices puts us in consideration for more purchases.

As we look toward 2024 (and beyond), we’re not done lowering our cost to serve. We’ve challenged every

closely held belief in our fulfillment network, and reevaluated every part of it, and found several areas where

we believe we can lower costs even further while also delivering faster for customers. Our inbound fulfillment

architecture and resulting inventory placement are areas of focus in 2024, and we have optimism there’s

more upside for us.

Internationally, we like the trajectory of our established countries, and see meaningful progress in our

emerging geographies (e.g. India, Brazil, Australia, Mexico, Middle East, Africa, etc.) as they continue to

expand selection and features, and move toward profitability (in Q4 2023, Mexico became our latest

international Stores locale to turn profitable). We have high conviction that these new geographies will

continue to grow and be profitable in the long run.

Alongside our Stores business, Amazon’s Advertising progress remains strong, growing 24% YoY from

$38B in 2022 to $47B in 2023, primarily driven by our sponsored ads. We’ve added Sponsored TV to this

offering, a self-service solution for brands to create campaigns that can appear on up to 30+ streaming

TV services, including Amazon Freevee and Twitch, and have no minimum spend. Recently, we’ve expanded

our streaming TV advertising by introducing ads into Prime Video shows and movies, where brands can

reach over 200 million monthly viewers in our most popular entertainment offerings, across hit movies and

shows, award-winning Amazon MGM Originals, and live sports like Thursday Night Football. Streaming

TV advertising is growing quickly and off to a strong start.

Shifting to AWS, we started 2023 seeing substantial cost optimization, with most companies trying to save

money in an uncertain economy. Much of this optimization was catalyzed by AWS helping customers use the

cloud more efficiently and leverage more powerful, price-performant AWS capabilities like Graviton chips

(our generalized CPU chips that provide ~40% better price-performance than other leading x86 processors),

S3 Intelligent Tiering (a storage class that uses AI to detect objects accessed less frequently and store them

in less expensive storage layers), and Savings Plans (which give customers lower prices in exchange for longer

commitments). This work diminished short-term revenue, but was best for customers, much appreciated,

and should bode well for customers and AWS longer-term. By the end of 2023, we saw cost optimization

attenuating, new deals accelerating, customers renewing at larger commitments over longer time periods, and

migrations growing again.

The past year was also a significant delivery year for AWS. We announced our next generation of generalized

CPU chips (Graviton4), which provides up to 30% better compute performance and 75% more memory

bandwidth than its already-leading predecessor (Graviton3). We also announced AWS Trainium2 chips,

which will deliver up to four times faster machine learning training for generative AI applications and three

times more memory capacity than Trainium1. We continued expanding our AWS infrastructure footprint,

now offering 105 Availability Zones within 33 geographic Regions globally, with six new Regions coming

(Malaysia, Mexico, New Zealand, the Kingdom of Saudi Arabia, Thailand, and a second German region

in Berlin). In Generative AI (“GenAI”), we added dozens of features to Amazon SageMaker to make it easier

for developers to build new Foundation Models (“FMs”). We invented and delivered a new service (Amazon

Bedrock) that lets companies leverage existing FMs to build GenAI applications. And, we launched the

most capable coding assistant around in Amazon Q. Customers are excited about these capabilities, and we’re

seeing significant traction in our GenAI offerings. (More on how we’re approaching GenAI and why we

believe we’ll be successful later in the letter.)

We’re also making progress on many of our newer business investments that have the potential to be

important to customers and Amazon long-term. Touching on two of them:

We have increasing conviction that Prime Video can be a large and profitable business on its own. This

confidence is buoyed by the continued development of compelling, exclusive content (e.g. Thursday Night

Football, Lord of the Rings, Reacher, The Boys, Citadel, Road House, etc.), Prime Video customers’ engagement

with this content, growth in our marketplace programs (through our third-party Channels program, as

well as the broad selection of shows and movies customers rent or buy), and the addition of advertising in

Prime Video.

In October, we hit a major milestone in our journey to commercialize Project Kuiper when we launched two

end-to-end prototype satellites into space, and successfully validated all key systems and sub-systems—

rare in an initial launch like this. Kuiper is our low Earth orbit satellite initiative that aims to provide

broadband connectivity to the 400-500 million households who don’t have it today (as well as governments

and enterprises seeking better connectivity and performance in more remote areas), and is a very large revenue

opportunity for Amazon. We’re on track to launch our first production satellites in 2024. We’ve still got a

long way to go, but are encouraged by our progress.

Overall, 2023 was a strong year, and I’m grateful to our collective teams who delivered on behalf of

customers. These results represent a lot of invention, collaboration, discipline, execution, and reimagination

across Amazon. Yet, I think every one of us at Amazon believes that we have a long way to go, in every one

of our businesses, before we exhaust how we can make customers’ lives better and easier, and there is

considerable upside in each of the businesses in which we’re investing.

===

In my annual letter over the last three years, I’ve tried to give shareholders more insight into how we’re

thinking about the company, the businesses we’re pursuing, our future opportunities, and what makes us

tick. We operate in a diverse number of market segments, but what ties Amazon together is our joint mission

to make customers’ lives better and easier every day. This is true across every customer segment we serve

(consumers, sellers, brands, developers, enterprises, and creators). At our best, we’re not just customer

obsessed, but also inventive, thinking several years out, learning like crazy, scrappy, delivering quickly, and

operating like the world’s biggest start-up.

We spend enormous energy thinking about how to empower builders, inside and outside of our company.

We characterize builders as people who like to invent. They like to dissect a customer experience, assess what’s

wrong with it, and reinvent it. Builders tend not to be satisfied until the customer experience is perfect.

This doesn’t hinder them from delivering improvements along the way, but it drives them to keep tinkering

and iterating continually. While unafraid to invent from scratch, they have no hesitation about using

high-quality, scalable, cost-effective components from others. What matters to builders is having the right

tools to keep rapidly improving customer experiences.

The best way we know how to do this is by building primitive services. Think of them as discrete, foundational

building blocks that builders can weave together in whatever combination they desire. Here’s how we

described primitives in our 2003 AWS Vision document:

“Primitives are the raw parts or the most foundational-level building blocks for software developers. They’re indivisible

(if they can be functionally split into two they must) and they do one thing really well. They’re meant to be used

together rather than as solutions in and of themselves. And, we’ll build them for maximum developer flexibility. We

won’t put a bunch of constraints on primitives to guard against developers hurting themselves. Rather, we’ll optimize for

developer freedom and innovation.”

Of course, this concept of primitives can be applied to more than software development, but they’re

especially relevant in technology. And, over the last 20 years, primitives have been at the heart of how we’ve

innovated quickly.

One of the many advantages to thinking in primitives is speed. Let me give you two counter examples that

illustrate this point. First, we built a successful owned-inventory retail business in the early years at Amazon

where we bought all our products from publishers, manufacturers, and distributors, stored them in our

warehouses, and shipped them ourselves. Over time, we realized we could add broader selection and lower

prices by allowing third-party sellers to list their offerings next to our own on our highly trafficked search and

product detail pages. We’d built several core retail services (e.g. payments, search, ordering, browse, item

management) that made trying different marketplace concepts simpler than if we didn’t have those

components. A good set of primitives? Not really.

It turns out that these core components were too jumbled together and not partitioned right. We learned

this the hard way when we partnered with companies like Target in our Merchant.com business in the early

2000s. The concept was that target.com would use Amazon’s ecommerce components as the backbone of

its website, and then customize however they wished. To enable this arrangement, we had to deliver those

components as separable capabilities through application programming interfaces (“APIs”). This decoupling

was far more difficult than anticipated because we’d built so many dependencies between these services as

Amazon grew so quickly the first few years.

This coupling was further highlighted by a heavyweight mechanism we used to operate called “NPI.” Any

new initiative requiring work from multiple internal teams had to be reviewed by this NPI cabal where each

team would communicate how many people-weeks their work would take. This bottleneck constrained

what we accomplished, frustrated the heck out of us, and inspired us to eradicate it by refactoring these

ecommerce components into true primitive services with well-documented, stable APIs that enabled our

builders to use each other’s services without any coordination tax.

In the middle of the Target and NPI challenges, we were contemplating building a new set of infrastructure

technology services that would allow both Amazon to move more quickly and external developers to

build anything they imagined. This set of services became known as AWS, and the above experiences

convinced us that we should build a set of primitive services that could be composed together how anybody

saw fit. At that time, most technology offerings were very feature-rich, and tried to solve multiple jobs

simultaneously. As a result, they often didn’t do any one job that well.

Our AWS primitive services were designed from the start to be different. They offered important, highly

flexible, but focused functionality. For instance, our first major primitive was Amazon Simple Storage Service

(“S3”) in March 2006 that aimed to provide highly secure object storage, at very high durability and

availability, at Internet scale, and very low cost. In other words, be stellar at object storage. When we launched

S3, developers were excited, and a bit mystified. It was a very useful primitive service, but they wondered,

why just object storage? When we launched Amazon Elastic Compute Cloud (“EC2”) in August 2006 and

Amazon SimpleDB in 2007, people realized we were building a set of primitive infrastructure services that

would allow them to build anything they could imagine, much faster, more cost-effectively, and without

having to manage or lay out capital upfront for the datacenter or hardware. As AWS unveiled these building

blocks over time (we now have over 240 at builders’ disposal—meaningfully more than any other provider),

whole companies sprang up quickly on top of AWS (e.g. Airbnb, Dropbox, Instagram, Pinterest, Stripe, etc.),

industries reinvented themselves on AWS (e.g. streaming with Netflix, Disney+, Hulu, Max, Fox,

Paramount), and even critical government agencies switched to AWS (e.g. CIA, along with several other

U.S. Intelligence agencies). But, one of the lesser-recognized beneficiaries was Amazon’s own consumer

businesses, which innovated at dramatic speed across retail, advertising, devices (e.g. Alexa and FireTV),

Prime Video and Music, Amazon Go, Drones, and many other endeavors by leveraging the speed with which

AWS let them build. Primitives, done well, rapidly accelerate builders’ ability to innovate.

So, how do you build the right set of primitives?

Pursuing primitives is not a guarantee of success. There are many you could build, and even more ways to

combine them. But, a good compass is to pick real customer problems you’re trying to solve.

Our logistics primitives are an instructive example. In Amazon’s early years, we built core capabilities

around warehousing items, and then picking, packing, and shipping them quickly and reliably to customers.

As we added third-party sellers to our marketplace, they frequently requested being able to use these same

logistics capabilities. Because we’d built this initial set of logistics primitives, we were able to introduce

Fulfillment by Amazon (“FBA”) in 2006, allowing sellers to use Amazon’s Fulfillment Network to store

items, and then have us pick, pack, and ship them to customers, with the bonus of these products being

available for fast, Prime delivery. This service has saved sellers substantial time and money (typically about

70% less expensive than doing themselves), and remains one of our most popular services. As more merchants

began to operate their own direct-to-consumer (“DTC”) websites, many yearned to still use our fulfillment

capabilities, while also accessing our payments and identity primitives to drive higher order conversion on

their own websites (as Prime members have already shared this payment and identity information with

Amazon). A couple years ago, we launched Buy with Prime to address this customer need. Prime members

can check out quickly on DTC websites like they do on Amazon, and receive fast Prime shipping speeds on

Buy with Prime items—increasing order conversion for merchants by ~25% vs. their default experience.

As our Stores business has grown substantially, and our supply chain become more complex, we’ve had to

develop a slew of capabilities in order to offer customers unmatched selection, at low prices, and with very fast

delivery times. We’ve become adept at getting products from other countries to the U.S., clearing customs,

and then shipping to storage facilities. Because we don’t have enough space in our shipping fulfillment centers

to store all the inventory needed to maintain our desired in-stock levels, we’ve built a set of lower-cost,

upstream warehouses solely optimized for storage (without sophisticated end-user, pick, pack, and ship

functions). Having these two pools of inventory has prompted us to build algorithms predicting when we’ll

run out of inventory in our shipping fulfillment centers and automatically replenishing from these upstream

warehouses. And, in the last few years, our scale and available alternatives have forced us to build our own

last mile delivery capability (roughly the size of UPS) to affordably serve the number of consumers and sellers

wanting to use Amazon.

We’ve solved these customer needs by building additional fulfillment primitives that both serve Amazon

consumers better and address external sellers’ increasingly complex ecommerce activities. For instance, for

sellers needing help importing products, we offer a Global Mile service that leverages our expertise here. To

ship inventory from the border (or anywhere domestically) to our storage facilities, we enable sellers to

use either our first-party Amazon Freight service or third-party freight partners via our Partnered Carrier

Program. To store more inventory at lower cost to ensure higher in-stock rates and shorter delivery times,

we’ve opened our upstream Amazon Warehousing and Distribution facilities to sellers (along with

automated replenishment to our shipping fulfillment centers when needed). For those wanting to manage

their own shipping, we’ve started allowing customers to use our last mile delivery network to deliver packages

to their end-customers in a service called Amazon Shipping. And, for sellers who wish to use our fulfillment

network as a central place to store inventory and ship items to customers regardless of where they ordered,

we have a Multi-Channel Fulfillment service. These are all primitives that we’ve exposed to sellers.

Building in primitives meaningfully expands your degrees of freedom. You can keep your primitives to

yourself and build compelling features and capabilities on top of them to allow your customers and business

to reap the benefits of rapid innovation. You can offer primitives to external customers as paid services (as

we have with AWS and our more recent logistics offerings). Or, you can compose these primitives into external,

paid applications as we have with FBA, Buy with Prime, or Supply Chain by Amazon (a recently released

logistics service that integrates several of our logistics primitives). But, you’ve got options. You’re only

constrained by the primitives you’ve built and your imagination.

Take the new, same-day fulfillment facilities in our Stores business. They’re located in the largest metro

areas around the U.S. (we currently have 58), house our top-moving 100,000 SKUs (but also cover millions

of other SKUs that can be injected from nearby fulfillment centers into these same-day facilities), and

streamline the time required to go from picking a customer’s order to being ready to ship to as little as

11 minutes. These facilities also constitute our lowest cost to serve in the network. The experience has been

so positive for customers that we’re planning to double the number of these facilities.

But, how else might we use this capability if we think of it as a core building block? We have a very large

and growing grocery business in organic grocery (with Whole Foods Market) and non-perishable goods

(e.g. consumables, canned goods, health and beauty products, etc.). We’ve been working hard on building a

mass, physical store offering (Amazon Fresh) that offers a great perishable experience; however, what if we

used our same-day facilities to enable customers to easily add milk, eggs, or other perishable items to any

Amazon order and get same day? It might change how people think of splitting up their weekly grocery

shopping, and make perishable shopping as convenient as non-perishable shopping already is.

Or, take a service that some people have questioned, but that’s making substantial progress and we think of

as a very valuable future primitive capability—our delivery drones (called Prime Air). Drones will eventually

allow us to deliver packages to customers in less than an hour. It won’t start off being available for all sizes

of packages and in all locations, but we believe it’ll be pervasive over time. Think about how the experience of

ordering perishable items changes with sub-one-hour delivery?

The same is true for Amazon Pharmacy. Need throat lozenges, Advil, an antibiotic, or some other

medication? Same-day facilities already deliver many of these items within hours, and that will only get

shorter as we launch Prime Air more expansively. Highly flexible building blocks can be composed across

businesses and in new combinations that change what’s possible for customers.

Being intentional about building primitives requires patience. Releasing the first couple primitive services can

sometimes feel random to customers (or the public at large) before we’ve unveiled how these building

blocks come together. I’ve mentioned AWS and S3 as an example, but our Health offering is another. In the

last 10 years, we’ve tried several Health experiments across various teams—but they were not driven by

our primitives approach. This changed in 2022 when we applied our primitives thinking to the enormous

global healthcare problem and opportunity. We’ve now created several important building blocks to help

transform the customer health experience: Acute Care (via Amazon Clinic), Primary Care (via One

Medical), and a Pharmacy service to buy whatever medication a patient may need. Because of our growing

success, Amazon customers are now asking us to help them with all kinds of wellness and nutrition

opportunities—which can be partially unlocked with some of our existing grocery building blocks, including

Whole Foods Market or Amazon Fresh.

As a builder, it’s hard to wait for these building blocks to be built versus just combining a bunch of

components together to solve a specif ic problem. The latter can be faster, but almost always slows you down

in the future. We’ve seen this temptation in our robotics efforts in our fulfillment network. There are

dozens of processes we seek to automate to improve safety, productivity, and cost. Some of the biggest

opportunities require invention in domains such as storage automation, manipulation, sortation, mobility

of large cages across long distances, and automatic identification of items. Many teams would skip right to the

complex solution, baking in “just enough” of these disciplines to make a concerted solution work, but

which doesn’t solve much more, can’t easily be evolved as new requirements emerge, and that can’t be reused

for other initiatives needing many of the same components. However, when you think in primitives, like

our Robotics team does, you prioritize the building blocks, picking important initiatives that can benefit from

each of these primitives, but which build the tool chest to compose more freely (and quickly) for future

and complex needs. Our Robotics team has built primitives in each of the above domains that will be

lynchpins in our next set of automation, which includes multi-floor storage, trailer loading and unloading,

large pallet mobility, and more flexible sortation across our outbound processes (including in vehicles). The

team is also building a set of foundation AI models to better identify products in complex environments,

optimize the movement of our growing robotic f leet, and better manage the bottlenecks in our facilities.

Sometimes, people ask us “what’s your next pillar? You have Marketplace, Prime, and AWS, what’s next?”

This, of course, is a thought-provoking question. However, a question people never ask, and might be even

more interesting is what’s the next set of primitives you’re building that enables breakthrough customer

experiences? If you asked me today, I’d lead with Generative AI (“GenAI”).

Much of the early public attention has focused on GenAI applications, with the remarkable 2022 launch of

ChatGPT. But, to our “primitive” way of thinking, there are three distinct layers in the GenAI stack, each of

which is gigantic, and each of which we’re deeply investing.

The bottom layer is for developers and companies wanting to build foundation models (“FMs”). The

primary primitives are the compute required to train models and generate inferences (or predictions), and

the software that makes it easier to build these models. Starting with compute, the key is the chip inside it. To

date, virtually all the leading FMs have been trained on Nvidia chips, and we continue to offer the broadest

collection of Nvidia instances of any provider. That said, supply has been scarce and cost remains an issue as

customers scale their models and applications. Customers have asked us to push the envelope on

price-performance for AI chips, just as we have with Graviton for generalized CPU chips. As a result, we’ve

built custom AI training chips (named Trainium) and inference chips (named Inferentia). In 2023, we

announced second versions of our Trainium and Inferentia chips, which are both meaningfully more

price-performant than their first versions and other alternatives. This past fall, leading FM-maker, Anthropic,

announced it would use Trainium and Inferentia to build, train, and deploy its future FMs. We already

have several customers using our AI chips, including Anthropic, Airbnb, Hugging Face, Qualtrics, Ricoh,

and Snap.

Customers building their own FM must tackle several challenges in getting a model into production.

Getting data organized and fine-tuned, building scalable and efficient training infrastructure, and then

deploying models at scale in a low latency, cost-efficient manner is hard. It’s why we’ve built Amazon

SageMaker, a managed, end-to-end service that’s been a game changer for developers in preparing their data

for AI, managing experiments, training models faster (e.g. Perplexity AI trains models 40% faster in

SageMaker), lowering inference latency (e.g. Workday has reduced inference latency by 80% with SageMaker),

and improving developer productivity (e.g. NatWest reduced its time-to-value for AI from 12-18 months to

under seven months using SageMaker).

The middle layer is for customers seeking to leverage an existing FM, customize it with their own data, and

leverage a leading cloud provider’s security and features to build a GenAI application—all as a managed

service. Amazon Bedrock invented this layer and provides customers with the easiest way to build and scale

GenAI applications with the broadest selection of first- and third-party FMs, as well as leading ease-of-use

capabilities that allow GenAI builders to get higher quality model outputs more quickly. Bedrock is off to a

very strong start with tens of thousands of active customers after just a few months. The team continues

to iterate rapidly on Bedrock, recently delivering Guardrails (to safeguard what questions applications will

answer), Knowledge Bases (to expand models’ knowledge base with Retrieval Augmented Generation—or

RAG—and real-time queries), Agents (to complete multi-step tasks), and Fine-Tuning (to keep teaching

and refining models), all of which improve customers’ application quality. We also just added new models

from Anthropic (their newly-released Claude 3 is the best performing large language model in the world),

Meta (with Llama 2), Mistral, Stability AI, Cohere, and our own Amazon Titan family of FMs. What

customers have learned at this early stage of GenAI is that there’s meaningful iteration required to build a

production GenAI application with the requisite enterprise quality at the cost and latency needed. Customers

don’t want only one model. They want access to various models and model sizes for different types of

applications. Customers want a service that makes this experimenting and iterating simple, and this is what

Bedrock does, which is why customers are so excited about it. Customers using Bedrock already include ADP,

Amdocs, Bridgewater Associates, Broadridge, Clariant, Dana-Farber Cancer Institute, Delta Air Lines,

Druva, Genesys, Genomics England, GoDaddy, Intuit, KT, Lonely Planet, LexisNexis, Netsmart, Perplexity

AI, Pfizer, PGA TOUR, Ricoh, Rocket Companies, and Siemens.

The top layer of this stack is the application layer. We’re building a substantial number of GenAI applications

across every Amazon consumer business. These range from Rufus (our new, AI-powered shopping assistant),

to an even more intelligent and capable Alexa, to advertising capabilities (making it simple with natural

language prompts to generate, customize, and edit high-quality images, advertising copy, and videos), to

customer and seller service productivity apps, to doz ens of others. We’re also building several apps in AWS,

including arguably the most compelling early GenAI use case—a coding companion. We recently launched

Amazon Q, an expert on AWS that writes, debugs, tests, and implements code, while also doing

transformations (like moving from an old version of Java to a new one), and querying customers’ various

data repositories (e.g. Intranets, wikis, Salesforce, Amazon S3, ServiceNow, Slack, Atlassian, etc.) to answer

questions, summarize data, carry on coherent conversation, and take action. Q is the most capable work

assistant available today and evolving fast.

While we’re building a substantial number of GenAI applications ourselves, the vast majority will ultimately

be built by other companies. However, what we’re building in AWS is not just a compelling app or foundation

model. These AWS services, at all three layers of the stack, comprise a set of primitives that democratize this

next seminal phase of AI, and will empower internal and external builders to transform virtually every

customer experience that we know (and invent altogether new ones as well). We’re optimistic that much of

this world-changing AI will be built on top of AWS.

(By the way, don’t underestimate the importance of security in GenAI. Customers’ AI models contain some

of their most sensitive data. AWS and its partners offer the strongest security capabilities and track record

in the world; and as a result, more and more customers want to run their GenAI on AWS.)

===

Recently, I was asked a provocative question—how does Amazon remain resilient? While simple in its

wording, it’s profound because it gets to the heart of our success to date as well as for the future. The answer

lies in our discipline around deeply held principles: 1/ hiring builders who are motivated to continually

improve and expand what’s possible; 2/ solving real customer challenges, rather than what we think may be

interesting technology; 3/ building in primitives so that we can innovate and experiment at the highest rate;

4/ not wasting time trying to fight gravity (spoiler alert: you always lose)—when we discover technology

that enables better customer experiences, we embrace it; 5/ accepting and learning from failed experiments—

actually becoming more energized to try again, with new knowledge to employ.

Today, we continue to operate in times of unprecedented change that come with unusual opportunities for

growth across the areas in which we operate. For instance, while we have a nearly $500B consumer business,

about 80% of the worldwide retail market segment still resides in physical stores. Similarly, with a cloud

computing business at nearly a $100B revenue run rate, more than 85% of the global IT spend is still

on-premises. These businesses will keep shifting online and into the cloud. In Media and Advertising,

content will continue to migrate from linear formats to streaming. Globally, hundreds of millions of people

who don’t have adequate broadband access will gain that connectivity in the next few years. Last but

certainly not least, Generative AI may be the largest technology transformation since the cloud (which

itself, is still in the early stages), and perhaps since the Internet. Unlike the mass modernization of on-

premises infrastructure to the cloud, where there’s work required to migrate, this GenAI revolution will be

built from the start on top of the cloud. The amount of societal and business benefit from the solutions that

will be possible will astound us all.

There has never been a time in Amazon’s history where we’ve felt there is so much opportunity to make our

customers’ lives better and easier. We’re incredibly excited about what’s possible, focused on inventing the

future, and look forward to working together to make it so.

Sincerely,

Andy Jassy

President and Chief Executive Officer

Amazon.com, Inc.

P.S. As we have always done, our original 1997 Shareholder Letter follows. What’s written there is as true

today as it was in 1997.

1997 LETTER TO SHAREHOLDERS

(Reprinted from the 1997 Annual Report)

To our shareholders:

Amazon.com passed many milestones in 1997: by year-end, we had served more than 1.5 million customers,

yielding 838% revenue growth to $147.8 million, and extended our market leadership despite aggressive

competitive entry.

But this is Day 1 for the Internet and, if we execute well, for Amazon.com. Today, online commerce saves

customers money and precious time. Tomorrow, through personalization, online commerce will accelerate the

very process of discovery. Amazon.com uses the Internet to create real value for its customers and, by doing so,

hopes to create an enduring franchise, even in established and large markets.

We have a window of opportunity as larger players marshal the resources to pursue the online opportunity

and as customers, new to purchasing online, are receptive to forming new relationships. The competitive

landscape has continued to evolve at a fast pace. Many large players have moved online with credible offerings

and have devoted substantial energy and resources to building awareness, traffic, and sales. Our goal is to move

quickly to solidify and extend our current position while we begin to pursue the online commerce opportunities

in other areas. We see substantial opportunity in the large markets we are targeting. This strategy is not without

risk: it requires serious investment and crisp execution against established franchise leaders.

It’s All About the Long Term

We believe that a fundamental measure of our success will be the shareholder value we create over the long

term. This value will be a direct result of our ability to extend and solidify our current market leadership position.

The stronger our market leadership, the more powerful our economic model. Market leadership can translate

directly to higher revenue, higher profitability, greater capital velocity, and correspondingly stronger returns on

invested capital.

Our decisions have consistently reflected this focus. We first measure ourselves in terms of the metrics most

indicative of our market leadership: customer and revenue growth, the degree to which our customers continue to

purchase from us on a repeat basis, and the strength of our brand. We have invested and will continue to invest

aggressively to expand and leverage our customer base, brand, and infrastructure as we move to establish an

enduring franchise.

Because of our emphasis on the long term, we may make decisions and weigh tradeoffs differently than

some companies. Accordingly, we want to share with you our fundamental management and decision-making

approach so that you, our shareholders, may confirm that it is consistent with your investment philosophy:

• We will continue to focus relentlessly on our customers.

• We will continue to make investment decisions in light of long-term market leadership considerations

rather than short-term profitability considerations or short-term Wall Street reactions.

• We will continue to measure our programs and the effectiveness of our investments analytically, to

jettison those that do not provide acceptable returns, and to step up our investment in those that work

best. We will continue to learn from both our successes and our failures.

• We will make bold rather than timid investment decisions where we see a sufficient probability of

gaining market leadership advantages. Some of these investments will pay off, others will not, and we

will have learned another valuable lesson in either case.

• When forced to choose between optimizing the appearance of our GAAP accounting and maximizing

the present value of future cash flows, we’ll take the cash flows.

• We will share our strategic thought processes with you when we make bold choices (to the extent

competitive pressures allow), so that you may evaluate for yourselves whether we are making rational

long-term leadership investments.

• We will work hard to spend wisely and maintain our lean culture. We understand the importance of

continually reinforcing a cost-conscious culture, particularly in a business incurring net losses.

• We will balance our focus on growth with emphasis on long-term profitability and capital management.

At this stage, we choose to prioritize growth because we believe that scale is central to achieving the

potential of our business model.

• We will continue to focus on hiring and retaining versatile and talented employees, and continue to

weight their compensation to stock options rather than cash. We know our success will be largely

affected by our ability to attract and retain a motivated employee base, each of whom must think like,

and therefore must actually be, an owner.

We aren’t so bold as to claim that the above is the “right” investment philosophy, but it’s ours, and we

would be remiss if we weren’t clear in the approach we have taken and will continue to take.

With this foundation, we would like to turn to a review of our business focus, our progress in 1997, and our

outlook for the future.

Obsess Over Customers

From the beginning, our focus has been on offering our customers compelling value. We realized that the

Web was, and still is, the World Wide Wait. Therefore, we set out to offer customers something they simply

could not get any other way, and began serving them with books. We brought them much more selection than

was possible in a physical store (our store would now occupy 6 football fields), and presented it in a useful, easy-

to-search, and easy-to-browse format in a store open 365 days a year, 24 hours a day. We maintained a dogged

focus on improving the shopping experience, and in 1997 substantially enhanced our store. We now offer

customers gift certificates, 1-Click

shopping, and vastly more reviews, content, browsing options, and

recommendation features. We dramatically lowered prices, further increasing customer value. Word of mouth

remains the most powerful customer acquisition tool we have, and we are grateful for the trust our customers

have placed in us. Repeat purchases and word of mouth have combined to make Amazon.com the market leader

in online bookselling.

By many measures, Amazon.com came a long way in 1997:

• Sales grew from $15.7 million in 1996 to $147.8 million – an 838% increase.

• Cumulative customer accounts grew from 180,000 to 1,510,000 – a 738% increase.

• The percentage of orders from repeat customers grew from over 46% in the fourth quarter of 1996 to

over 58% in the same period in 1997.

• In terms of audience reach, per Media Metrix, our Web site went from a rank of 90th to within the

top 20.

• We established long-term relationships with many important strategic partners, including America

Online, Yahoo!, Excite, Netscape, GeoCities, AltaVista, @Home, and Prodigy.

Infrastructure

During 1997, we worked hard to expand our business infrastructure to support these greatly increased

traffic, sales, and service levels:

• Amazon.com’s employee base grew from 158 to 614, and we significantly strengthened our

management team.

• Distribution center capacity grew from 50,000 to 285,000 square feet, including a 70% expansion of our

Seattle facilities and the launch of our second distribution center in Delaware in November.

• Inventories rose to over 200,000 titles at year-end, enabling us to improve availability for our customers.

• Our cash and investment balances at year-end were $125 million, thanks to our initial public offering in

May 1997 and our $75 million loan, affording us substantial strategic flexibility.

Our Employees

The past year’s success is the product of a talented, smart, hard-working group, and I take great pride in

being a part of this team. Setting the bar high in our approach to hiring has been, and will continue to be, the

single most important element of Amazon.com’s success.

It’s not easy to work here (when I interview people I tell them, “You can work long, hard, or smart, but at

Amazon.com you can’t choose two out of three”), but we are working to build something important, something

that matters to our customers, something that we can all tell our grandchildren about. Such things aren’t meant to

be easy. We are incredibly fortunate to have this group of dedicated employees whose sacrifices and passion

build Amazon.com.

Goals for 1998

We are still in the early stages of learning how to bring new value to our customers through Internet

commerce and merchandising. Our goal remains to continue to solidify and extend our brand and customer base.

This requires sustained investment in systems and infrastructure to support outstanding customer convenience,

selection, and service while we grow. We are planning to add music to our product offering, and over time we

believe that other products may be prudent investments. We also believe there are significant opportunities to

better serve our customers overseas, such as reducing delivery times and better tailoring the customer experience.

To be certain, a big part of the challenge for us will lie not in finding new ways to expand our business, but in

prioritizing our investments.

We now know vastly more about online commerce than when Amazon.com was founded, but we still have

so much to learn. Though we are optimistic, we must remain vigilant and maintain a sense of urgency. The

challenges and hurdles we will face to make our long-term vision for Amazon.com a reality are several:

aggressive, capable, well-funded competition; considerable growth challenges and execution risk; the risks of

product and geographic expansion; and the need for large continuing investments to meet an expanding market

opportunity. However, as we’ve long said, online bookselling, and online commerce in general, should prove to

be a very large market, and it’s likely that a number of companies will see significant benefit. We feel good about

what we’ve done, and even more excited about what we want to do.

1997 was indeed an incredible year. We at Amazon.com are grateful to our customers for their business and

trust, to each other for our hard work, and to our shareholders for their support and encouragement.

Jeffrey P. Bezos

Founder and Chief Executive Officer

Amazon.com, Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________

FORM 10-K

____________________________________

(Mark One)

☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2023

☐

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 Class Trading Symbol(s) Name of Each Exchange on Which Registered

Common Stock, par value $.01 per share AMZN Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act:

None

____________________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒

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 filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control

over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its

audit report. ☒

If securities are registered pursuant to Section 12(b) of the Exchange Act, indicate by check mark whether the financial statements of the registrant included

in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received

by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2023

$ 1,183,684,965,587

Number of shares of common stock outstanding as of January 24, 2024

10,387,381,291

____________________________________

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this Report, to the extent not set forth herein, is incorporated herein by reference from the registrant’s definitive proxy

statement relating to the Annual Meeting of Shareholders to be held in 2024, which definitive proxy statement shall be filed with the Securities and Exchange

Commission within 120 days after the end of the fiscal year to which this Report relates.

AMAZON.COM, INC.

FORM 10-K

For the Fiscal Year Ended December 31, 2023

INDEX

Page

PART I

Item 1. Business 3

Item 1A. Risk Factors 6

Item 1B. Unresolved Staff Comments 16

Item 1C. Cybersecurity 16

Item 2. Properties 18

Item 3. Legal Proceedings 18

Item 4. Mine Safety Disclosures 18

PART II

Item 5. Market for the Registrant’s Common Stock, Related Shareholder Matters, and Issuer Purchases of

Equity Securities

Item 6. Reserved 19

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 32

Item 8. Financial Statements and Supplementary Data 34

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 71

Item 9A. Controls and Procedures 71

Item 9B. Other Information 73

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 73

PART III

Item 10. Directors, Executive Officers, and Corporate Governance 73

Item 11. Executive Compensation 73

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters 73

Item 13. Certain Relationships and Related Transactions, and Director Independence 74

Item 14. Principal Accountant Fees and Services 74

PART IV

Item 15. Exhibits, Financial Statement Schedules 75

Item 16. Form 10-K Summary 77

Signatures 78

AMAZON.COM, INC.

PART I

Item 1. Business

This Annual Report on Form 10-K and the documents incorporated herein by reference contain forward-looking

statements based on expectations, estimates, and projections as of the date of this filing. Actual results and outcomes may differ

materially from those expressed in forward-looking statements. See Item 1A of Part I — “Risk Factors.” As used herein,

“Amazon.com,” “we,” “our,” and similar terms include Amazon.com, Inc. and its subsidiaries, unless the context indicates

otherwise.

General

We seek to be Earth’s most customer-centric company. We are guided by four principles: customer obsession rather than

competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. In each of our

segments, we serve our primary customer sets, consisting of consumers, sellers, developers, enterprises, content creators,

advertisers, and employees.

We have organized our operations into three segments: North America, International, and Amazon Web Services

(“AWS”). These segments reflect the way the Company evaluates its business performance and manages its operations.

Information on our net sales is contained in Item 8 of Part II, “Financial Statements and Supplementary Data — Note 10 —

Segment Information.”

Consumers

We serve consumers through our online and physical stores and focus on selection, price, and convenience. We design

our stores to enable hundreds of millions of unique products to be sold by us and by third parties across dozens of product

categories. Customers access our offerings through our websites, mobile apps, Alexa, devices, streaming, and physically

visiting our stores. We also manufacture and sell electronic devices, including Kindle, Fire tablet, Fire TV, Echo, Ring, Blink,

and eero, and we develop and produce media content. We seek to offer our customers low prices, fast and free delivery, easy-

to-use functionality, and timely customer service. In addition, we offer subscription services such as Amazon Prime, a

membership program that includes fast, free shipping on tens of millions of items, access to award-winning movies and series,

and other benefits.

We fulfill customer orders in a number of ways, including through: North America and International fulfillment networks

that we operate; co-sourced and outsourced arrangements in certain countries; digital delivery; and through our physical stores.

We operate customer service centers globally, which are supplemented by co-sourced arrangements. See Item 2 of Part I,

“Properties.”

Sellers

We offer programs that enable sellers to grow their businesses, sell their products in our stores, and fulfill orders using

our services. We are not the seller of record in these transactions. We earn fixed fees, a percentage of sales, per-unit activity

fees, interest, or some combination thereof, for our seller programs.

Developers and Enterprises

We serve developers and enterprises of all sizes, including start-ups, government agencies, and academic institutions,

through AWS, which offers a broad set of on-demand technology services, including compute, storage, database, analytics, and

machine learning, and other services.

Content Creators

We offer programs that allow authors, independent publishers, musicians, filmmakers, Twitch streamers, skill and app

developers, and others to publish and sell content.

Advertisers

We provide advertising services to sellers, vendors, publishers, authors, and others, through programs such as sponsored

ads, display, and video advertising.

Competition

Our businesses encompass a large variety of product types, service offerings, and delivery channels. The worldwide

marketplace in which we compete is evolving rapidly and intensely competitive, and we face a broad array of competitors from

many different industry sectors around the world. Our current and potential competitors include: (1) physical, e-commerce, and

omnichannel retailers, publishers, vendors, distributors, manufacturers, and producers of the products we offer and sell to

consumers and businesses; (2) publishers, producers, and distributors of physical, digital, and interactive media of all types and

all distribution channels; (3) web search engines, comparison shopping websites, social networks, web portals, and other online

and app-based means of discovering, using, or acquiring goods and services, either directly or in collaboration with other

retailers; (4) companies that provide e-commerce services, including website development and hosting, omnichannel sales,

inventory and supply chain management, advertising, fulfillment, customer service, and payment processing; (5) companies that

provide fulfillment and logistics services for themselves or for third parties, whether online or offline; (6) companies that

provide information technology services or products, including on-premises or cloud-based infrastructure and other services;

(7) companies that design, manufacture, market, or sell consumer electronics, telecommunication, and electronic devices; (8)

companies that sell grocery products online and in physical stores; and (9) companies that provide advertising services, whether

in digital or other formats. We believe that the principal competitive factors in our retail businesses include selection, price, and

convenience, including fast and reliable fulfillment. Additional competitive factors for our seller and enterprise services include

the quality, speed, and reliability of our services and tools, as well as customers’ ability and willingness to change business

practices. Some of our current and potential competitors have greater resources, longer histories, more customers, greater brand

recognition, and greater control over inputs critical to our various businesses. They may secure better terms from suppliers,

adopt more aggressive pricing, pursue restrictive distribution agreements that restrict our access to supply, direct consumers to

their own offerings instead of ours, lock-in potential customers with restrictive terms, and devote more resources to technology,

infrastructure, fulfillment, and marketing. The internet facilitates competitive entry and comparison shopping, which enhances

the ability of new, smaller, or lesser-known businesses to compete against us. Each of our businesses is also subject to rapid

change and the development of new business models and the entry of new and well-funded competitors. Other companies also

may enter into business combinations or alliances that strengthen their competitive positions.

Intellectual Property

We regard our trademarks, service marks, copyrights, patents, domain names, trade dress, trade secrets, proprietary

technologies, and similar intellectual property as critical to our success, and we rely on trademark, copyright, and patent law,

trade-secret protection, and confidentiality and/or license agreements with our employees, customers, partners, and others to

protect our proprietary rights. We have registered, or applied for the registration of, a number of U.S. and international domain

names, trademarks, service marks, and copyrights. Additionally, we have filed U.S. and international patent applications

covering certain of our proprietary technology.

Seasonality

Our business is affected by seasonality, which historically has resulted in higher sales volume during our fourth quarter,

which ends December 31.

Human Capital

Our employees are critical to our mission of being Earth’s most customer-centric company. As of December 31, 2023, we

employed approximately 1,525,000 full-time and part-time employees. Additionally, we use independent contractors and

temporary personnel to supplement our workforce. Competition for qualified personnel is intense, particularly for software

engineers, computer scientists, and other technical staff, and constrained labor markets have increased competition for

personnel across other parts of our business.

As we strive to be Earth’s best employer, we focus on investment and innovation, inclusion and diversity, safety, and

engagement to hire and develop the best talent. We rely on numerous and evolving initiatives to implement these objectives and

invent mechanisms for talent development, including competitive pay and benefits, flexible work arrangements, and skills

training and educational programs such as Amazon Career Choice (education funding for eligible employees) and the Amazon

Technical Academy (software development engineer training). Over 175,000 Amazon employees around the world have

participated in Career Choice. We also continue to inspect and refine the mechanisms we use to hire, develop, evaluate, and

retain our employees to promote equity for all candidates and employees. In addition, safety is integral to everything we do at

Amazon and we continue to invest in safety improvements such as capital improvements, new safety technology, vehicle safety

controls, and engineering ergonomic solutions. Our safety team is dedicated to using the science of safety to solve complex

problems and establish new industry best practices. We also provide mentorship and support resources to our employees, and

have deployed numerous programs that advance employee engagement, communication, and feedback.

Available Information

Our investor relations website is amazon.com/ir and we encourage investors to use it as a way of easily finding

information about us. We promptly make available on this website, free of charge, the reports that we file or furnish with the

Securities and Exchange Commission (“SEC”), corporate governance information (including our Code of Business Conduct

and Ethics), and select press releases.

Executive Officers and Directors

The following tables set forth certain information regarding our Executive Officers and Directors as of January 24, 2024:

Information About Our Executive Officers

Name Age Position

Jeffrey P. Bezos

60 Executive Chair

Andrew R. Jassy

56 President and Chief Executive Officer

Douglas J. Herrington

57 CEO Worldwide Amazon Stores

Brian T. Olsavsky

60 Senior Vice President and Chief Financial Officer

Shelley L. Reynolds

59 Vice President, Worldwide Controller, and Principal Accounting Officer

Adam N. Selipsky

57 CEO Amazon Web Services

David A. Zapolsky

60 Senior Vice President, Global Public Policy and General Counsel

Jeffrey P. Bezos. Mr. Bezos founded Amazon.com in 1994 and has served as Executive Chair since July 2021. He has

served as Chair of the Board since 1994 and served as Chief Executive Officer from May 1996 until July 2021, and as President

from 1994 until June 1999 and again from October 2000 to July 2021.

Andrew R. Jassy. Mr. Jassy has served as President and Chief Executive Officer since July 2021, CEO Amazon Web

Services from April 2016 until July 2021, and Senior Vice President, Amazon Web Services, from April 2006 until April 2016.

Douglas J. Herrington. Mr. Herrington has served as CEO Worldwide Amazon Stores since July 2022, Senior Vice

President, North America Consumer from January 2015 to July 2022, Senior Vice President, Consumables from May 2014 to

December 2014, and Vice President, Consumables from May 2005 to April 2014.

Brian T. Olsavsky. Mr. Olsavsky has served as Senior Vice President and Chief Financial Officer since June 2015, Vice

President, Finance for the Global Consumer Business from December 2011 to June 2015, and numerous financial leadership

roles across Amazon with global responsibility since April 2002.

Shelley L. Reynolds. Ms. Reynolds has served as Vice President, Worldwide Controller, and Principal Accounting

Officer since April 2007.

Adam N. Selipsky. Mr. Selipsky has served as CEO Amazon Web Services since July 2021, Senior Vice President,

Amazon Web Services from May 2021 until July 2021, President and CEO of Tableau Software from September 2016 until

May 2021, and Vice President, Marketing, Sales and Support of Amazon Web Services from May 2005 to September 2016.

David A. Zapolsky. Mr. Zapolsky has served as Senior Vice President, Global Public Policy and General Counsel since

May 2023 and has served as our Secretary since September 2012. He served as Senior Vice President and General Counsel

from May 2014 to May 2023, Vice President and General Counsel from September 2012 to May 2014, and as Vice President

and Associate General Counsel for Litigation and Regulatory matters from April 2002 until September 2012.

Board of Directors

Name Age Position

Jeffrey P. Bezos

60 Executive Chair

Andrew R. Jassy

56 President and Chief Executive Officer

Keith B. Alexander

72 Chair of IronNet, Inc.

Edith W. Cooper 62 Former Executive Vice President, Goldman Sachs Group, Inc.

Jamie S. Gorelick

73 Partner, Wilmer Cutler Pickering Hale and Dorr LLP

Daniel P. Huttenlocher

65 Dean, MIT Schwarzman College of Computing

Judith A. McGrath

71 Former Chair and CEO, MTV Networks

Indra K. Nooyi

68 Former Chair and CEO, PepsiCo, Inc.

Jonathan J. Rubinstein

67 Former co-CEO, Bridgewater Associates, LP

Brad D. Smith

59 President, Marshall University

Patricia Q. Stonesifer

67 Former President and Chief Executive Officer, Martha’s Table

Wendell P. Weeks

64 Chairman and CEO, Corning Incorporated

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 7 of Part II, “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.

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

• geopolitical events, including war and terrorism.

As international physical, e-commerce, and omnichannel retail, cloud services, and other services grow, competition will

intensify, including through adoption of evolving business models. Local companies may have a substantial competitive

advantage because of their greater understanding of, and focus on, the local customer, as well as their more established local

brand names. The inability to hire, train, retain, and manage sufficient required personnel may limit our international growth.

The People’s Republic of China (“PRC”) and India regulate Amazon’s and its affiliates’ businesses and operations in

country through regulations and license requirements that may restrict (i) foreign investment in and operation of the internet, IT

infrastructure, data centers, retail, delivery, and other sectors, (ii) internet content, and (iii) the sale of media and other products

and services. For example, in order to meet local ownership, regulatory licensing, and cybersecurity requirements, we provide

certain technology services in China through contractual relationships with third parties that hold PRC licenses to provide

services. In India, the government restricts the ownership or control of Indian companies by foreign entities involved in online

multi-brand retail trading activities. For www.amazon.in, we provide certain marketing tools and logistics services to third-

party sellers to enable them to sell online and deliver to customers, and we hold an indirect minority interest in an entity that is a

third-party seller on the www.amazon.in marketplace. Although we believe these structures and activities comply with existing

laws, they involve unique risks, and the PRC and India may from time to time consider and implement additional changes in

their regulatory, licensing, or other requirements that could impact these structures and activities. There are substantial

uncertainties regarding the interpretation of PRC and Indian laws and regulations, and it is possible that these governments will

ultimately take a view contrary to ours. In addition, our Chinese and Indian businesses and operations may be unable to

continue to operate if we or our affiliates are unable to access sufficient funding or, in China, enforce contractual relationships

we or our affiliates have in place. Violation of any existing or future PRC, Indian, or other laws or regulations or changes in the

interpretations of those laws and regulations could result in our businesses in those countries being subject to fines and other

financial penalties, having licenses revoked, or being forced to restructure our operations or shut down entirely.

In addition, because China-based sellers account for significant portions of our third-party seller services and advertising

revenues, and China-based suppliers provide significant portions of our components and finished goods, regulatory and trade

restrictions, data protection and cybersecurity laws, economic factors, geopolitical events, security issues, or other factors

negatively impacting China-based sellers and suppliers could adversely affect our operating results.

The Variability in Our Retail Business Places Increased Strain on Our Operations

Demand for our products and services can fluctuate significantly for many reasons, including as a result of seasonality,

promotions, product launches, or unforeseeable events, such as in response to global economic conditions such as recessionary

fears or rising inflation, natural or human-caused disasters (including public health crises) or extreme weather (including as a

result of climate change), or geopolitical events. For example, we expect a disproportionate amount of our retail sales to occur

during our fourth quarter. Our failure to stock or restock popular products in sufficient amounts such that we fail to meet

customer demand could significantly affect our revenue and our future growth. When we overstock products, we may be

required to take significant inventory markdowns or write-offs and incur commitment costs, which could materially reduce

profitability. We regularly experience increases in our net shipping cost due to complimentary upgrades, split-shipments, and

additional long-zone shipments necessary to ensure timely delivery for the holiday season. If too many customers access our

websites within a short period of time due to increased demand, we may experience system interruptions that make our websites

unavailable or prevent us from efficiently fulfilling orders, which may reduce the volume of goods we offer or sell and the

attractiveness of our products and services. In addition, we may be unable to adequately staff our fulfillment network and

customer service centers during these peak periods and delivery and other fulfillment companies and customer service co-

sourcers may be unable to meet the seasonal demand. Risks described elsewhere in this Item 1A relating to fulfillment network

optimization and inventory are magnified during periods of high demand.

As a result of holiday sales, as of December 31 of each year, our cash, cash equivalents, and marketable securities

balances typically reach their highest level (other than as a result of cash flows provided by or used in investing and financing

activities) because consumers primarily use credit cards in our stores and the related receivables settle quickly. Typically, there

is also a corresponding increase in accounts payable as of December 31 due to inventory purchases and third-party seller sales.

Our accounts payable balance generally declines during the first three months of the year as vendors and sellers are paid,

resulting in a corresponding decline in our cash, cash equivalents, and marketable securities balances.

We Are Impacted by Fraudulent or Unlawful Activities of Sellers

The law relating to the liability of online service providers is currently unsettled. In addition, governmental agencies have

in the past and could in the future require changes in the way this business is conducted. Under our seller programs, we

maintain policies and processes designed to prevent sellers from collecting payments, fraudulently or otherwise, when buyers

never receive the products they ordered or when the products received are materially different from the sellers’ descriptions,

and to prevent sellers in our stores or through other stores from selling unlawful, counterfeit, pirated, or stolen goods, selling

goods in an unlawful or unethical manner, violating the proprietary rights of others, or otherwise violating our policies. When

these policies and processes are circumvented or fail to operate sufficiently, it can harm our business or damage our reputation

and we could face civil or criminal liability for unlawful activities by our sellers. Under our A-to-z Guarantee, we may

reimburse customers for payments up to certain limits in these situations, and as our third-party seller sales grow, the cost of

this program will increase and could negatively affect our operating results.

We Face Risks Related to Adequately Protecting Our Intellectual Property Rights and Being Accused of Infringing

Intellectual Property Rights of Third Parties

We regard our trademarks, service marks, copyrights, patents, trade dress, trade secrets, proprietary technology, and

similar intellectual property as critical to our success, and we rely on trademark, copyright, and patent law, trade secret

protection, and confidentiality and/or license agreements with our employees, customers, and others to protect our proprietary

rights. Effective intellectual property protection is not available in every country in which our products and services are made

available. We also may not be able to acquire or maintain appropriate domain names in all countries in which we do business.

Furthermore, regulations governing domain names may not protect our trademarks and similar proprietary rights. We may be

unable to prevent third parties from acquiring domain names that are similar to, infringe upon, or diminish the value of our

trademarks and other proprietary rights.

We are not always able to discover or determine the extent of any unauthorized use of our proprietary rights. Actions

taken by third parties that license our proprietary rights may materially diminish the value of our proprietary rights or

reputation. The protection of our intellectual property requires the expenditure of significant financial and managerial resources.

Moreover, the steps we take to protect our intellectual property do not always adequately protect our rights or prevent third

parties from infringing or misappropriating our proprietary rights. We also cannot be certain that others will not independently

develop or otherwise acquire equivalent or superior technology or other intellectual property rights.

We have been subject to, and expect to continue to be subject to, claims and legal proceedings regarding alleged

infringement by us of the intellectual property rights of third parties. Such claims, whether or not meritorious, have in the past,

and may in the future, result in the expenditure of significant financial and managerial resources, injunctions against us, or

significant payments for damages, including to satisfy indemnification obligations or to obtain licenses from third parties who

allege that we have infringed their rights. Such licenses may not be available on terms acceptable to us or at all. These risks

have been amplified by the increase in third parties whose sole or primary business is to assert such claims. In addition, our and

our customers’ use of artificial intelligence may result in increased claims of infringement or other claims, including those

based on unauthorized use of third-party technology or content.

Our digital content offerings depend in part on effective digital rights management technology to control access to digital

content. Breach or malfunctioning of the digital rights management technology that we use could subject us to claims, and

content providers may be unwilling to include their content in our service.

We Have Foreign Exchange Risk

The results of operations of, and certain of our intercompany balances associated with, our international stores and

product and service offerings are exposed to foreign exchange rate fluctuations. Due to these fluctuations, operating results may

differ materially from expectations, and we may record significant gains or losses on the remeasurement of intercompany

balances. As we have expanded our international operations, our exposure to exchange rate fluctuations has increased. We also

hold cash equivalents and/or marketable securities in foreign currencies such as British Pounds, Canadian Dollars, Euros, and

Japanese Yen. When the U.S. Dollar strengthens compared to these currencies, cash equivalents, and marketable securities

balances, when translated, may be materially less than expected and vice versa.

Operating Risks

Our Expansion Places a Significant Strain on our Management, Operational, Financial, and Other Resources

We are continuing to rapidly and significantly expand our global operations, including increasing our product and service

offerings and scaling our infrastructure to support our retail and services businesses. The complexity of the current scale of our

business can place significant strain on our management, personnel, operations, systems, technical performance, financial

resources, and internal financial control and reporting functions, and our expansion increases these factors. Failure to manage

growth effectively could damage our reputation, limit our growth, and negatively affect our operating results.

We Experience Significant Fluctuations in Our Operating Results and Growth Rate

We are not always able to accurately forecast our growth rate. We base our expense levels and investment plans on sales

estimates. A significant portion of our expenses and investments is fixed, and we are not always able to adjust our spending

quickly enough if our sales are less than expected.

Our revenue growth may not be sustainable, and our percentage growth rates may decrease. Our revenue and operating

profit growth depends on the continued growth of demand for the products and services offered by us or our sellers, and our

business is affected by, among other things, general economic, business, and geopolitical conditions worldwide. A softening of

demand, whether caused by changes in customer preferences or a weakening of the U.S. or global economies, may result in

decreased revenue or growth.

Our sales and operating results will also fluctuate for many other reasons, including due to factors described elsewhere in

this section and the following:

• our ability to retain and increase sales to existing customers, attract new customers, and satisfy our customers’

demands;

• our ability to retain and expand our network of sellers;

• our ability to offer products on favorable terms, manage inventory, and fulfill orders;

• the introduction of competitive stores, websites, products, services, price decreases, or improvements;

• changes in usage or adoption rates of the internet, e-commerce, electronic devices, and web services, including

outside the U.S.;

• timing, effectiveness, and costs of expansion and upgrades of our systems and infrastructure;

• the success of our geographic, service, and product line expansions;

• the extent to which we finance, and the terms of any such financing for, our current operations and future growth;

• the outcomes of legal proceedings and claims, which may include significant monetary damages or injunctive relief

and could have a material adverse impact on our operating results;

• variations in the mix of products and services we sell;

• variations in our level of merchandise and vendor returns;

• the extent to which we offer fast and free delivery, continue to reduce prices worldwide, and provide additional

benefits to our customers;

• factors affecting our reputation or brand image (including any actual or perceived inability to achieve our goals or

commitments, whether related to sustainability, customers, employees, or other topics), and public perceptions

regarding social or ethical issues related to our development and use of artificial intelligence and machine learning

technologies, products, and services;

• the extent to which we invest in technology and infrastructure, fulfillment, and other expense categories;

• availability of and increases in the prices of transportation (including fuel), resources such as land, water, and energy,

commodities like paper and packing supplies and hardware products, and technology infrastructure products,

including as a result of inflationary pressures;

• constrained labor markets, which increase our payroll costs;

• the extent to which operators of the networks between our customers and our stores successfully charge fees to grant

our customers unimpaired and unconstrained access to our online services;

• our ability to collect amounts owed to us when they become due;

• the extent to which new and existing technologies, or industry trends, restrict online advertising or affect our ability to

customize advertising or otherwise tailor our product and service offerings;

• the extent to which use of our services is affected by spyware, viruses, phishing and other spam emails, denial of

service attacks, data theft, computer intrusions, outages, and similar events;

• the extent to which we fail to maintain our unique culture of innovation, customer obsession, and long-term thinking,

which has been critical to our growth and success;

• disruptions from natural or human-caused disasters (including public health crises) or extreme weather (including as a

result of climate change), geopolitical events and security issues (including terrorist attacks, armed hostilities, and

political conflicts, including those involving China), labor or trade disputes (including restrictive governmental

actions impacting us, our customers, and our third-party sellers and suppliers in China or other foreign countries), and

similar events; and

• potential negative impacts of climate change, including: increased operating costs due to more frequent extreme

weather events or climate-related changes, such as rising temperatures and water scarcity; increased investment

requirements associated with the transition to a low-carbon economy; decreased demand for our products and

services as a result of changes in customer behavior; increased compliance costs due to more extensive and global

regulations and third-party requirements; and reputational damage resulting from perceptions of our environmental

impact.

We Face Risks Related to Successfully Optimizing and Operating Our Fulfillment Network and Data Centers

Failures to adequately predict customer demand and consumer spending patterns or otherwise optimize and operate our

fulfillment network and data centers successfully from time to time result in excess or insufficient fulfillment or data center

capacity, service interruptions, increased costs, and impairment charges, any of which could materially harm our business. As

we continue to add fulfillment and data center capability or add new businesses with different requirements, our fulfillment and

data center networks become increasingly complex and operating them becomes more challenging. There can be no assurance

that we will be able to operate our networks effectively.

In addition, failure to optimize inventory management or staffing in our fulfillment network increases our net shipping

cost by increasing the distance products are shipped and reducing the number of units per shipment or delivery. We and our co-

sourcers may be unable to adequately staff our fulfillment network and customer service centers. For example, productivity

across our fulfillment network is affected by regional labor market constraints, which increase payroll costs and make it

difficult to hire, train, and deploy a sufficient number of people to operate our fulfillment network as efficiently as we would

like.

Under some of our commercial agreements, we maintain the inventory of other companies, thereby increasing the

complexity of tracking inventory and operating our fulfillment network. Our failure to adequately predict seller demand for

storage or to properly handle such inventory or the inability of the other businesses on whose behalf we perform inventory

fulfillment services to accurately forecast product demand may result in us being unable to secure sufficient storage space or to

optimize our fulfillment network or cause other unexpected costs and other harm to our business and reputation.

We rely on a limited number of shipping companies to deliver inventory to us and completed orders to our customers. An

inability to negotiate acceptable terms with these companies or performance problems, staffing limitations, or other difficulties

experienced by these companies or by our own transportation systems, including as a result of labor market constraints and

related costs, could negatively impact our operating results and customer experience. In addition, our ability to receive inbound

inventory efficiently and ship completed orders to customers also may be negatively affected by natural or human-caused

disasters (including public health crises) or extreme weather (including as a result of climate change), geopolitical events and

security issues, labor or trade disputes, and similar events.

We Could Be Harmed by Data Loss or Other Security Breaches

Because we collect, process, store, and transmit large amounts of data, including confidential, classified, sensitive,

proprietary, and business and personal information, failure to prevent or mitigate data loss, theft, misuse, unauthorized access,

or other security breaches or vulnerabilities affecting our or our vendors’ or customers’ technology, products, and systems,

could: expose us or our customers to a risk of loss, disclosure, or misuse of such information; adversely affect our operating

results; result in litigation, liability, or regulatory action (including under laws related to privacy, data use, data protection, data

security, network security, and consumer protection); deter customers or sellers from using our stores, products, and services;

and otherwise harm our business and reputation. We use third-party technology and systems for a variety of reasons, including,

without limitation, encryption and authentication technology, employee email, content delivery to customers, back-office

support, and other functions. Some of our systems have experienced past security breaches, and, although they did not have a

material adverse effect on our operating results, there can be no assurance that future incidents will not have material adverse

effects on our operations or financial results. Although we have developed systems and processes that are designed to protect

customer data and prevent such incidents, including systems and processes designed to reduce the impact of a security breach at

a third-party vendor or customer, such measures cannot provide absolute security and may fail to operate as intended or be

circumvented.

We Face Risks Related to System Interruption and Lack of Redundancy

We experience occasional system interruptions and delays that make our websites and services unavailable or slow to

respond and prevent us from efficiently accepting or fulfilling orders or providing services to customers and third parties, which

may reduce our net sales and the attractiveness of our products and services. Steps we take to add software and hardware,

upgrade our systems and network infrastructure, and improve the stability and efficiency of our systems may not be sufficient to

avoid system interruptions or delays that could adversely affect our operating results.

Our computer and communications systems and operations in the past have been, or in the future could be, damaged or

interrupted due to events such as natural or human-caused disasters (including public health crises) or extreme weather

(including as a result of climate change), geopolitical events and security issues (including terrorist attacks and armed

hostilities), computer viruses, physical or electronic break-ins, operational failures (including from energy shortages), and

similar events or disruptions. Any of these events could cause system interruption, delays, and loss of critical data, and could

prevent us from accepting and fulfilling customer orders and providing services, which could make our product and service

offerings less attractive and subject us to liability. Our systems are not fully redundant and our disaster recovery planning may

not be sufficient. In addition, our insurance may not provide sufficient coverage to compensate for related losses. Any of these

events could damage our reputation and be expensive to remedy.

The Loss of Key Senior Management Personnel or the Failure to Hire and Retain Highly Skilled and Other Personnel

Could Negatively Affect Our Business

We depend on our senior management and other key personnel, including our President and CEO. We do not have “key

person” life insurance policies. We also rely on other highly skilled personnel. Competition for qualified personnel in the

industries in which we operate, as well as senior management, has historically been intense. For example, we experience

significant competition in the technology industry, particularly for software engineers, computer scientists, and other technical

staff. In addition, changes we make to our current and future work environments may not meet the needs or expectations of our

employees or may be perceived as less favorable compared to other companies’ policies, which could negatively impact our

ability to hire and retain qualified personnel. The loss of any of our executive officers or other key employees, the failure to

successfully transition key roles, or the inability to hire, train, retain, and manage qualified personnel, could harm our business.

We also rely on a significant number of personnel to operate our stores, fulfillment network, and data centers and carry

out our other operations. Failure to successfully hire, train, manage, and retain sufficient personnel to meet our needs can strain

our operations, increase payroll and other costs, and harm our business and reputation. In addition, changes in laws and

regulations applicable to employees, independent contractors, and temporary personnel could increase our payroll costs,

decrease our operational flexibility, and negatively impact how we are able to staff our operations and supplement our

workforce.

We are also subject to labor union efforts to organize groups of our employees from time to time. These organizational

efforts, if successful, decrease our operational flexibility, which could adversely affect our operating efficiency. In addition, our

response to any organizational efforts could be perceived negatively and harm our business and reputation.

Our Supplier Relationships Subject Us to a Number of Risks

We have significant suppliers, including content and technology licensors, and in some cases, limited or single-sources of

supply, that are important to our sourcing, services, manufacturing, and any related ongoing servicing of merchandise and

content. We do not have long-term arrangements with most of our suppliers to guarantee availability of merchandise, content,

components, or services, particular payment terms, or the extension of credit limits. Decisions by our current suppliers to limit

or stop selling or licensing merchandise, content, components, or services to us on acceptable terms, or delay delivery,

including as a result of one or more supplier bankruptcies due to poor economic conditions, as a result of natural or human-

caused disasters (including public health crises) or geopolitical events, or for other reasons, may result in our being unable to

procure alternatives from other suppliers in a timely and efficient manner and on acceptable terms, or at all. For example, we

rely on a limited group of suppliers for semiconductor products, including products related to artificial intelligence

infrastructure such as graphics processing units. Constraints on the availability of these products could adversely affect our

ability to develop and operate artificial intelligence technologies, products, or services. In addition, violations by our suppliers

or other vendors of applicable laws, regulations, contractual terms, intellectual property rights of others, or our Supply Chain

Standards, as well as products or practices regarded as unethical, unsafe, or hazardous, could expose us to claims, damage our

reputation, limit our growth, and negatively affect our operating results.

Our Commercial Agreements, Strategic Alliances, and Other Business Relationships Expose Us to Risks

We provide physical, e-commerce, and omnichannel retail, cloud services, and other services to businesses through

commercial agreements, strategic alliances, and business relationships. Under these agreements, we provide web services,

technology, fulfillment, computing, digital storage, and other services, as well as enable sellers to offer products or services

through our stores. These arrangements are complex and require substantial infrastructure capacity, personnel, and other

resource commitments, which may limit the amount of business we can service. We may not be able to implement, maintain,

and develop the components of these commercial relationships, which may include web services, fulfillment, customer service,

inventory management, tax collection, payment processing, hardware, content, and third-party software, and engaging third

parties to perform services. The amount of compensation we receive under certain of our commercial agreements is partially

dependent on the volume of the other company’s sales. Therefore, when the other company’s offerings are not successful, the

compensation we receive may be lower than expected or the agreement may be terminated. Moreover, we may not be able to

enter into additional or alternative commercial relationships and strategic alliances on favorable terms. We also may be subject

to claims from businesses to which we provide these services if we are unsuccessful in implementing, maintaining, or

developing these services.

As our agreements terminate, we may be unable to renew or replace these agreements on comparable terms, or at all. We

may in the future enter into amendments on less favorable terms or encounter parties that have difficulty meeting their

contractual obligations to us, which could adversely affect our operating results.

Our present and future commercial agreements, strategic alliances, and business relationships create additional risks such

as:

• disruption of our ongoing business, including loss of management focus on existing businesses;

• impairment of other relationships;

• variability in revenue and income from entering into, amending, or terminating such agreements or relationships; and

• difficulty integrating under the commercial agreements.

Our Business Suffers When We Are Unsuccessful in Making, Integrating, and Maintaining Acquisitions and Investments

We have acquired and invested in a number of companies, and we may in the future acquire or invest in or enter into joint

ventures with additional companies. These transactions involve risks such as:

• disruption of our ongoing business, including loss of management focus on existing businesses;

• problems retaining key personnel;

• additional operating losses and expenses of the businesses we acquired or in which we invested;

• the potential impairment of tangible and intangible assets and goodwill, including as a result of acquisitions;

• the potential impairment of customer and other relationships of the company we acquired or in which we invested or

our own customers as a result of any integration of operations;

• the difficulty of completing such transactions, including obtaining regulatory approvals or satisfying other closing

conditions, and achieving anticipated benefits within expected timeframes, or at all;

• the difficulty of incorporating acquired operations, technology, and rights into our offerings, and unanticipated

expenses related to such integration;

• the difficulty of integrating a new company’s accounting, financial reporting, management, information and data

security, human resource, and other administrative systems to permit effective management, and the lack of control if

such integration is delayed or not successfully implemented;

• losses we may incur as a result of declines in the value of an investment or as a result of incorporating an investee’s

financial performance into our financial results;

• for investments in which an investee’s financial performance is incorporated into our financial results, either in full or

in part, or investments for which we are required to file financial statements or provide financial information, the

dependence on the investee’s accounting, financial reporting, and similar systems, controls, and processes;

• the difficulty of implementing at companies we acquire the controls, procedures, and policies appropriate for a larger

public company;

• the risks associated with businesses we acquire or invest in, which may differ from or be more significant than the

risks our other businesses face;

• potential unknown liabilities associated with a company we acquire or in which we invest; and

• for foreign transactions, additional risks related to the integration of operations across different cultures and

languages, and the economic, political, and regulatory risks associated with specific countries.

As a result of future acquisitions or mergers, we might need to issue additional equity securities, spend our cash, or incur

debt, contingent liabilities, or amortization expenses related to intangible assets, any of which could reduce our profitability and

harm our business or only be available on unfavorable terms, if at all. In addition, valuations supporting our acquisitions and

strategic investments could change rapidly. We could determine that such valuations have experienced impairments or other-

than-temporary declines in fair value which could adversely impact our financial results.

We Face Significant Inventory Risk

In addition to risks described elsewhere in this Item 1A relating to fulfillment network and inventory optimization by us

and third parties, we are exposed to significant inventory risks that may adversely affect our operating results as a result of

seasonality, new product launches, rapid changes in product cycles and pricing, defective merchandise, changes in customer

demand and consumer spending patterns, changes in consumer tastes with respect to our products, spoilage, and other factors.

We endeavor to accurately predict these trends and avoid overstocking or understocking products we manufacture and/or sell.

Demand for products, however, can change significantly between the time inventory or components are ordered and the date of

sale. In addition, when we begin selling or manufacturing a new product or offering a new service, it may be difficult to

establish vendor relationships, determine appropriate product or component selection, and accurately forecast demand. The

acquisition of certain types of inventory or components requires significant lead-time and prepayment and they may not be

returnable. We carry a broad selection and significant inventory levels of certain products, such as consumer electronics, and at

times we are unable to sell products in sufficient quantities or to meet demand during the relevant selling seasons. Any one of

the inventory risk factors set forth above may adversely affect our operating results.

We Are Subject to Payments-Related Risks

We accept payments using a variety of methods, including credit card, debit card, credit accounts (including promotional

financing), gift cards, direct debit from a customer’s bank account, consumer invoicing, physical bank check, and payment

upon delivery. For existing and future payment options we offer to our customers, we currently are subject to, and may become

subject to additional, regulations and compliance requirements (including obligations to implement enhanced authentication

processes that could result in significant costs and reduce the ease of use of our payments products), as well as fraud. For

certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time

and raise our operating costs and lower profitability. We rely on third parties to provide certain Amazon-branded payment

methods and payment processing services, including the processing of credit cards, debit cards, electronic checks, and

promotional financing. In each case, it could disrupt our business if these companies become unwilling or unable to provide

these services to us. We also offer co-branded credit card programs, which could adversely affect our operating results if

renewed on less favorable terms or terminated. We are also subject to payment card association operating rules, including data

security rules, certification requirements, and rules governing electronic funds transfers, which could change or be reinterpreted

to make it difficult or impossible for us to comply. Failure to comply with these rules or requirements, as well as any breach,

compromise, or failure to otherwise detect or prevent fraudulent activity involving our data security systems, could result in our

being liable for card issuing banks’ costs, subject to fines and higher transaction fees, and loss of our ability to accept credit and

debit card payments from our customers, process electronic funds transfers, or facilitate other types of online payments, and our

business and operating results could be adversely affected.

In addition, we provide regulated services in certain jurisdictions because we enable customers to keep account balances

with us and transfer money to third parties, and because we provide services to third parties to facilitate payments on their

behalf. Jurisdictions subject us to requirements for licensing, regulatory inspection, bonding and capital maintenance, the use,

handling, and segregation of transferred funds, consumer disclosures, maintaining or processing data, and authentication. We

are also subject to or voluntarily comply with a number of other laws and regulations relating to payments, money laundering,

international money transfers, privacy, data use, data protection, data security, data localization, network security, consumer

protection, and electronic fund transfers. If we were found to be in violation of applicable laws or regulations, we could be

subject to additional requirements and civil and criminal penalties, or forced to cease providing certain services.

We Have a Rapidly Evolving Business Model and Our Stock Price Is Highly Volatile

We have a rapidly evolving business model. The trading price of our common stock fluctuates significantly in response

to, among other risks, the risks described elsewhere in this Item 1A, as well as:

• changes in interest rates;

• conditions or trends in the internet and the industry segments we operate in;

• quarterly variations in operating results;

• fluctuations in the stock market in general and market prices for internet-related companies in particular;

• changes in financial estimates by us or decisions to increase or decrease future spending or investment levels;

• changes in financial estimates and recommendations by securities analysts;

• changes in our capital structure, including issuance of additional debt or equity to the public;

• changes in the valuation methodology of, or performance by, other e-commerce or technology companies; and

• transactions in our common stock by major investors and certain analyst reports, news, and speculation.

Volatility in our stock price could adversely affect our business and financing opportunities and force us to increase our

cash compensation to employees or grant larger stock awards than we have historically, which could hurt our operating results

or reduce the percentage ownership of our existing stockholders, or both.

Legal and Regulatory Risks

Government Regulation Is Evolving and Unfavorable Changes Could Harm Our Business

We are subject to general business regulations and laws, as well as regulations and laws specifically governing the

internet, physical, e-commerce, and omnichannel retail, digital content, web services, electronic devices, advertising, artificial

intelligence technologies and services, and other products and services that we offer or sell. These regulations and laws cover

taxation, privacy, data use, data protection, data security, data localization, network security, consumer protection, pricing,

content, copyrights, distribution, transportation, mobile communications, electronic device certification, electronic waste,

energy consumption, environmental and climate-related regulation, electronic contracts and other communications, competition,

employment, trade and protectionist measures, web services, the provision of online payment services, registration, licensing,

and information reporting requirements, unencumbered internet access to our services or access to our facilities, the design and

operation of websites, health, safety, and sanitation standards, the characteristics, legality, and quality of products and services,

product labeling, the commercial operation of unmanned aircraft systems, healthcare, and other matters. It is not clear how

existing laws governing issues such as property ownership, libel, privacy, data use, data protection, data security, data

localization, network security, and consumer protection apply to aspects of our operations such as the internet, e-commerce,

digital content, web services, electronic devices, advertising, and artificial intelligence technologies and services. A large

number of jurisdictions regulate our operations, and the extent, nature, and scope of such regulations is evolving and expanding

as the scope of our businesses expand. We are regularly subject to formal and informal reviews, investigations, and other

proceedings by governments and regulatory authorities under existing laws, regulations, or interpretations or pursuing new and

novel approaches to regulate our operations. For example, we face a number of open investigations based on claims that aspects

of our operations infringe competition rules, including aspects of Amazon’s operation of its stores including its fulfillment

network, Amazon’s acquisitions, and certain aspects of AWS’s offering of cloud services. We strongly dispute these claims and

intend to defend ourselves vigorously in these investigations. Similarly, we face investigations under a growing patchwork of

laws and regulations governing the collection, use, and disclosure of data, the interpretation of which continues to evolve,

leading to uncertainty about how regulators will view our privacy practices. In addition, regulators and lawmakers are

increasingly focused on controlling additional aspects of the operations of technology companies and companies they have

characterized to be online “gatekeepers” through the application of existing regulations and laws and the adoption of new

regulations and laws, which increases our compliance costs and limits the operation of our business. Unfavorable regulations,

laws, decisions, or interpretations by government or regulatory authorities applying those laws and regulations, or inquiries,

investigations, or enforcement actions threatened or initiated by them, could cause us to incur substantial costs, expose us to

unanticipated civil and criminal liability or penalties (including substantial monetary fines), diminish the demand for, or

availability of, our products and services, increase our cost of doing business, require us to change our business practices in a

manner materially adverse to our business, damage our reputation, impede our growth, or otherwise have a material effect on

our operations. The media, political, and regulatory scrutiny we face, which may continue to increase, amplifies these risks.

Claims, Litigation, Government Investigations, and Other Proceedings May Adversely Affect Our Business and Results of

Operations

As an innovative company offering a wide range of consumer and business products and services around the world, we

are regularly subject to actual and threatened claims, litigation, reviews, investigations, and other proceedings, including

proceedings by governments and regulatory authorities, involving a wide range of issues, including patent and other intellectual

property matters, taxes, labor and employment (including the characterization of delivery drivers), competition and antitrust,

privacy, data use, data protection, data security, data localization, network security, consumer protection, commercial disputes,

goods and services offered by us and by third parties (including artificial intelligence technologies and services), and other

matters. The number and scale of these proceedings have increased over time as our businesses have expanded in scope and

geographic reach, as our products, services, and operations have become more complex and available to, and used by, more

people, and as governments and regulatory authorities seek to regulate us on a pre-emptive basis. For example, we are litigating

a number of matters alleging price fixing, monopolization, and consumer protection claims, including those brought by state

attorneys general and the Federal Trade Commission. Any of these types of proceedings can have an adverse effect on us

because of legal costs, disruption of our operations, diversion of management resources, negative publicity, and other factors.

The outcomes of these matters are inherently unpredictable and subject to significant uncertainties. Determining legal reserves

or possible losses from such matters involves judgment and may not reflect the full range of uncertainties and unpredictable

outcomes. Until the final resolution of such matters, we may be exposed to losses in excess of the amount recorded, and such

amounts could be material. Should any of our estimates and assumptions change or prove to have been incorrect, it could have a

material effect on our business, consolidated financial position, results of operations, or cash flows. In addition, it is possible

that a resolution of one or more such proceedings, including as a result of a settlement, could involve licenses, sanctions,

consent decrees, or orders requiring us to make substantial future payments, preventing us from offering certain products or

services, requiring us to change our business practices in a manner materially adverse to our business, requiring development of

non-infringing or otherwise altered products or technologies, damaging our reputation, or otherwise having a material effect on

our operations.

We Are Subject to Product Liability Claims When People or Property Are Harmed by the Products We Sell or

Manufacture

Some of the products we sell or manufacture expose us to product liability or food safety claims relating to personal

injury or illness, death, or environmental or property damage, and can require product recalls or other actions. Third parties who

sell products using our services and stores also expose us to product liability claims. Additionally, under our A-to-z Guarantee,

we may reimburse customers for certain product liability claims up to certain limits in these situations, and as our third-party

seller sales grow, the cost of this program will increase and could negatively affect our operating results. Although we maintain

liability insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will

continue to be available to us on economically reasonable terms, or at all. Although we impose contractual terms on sellers that

are intended to prohibit sales of certain type of products, we may not be able to detect, enforce, or collect sufficient damages for

breaches of such agreements. In addition, some of our agreements with our vendors and sellers do not indemnify us from

product liability.

We Face Additional Tax Liabilities and Collection Obligations

We are subject to a variety of taxes and tax collection obligations in the U.S. (federal and state) and numerous foreign

jurisdictions. We may recognize additional tax expense and be subject to additional tax liabilities, including other liabilities for

tax collection obligations due to changes in 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.

Such changes could come about as a result of economic, political, and other conditions. An increasing number of jurisdictions

are considering or have adopted laws or administrative practices that impose new tax measures, including revenue-based taxes,

targeting online commerce and the remote selling of goods and services. These include new obligations to withhold or collect

sales, consumption, value added, or other taxes on online marketplaces and remote sellers, or other requirements that may result

in liability for third party obligations. For example, non-U.S. jurisdictions have proposed or enacted taxes on online advertising

and marketplace service revenues. Proliferation of these or similar unilateral tax measures may continue unless broader

international tax reform is implemented. In addition, the European Union and other countries (including those in which we

operate) have enacted or have committed to enact global minimum taxes, which may increase our tax expense in future years.

Our results of operations and cash flows could be adversely affected by additional taxes imposed on us prospectively or

retroactively or additional taxes or penalties resulting from the failure to comply with any collection obligations or failure to

provide information about our customers, suppliers, and other third parties for tax reporting purposes to various government

agencies. In some cases we also may not have sufficient notice to enable us to build systems and adopt processes to properly

comply with new reporting or collection obligations by the effective date.

Our tax expense and liabilities are also affected by other 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,

losses incurred in jurisdictions for which we are not able to realize related tax benefits, the applicability of special or

extraterritorial 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, and changes in our tax assets and liabilities and their valuation. In the

ordinary course of our business, there are many transactions and calculations for which the ultimate tax determination is

uncertain. Significant judgment is required in evaluating and estimating our tax expense, assets, and liabilities.

We are also subject to tax controversies in various jurisdictions that can result in tax assessments against us.

Developments in an audit, investigation, or other tax controversy can 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. Due to the

inherent complexity and uncertainty of these matters, interpretations of certain tax laws by authorities, and judicial,

administrative, and regulatory processes in certain jurisdictions, the final outcome of any such controversy may be materially

different from our expectations. For example, the Indian tax authority has asserted that tax applies to cloud services fees paid to

Amazon in the U.S. We are contesting this position; however, if this matter is adversely resolved, we may be required to pay

additional amounts with respect to current and prior periods and our taxes in the future could increase. 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 tax accruals.

We Are Subject to Risks Related to Government Contracts and Related Procurement Regulations

Our contracts with U.S., as well as state, local, and foreign, government entities are subject to various procurement

regulations and other requirements relating to their formation, administration, and performance. We are subject to audits and

investigations relating to our government contracts, and any violations could result in various civil and criminal penalties and

administrative sanctions, including termination of contract, refunding or suspending of payments, forfeiture of profits, payment

of fines, and suspension or debarment from future government business. In addition, some of these contracts are subject to

periodic funding approval and/or provide for termination by the government at any time, without cause.

Item 1B. Unresolved Staff Comments

None.

Item 1C. Cybersecurity

We have processes in place for assessing, identifying, and managing material risks from potential unauthorized

occurrences on or through our electronic information systems that could adversely affect the confidentiality, integrity, or

availability of our information systems or the information residing on those systems. These include a wide variety of

mechanisms, controls, technologies, methods, systems, and other processes that are designed to prevent, detect, or mitigate data

loss, theft, misuse, unauthorized access, or other security incidents or vulnerabilities affecting the data. The data include

confidential, proprietary, and business and personal information that we collect, process, store, and transmit as part of our

business, including on behalf of third parties. We also use systems and processes designed to reduce the impact of a security

incident at a third-party vendor or customer. Additionally, we use processes to oversee and identify material risks from

cybersecurity threats associated with our use of third-party technology and systems, including: technology and systems we use

for encryption and authentication; employee email; content delivery to customers; back-office support; and other functions.

As part of our risk management process, we conduct application security assessments, vulnerability management,

penetration testing, security audits, and ongoing risk assessments. We also maintain a variety of incident response plans that are

utilized when incidents are detected. We require employees with access to information systems, including all corporate

employees, to undertake data protection and cybersecurity training and compliance programs annually.

We have a unified and centrally-coordinated team, led by our chief security officer, that is responsible for implementing

and maintaining centralized cybersecurity and data protection practices at Amazon in close coordination with senior leadership

and other teams across Amazon. Reporting to our chief security officer are a number of experienced chief information security

officers responsible for various parts of our business, including AWS, each of whom is supported by a team of trained

cybersecurity professionals. In addition to our extensive in-house cybersecurity capabilities, at times we also engage assessors,

consultants, auditors, or other third parties to assist with assessing, identifying, and managing cybersecurity risks.

Our cybersecurity risks and associated mitigations are evaluated by senior leadership, including as part of our enterprise

risk assessments that are reviewed by the Audit Committee and our Board of Directors. Such risks and mitigations are also

subject to oversight by the Security Committee of our Board of Directors. Additional information about cybersecurity risks we

face is discussed in Item 1A of Part I, “Risk Factors,” under the heading “We Could Be Harmed by Data Loss or Other Security

Breaches,” which should be read in conjunction with the information above.

The Security Committee, which is comprised of independent directors, oversees our policies and procedures for

protecting our cybersecurity infrastructure and for compliance with applicable data protection and security regulations, and

related risks. The Security Committee receives reports regarding such risks from management, including our chief security

officer, and reports to the Board at least annually. The Security Committee also oversees the Board’s response to any significant

cybersecurity incidents.

Our chief security officer, who has extensive cybersecurity knowledge and skills gained from over 15 years of work

experience on the security team at Amazon and an extensive career in the technology and cybersecurity industries as a senior

executive in the federal government, heads the team responsible for implementing and maintaining cybersecurity and data

protection practices at Amazon and reports directly to the Chief Executive Officer.

Item 2. Properties

As of December 31, 2023, we operated the following facilities (in thousands):

Description of Use

Leased Square

Footage (1)

Owned Square

Footage Location

Office space

29,655 9,222

North America

Office space 24,528 1,802 International

Physical stores (2)

22,871 707

North America

Physical stores (2)

255 —

International

Fulfillment, data centers, and other

413,017 25,630

North America

Fulfillment, data centers, and other

173,765 14,802

International

Total 664,091 52,163

___________________

(1) For leased properties, represents the total leased space excluding sub-leased space.

(2) This includes 600 North America and 28 International stores as of December 31, 2023.

Segment

Leased Square

Footage (1)

Owned Square

Footage (1)

North America

424,145 15,438

International 165,329 7,931

AWS

20,434 17,770

Total 609,908 41,139

___________________

(1) Segment amounts exclude corporate facilities. Shared facilities are allocated among the segments based on usage and

primarily relate to facilities that hold our technology infrastructure. See Item 8 of Part II, “Financial Statements and

Supplementary Data — Note 10 — Segment Information.”

We own and lease our corporate headquarters in Washington’s Puget Sound region and Arlington, Virginia.

Item 3. Legal Proceedings

See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 7 — Commitments and Contingencies —

Legal Proceedings.”

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for the Registrant’s Common Stock, Related Shareholder Matters, and Issuer Purchases of Equity

Securities

Market Information

Our common stock is traded on the Nasdaq Global Select Market under the symbol “AMZN.”

Holders

As of January 24, 2024, there were 11,656 shareholders of record of our common stock, although there is a much larger

number of beneficial owners.

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

None.

Item 6. Reserved

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Annual Report on Form 10-K 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 Annual Report on Form 10-K 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 I, “Risk Factors.”

Overview

Our primary source of revenue is the sale of a wide range of products and services to customers. The products offered

through our stores include merchandise and content we have purchased for resale and products offered by third-party sellers,

and we also manufacture and sell electronic devices and produce media content. Generally, we recognize gross revenue from

items we sell from our inventory as product sales and recognize our net share of revenue of items sold by third-party sellers as

service sales. We seek to increase unit sales across our stores, through increased product selection, across numerous product

categories. We also offer other services such as compute, storage, and database offerings, fulfillment, advertising, publishing,

and digital content subscriptions.

Our financial focus is on long-term, sustainable growth in free cash flows. Free cash flows are driven primarily by

increasing operating income and efficiently managing accounts receivable, inventory, accounts payable, and cash capital

expenditures, including our decision to purchase or lease property and equipment. Increases in operating income primarily

result from increases in sales of products and services and efficiently managing our operating costs, partially offset by

investments we make in longer-term strategic initiatives, including capital expenditures focused on improving the customer

experience. To increase sales of products and services, we focus on improving all aspects of the customer experience, including

lowering prices, improving availability, offering faster delivery and performance times, increasing selection, producing original

content, increasing product categories and service offerings, expanding product information, improving ease of use, improving

reliability, and earning customer trust. See “Results of Operations — Non-GAAP Financial Measures” below for additional

information on our non-GAAP free cash flows financial measures.

We seek to reduce our variable costs per unit and work to leverage our fixed costs. Our variable costs include product

and content costs, payment processing and related transaction costs, picking, packaging, and preparing orders for shipment,

transportation, customer service support, costs necessary to run AWS, and a portion of our marketing costs. Our fixed costs

include the costs necessary to build and run our technology infrastructure; to build, enhance, and add features to our online

stores, web services, electronic devices, and digital offerings; and to build and optimize our fulfillment network. Variable costs

generally change directly with sales volume, while fixed costs generally are dependent on the timing of capacity needs,

geographic expansion, category expansion, and other factors. To decrease our variable costs on a per unit basis and enable us to

lower prices for customers, we seek to increase our direct sourcing, increase discounts from suppliers, and reduce defects in our

processes. To minimize unnecessary growth in fixed costs, we seek to improve process efficiencies and maintain a lean culture.

We seek to turn inventory quickly and collect from consumers before our payments to vendors and sellers become due.

Because consumers primarily use credit cards in our stores, our receivables from consumers settle quickly. We expect

variability in inventory turnover over time since it is affected by numerous factors, including our product mix, the mix of sales

by us and by third-party sellers, our continuing focus on in-stock inventory availability and selection of product offerings,

supply chain disruptions and resulting vendor lead times, our investment in new geographies and product lines, and the extent

to which we choose to utilize third-party fulfillment providers. We also expect some variability in accounts payable days over

time since they are affected by several factors, including the mix of product sales, the mix of sales by third-party sellers, the mix

of suppliers, seasonality, and changes in payment and other terms over time, including the effect of balancing pricing and

timing of payment terms with suppliers.

We expect spending in technology and infrastructure will increase over time as we add computer scientists, designers,

software and hardware engineers, and merchandising employees. 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 seek to invest efficiently in several areas of technology and infrastructure,

including AWS, and expansion of new and existing product categories and service offerings, as well as in infrastructure to

enhance the customer experience and improve our process efficiencies. We believe that advances in technology, specifically the

speed and reduced cost of processing power, data storage and analytics, improved wireless connectivity, and the practical

applications of artificial intelligence and machine learning, will continue to improve users’ experience on the internet and

increase its ubiquity in people’s lives. To best take advantage of these continued advances in technology, we are investing in

AWS, which offers a broad set of on-demand technology services, including compute, storage, database, analytics, and machine

learning, and other services to developers and enterprises of all sizes. We are also investing in initiatives to build and deploy

innovative and efficient software and electronic devices as well as other initiatives including the development of a satellite

network for global broadband service and autonomous vehicles for ride-hailing services.

We seek to efficiently manage shareholder dilution while maintaining the flexibility to issue shares for strategic purposes,

such as financings, acquisitions, and aligning employee compensation with shareholders’ interests. We utilize restricted stock

units as our primary vehicle for equity compensation because we believe this compensation model aligns the long-term interests

of our shareholders and employees. In measuring shareholder dilution, we include all vested and unvested stock awards

outstanding, without regard to estimated forfeitures. Total shares outstanding plus outstanding stock awards were 10.6 billion

and 10.8 billion as of December 31, 2022 and 2023.

Our financial reporting currency is the U.S. Dollar and changes in foreign exchange rates significantly affect our

reported results and consolidated trends. For example, if the U.S. Dollar weakens year-over-year relative to currencies in our

international locations, our consolidated net sales and operating expenses will be higher than if currencies had remained

constant. Likewise, if the U.S. Dollar strengthens year-over-year relative to currencies in our international locations, our

consolidated net sales and operating expenses will be lower than if currencies had remained constant. We believe that our

increasing diversification beyond the U.S. economy through our growing international businesses benefits our shareholders

over the long-term. We also believe it is useful to evaluate our operating results and growth rates before and after the effect of

currency changes.

In addition, the remeasurement of our intercompany balances can result in significant gains and losses associated with the

effect of movements in foreign exchange rates. Currency volatilities may continue, which may significantly impact (either

positively or negatively) our reported results and consolidated trends and comparisons.

For additional information about each line item addressed above, refer to Item 8 of Part II, “Financial Statements and

Supplementary Data — Note 1 — Description of Business, Accounting Policies, and Supplemental Disclosures.”

Our Annual Report on Form 10-K for the year ended December 31, 2022 includes a discussion and analysis of our

financial condition and results of operations for the year ended December 31, 2021 in Item 7 of Part II, “Management’s

Discussion and Analysis of Financial Condition and Results of Operations.”

Critical Accounting Estimates

The preparation of financial statements in conformity with generally accepted accounting principles of the United States

(“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.” 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

December 31, 2023, we would have recorded an additional cost of sales of approximately $355 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

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):

Year Ended December 31,

2022 2023

Cash provided by (used in):

Operating activities

$ 46,752 $ 84,946

Investing activities

(37,601) (49,833)

Financing activities

9,718 (15,879)

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 $70.0 billion and $86.8 billion as of December 31, 2022 and 2023.

Amounts held in foreign currencies were $18.3 billion and $23.5 billion as of December 31, 2022 and 2023. Our foreign

currency balances include British Pounds, Canadian Dollars, Euros, Indian Rupees, and Japanese Yen.

Cash provided by (used in) operating activities was $46.8 billion and $84.9 billion in 2022 and 2023. 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 in 2023, compared to the prior year, was due to an

increase in net income (loss), 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 $(37.6) billion and $(49.8) billion in 2022 and 2023, with the

variability caused primarily by purchases, sales, and maturities of marketable securities and cash capital expenditures. Cash

capital expenditures were $58.3 billion, and $48.1 billion in 2022 and 2023, 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, which investments we expect to increase in 2024. We made cash payments, net of acquired cash, related to acquisition

and other investment activity of $8.3 billion and $5.8 billion in 2022 and 2023. We funded the acquisitions of MGM Holdings

Inc. in 2022 and 1Life Healthcare, Inc. (One Medical) in 2023 with cash on hand. In 2023, we invested $1.25 billion in a note

from Anthropic, PBC, which is convertible into equity. We have an agreement that expires in Q1 2024 to invest up to an

additional $2.75 billion in a second convertible note.

Cash provided by (used in) financing activities was $9.7 billion and $(15.9) billion in 2022 and 2023. Cash inflows from

financing activities resulted from proceeds from short-term debt, and other and long-term-debt of $62.7 billion and $18.1 billion

in 2022 and 2023. Cash outflows from financing activities resulted from repurchases of common stock in 2022, payments of

short-term debt, and other, long-term debt, finance leases, and financing obligations of $53.0 billion and $34.0 billion in 2022

and 2023. Property and equipment acquired under finance leases was $675 million and $642 million in 2022 and 2023.

We had no borrowings outstanding under the two unsecured revolving credit facilities or the commercial paper programs,

we had $682 million of borrowings outstanding under the secured revolving credit facility, and the entire amount of the term

loan has been repaid as of December 31, 2023. See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 6

— Debt” for additional information.

As of December 31, 2023, cash, cash equivalents, and marketable securities held by foreign subsidiaries were $4.7

billion. 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. Our federal tax provision included a partial accelerated depreciation deduction election for 2021, and

a full election for 2022 and 2023. 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 $6.0 billion and $11.2 billion for 2022 and 2023.

As of December 31, 2022 and 2023, restricted cash, cash equivalents, and marketable securities were $365 million and

$503 million. See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 6 — Debt” and “Financial

Statements and Supplementary Data — Note 7 — Commitments and Contingencies” 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 I, “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.

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 8 of Part II, “Financial

Statements and Supplementary Data — Note 10 — 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 also expect the current macroeconomic

environment and enterprise customer cost optimization efforts to impact our AWS revenue growth rates. We expect some or all

of these factors to continue to impact our operations into Q1 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):

Year Ended December 31,

2022 2023

Net Sales:

North America

$ 315,880 $ 352,828

International

118,007 131,200

AWS

80,096 90,757

Consolidated

$ 513,983 $ 574,785

Year-over-year Percentage Growth (Decline):

North America

13 % 12 %

International

(8) 11

AWS

29 13

Consolidated

9 12

Year-over-year Percentage Growth, excluding the effect of foreign exchange rates:

North America

13 % 12 %

International

4 11

AWS

29 13

Consolidated

13 12

Net Sales Mix:

North America

61 % 61 %

International

23 23

AWS

16 16

Consolidated

100 % 100 %

Sales increased 12% in 2023, compared to the prior year. Changes in foreign exchange rates reduced net sales by

$71 million in 2023. 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 2023, compared to the prior year. The sales growth primarily reflects increased

unit sales, primarily 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 shipping offers.

International sales increased 11% in 2023, compared to the prior year. The sales growth primarily reflects increased unit

sales, primarily 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 shipping offers. Changes in

foreign exchange rates increased International net sales by $88 million in 2023.

AWS sales increased 13% in 2023, compared to the prior year. 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):

Year Ended December 31,

2022 2023

Operating Income (Loss)

North America

$ (2,847) $ 14,877

International

(7,746) (2,656)

AWS

22,841 24,631

Consolidated

$ 12,248 $ 36,852

Operating income was $12.2 billion and $36.9 billion for 2022 and 2023. 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 North America operating income in 2023, as compared to the operating loss in the prior year, 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 decrease in International operating loss in absolute dollars in 2023, compared to the prior year, is primarily due to

increased unit sales and increased advertising sales, partially offset by increased fulfillment and shipping costs and increased

technology and infrastructure costs. Changes in foreign exchange rates positively impacted operating loss by $246 million in

2023.

The increase in AWS operating income in absolute dollars in 2023, compared to the prior year, is primarily due to

increased sales, partially offset by increased payroll and related expenses and spending on technology infrastructure, both of

which were primarily driven by additional investments to support AWS business growth. Changes in foreign exchange rates

positively impacted operating income by $220 million in 2023.

Operating Expenses

Information about operating expenses is as follows (in millions):

Year Ended December 31,

2022 2023

Operating Expenses:

Cost of sales

$ 288,831 $ 304,739

Fulfillment

84,299 90,619

Technology and infrastructure

73,213 85,622

Sales and marketing

42,238 44,370

General and administrative

11,891 11,816

Other operating expense (income), net

1,263 767

Total operating expenses

$ 501,735 $ 537,933

Year-over-year Percentage Growth (Decline):

Cost of sales

6 % 6 %

Fulfillment

12 7

Technology and infrastructure

31 17

Sales and marketing

30 5

General and administrative

35 (1)

Other operating expense (income), net

1,936 (39)

Percent of Net Sales:

Cost of sales

56.2 % 53.0 %

Fulfillment

16.4 15.8

Technology and infrastructure

14.2 14.9

Sales and marketing 8.2 7.7

General and administrative

2.3 2.1

Other operating expense (income), net

0.2 0.1

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 absolute dollars in 2023, compared to the prior year, is primarily due to increased product

and shipping costs resulting from increased sales, partially offset by fulfillment network efficiencies and lower transportation

rates. Changes in foreign exchange rates reduced cost of sales by $254 million in 2023.

Shipping costs were $83.5 billion and $89.5 billion in 2022 and 2023. 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 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 absolute dollars in 2023, compared to the prior year, 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 $52 million in 2023.

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 increase in technology and infrastructure costs in absolute dollars in 2023,

compared to the prior year, is primarily due to an increase in spending on infrastructure and increased 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.

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, social and online advertising, third-party customer referrals, 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 increase in sales and marketing costs in absolute dollars in 2023, compared to the prior year, is primarily due to

increased payroll and related expenses for personnel engaged in marketing and selling activities.

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

General and administrative costs were $11.9 billion and $11.8 billion during 2022 and 2023, and were primarily related to

payroll and related expenses and professional fees.

Other Operating Expense (Income), Net

Other operating expense (income), net was $1.3 billion and $767 million during 2022 and 2023, and was primarily related

to asset impairments for physical store closures in 2022 and for fulfillment network facilities and physical store closures in

2023, and the amortization of intangible assets.

Interest Income and Expense

Our interest income was $989 million and $2.9 billion during 2022 and 2023, 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 $2.4 billion and $3.2 billion in 2022 and 2023 and was primarily related to debt and finance leases.

See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 4 — Leases and Note 6 — Debt” for additional

information.

Our long-term lease liabilities were $73.0 billion and $77.3 billion as of December 31, 2022 and 2023. Our long-term

debt was $67.1 billion and $58.3 billion as of December 31, 2022 and 2023. See Item 8 of Part II, “Financial Statements and

Supplementary Data — Note 4 — Leases and Note 6 — Debt” for additional information.

Other Income (Expense), Net

Other income (expense), net was $(16.8) billion and $938 million during 2022 and 2023. 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 in 2022 and 2023 is a marketable equity securities valuation gain (loss) of

$(12.7) billion and $797 million from our equity investment in Rivian.

Income Taxes

Our effective tax rate is subject to significant variation due to several factors, including variability in 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.

We recorded a provision (benefit) for income taxes of $(3.2) billion and $7.1 billion in 2022 and 2023. See Item 8 of Part

II, “Financial Statements and Supplementary Data — Note 9 — 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 2022 and 2023 (in millions):

Year Ended December 31,

2022 2023

Net cash provided by (used in) operating activities

$ 46,752 $ 84,946

Purchases of property and equipment, net of proceeds from sales and incentives

(58,321) (48,133)

Free cash flow

$ (11,569) $ 36,813

Net cash provided by (used in) investing activities

$ (37,601) $ (49,833)

Net cash provided by (used in) financing activities

$ 9,718 $ (15,879)

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 2022 and 2023 (in millions):

Year Ended December 31,

2022 2023

Net cash provided by (used in) operating activities

$ 46,752 $ 84,946

Purchases of property and equipment, net of proceeds from sales and incentives

(58,321) (48,133)

Free cash flow

(11,569) 36,813

Principal repayments of finance leases

(7,941) (4,384)

Principal repayments of financing obligations

(248) (271)

Free cash flow less principal repayments of finance leases and financing obligations

$ (19,758) $ 32,158

Net cash provided by (used in) investing activities

$ (37,601) $ (49,833)

Net cash provided by (used in) financing activities

$ 9,718 $ (15,879)

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 2022 and 2023 (in millions):

Year Ended December 31,

2022 2023

Net cash provided by (used in) operating activities

$ 46,752 $ 84,946

Purchases of property and equipment, net of proceeds from sales and incentives

(58,321) (48,133)

Free cash flow

(11,569) 36,813

Equipment acquired under finance leases (1)

(299) (310)

Principal repayments of all other finance leases (2)

(670) (683)

Principal repayments of financing obligations

(248) (271)

Free cash flow less equipment finance leases and principal repayments of all other finance

leases and financing obligations

$ (12,786) $ 35,549

Net cash provided by (used in) investing activities

$ (37,601) $ (49,833)

Net cash provided by (used in) financing activities

$ 9,718 $ (15,879)

___________________

(1) For the year ended December 31, 2022 and 2023, this amount relates to equipment included in “Property and equipment

acquired under finance leases, net of remeasurements and modifications” of $675 million and $642 million.

(2) For the year ended December 31, 2022 and 2023, this amount relates to property included in “Principal repayments of

finance leases” of $7,941 million and $4,384 million.

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):

Year Ended December 31, 2022 Year Ended December 31, 2023

Reported

Exchange

Rate

Effect (1)

At Prior

Year

Rates (2)

Reported

Exchange

Rate

Effect (1)

At Prior

Year

Rates (2)

Net sales

$ 513,983 $ 15,495

$ 529,478

$ 574,785 $ 71 $ 574,856

Operating expenses

501,735 16,356 518,091 537,933 531 538,464

Operating income

12,248 (861) 11,387 36,852 (460) 36,392

___________________

(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.

Guidance

We provided guidance on February 1, 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 February 1, 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

I, “Risk Factors.”

First Quarter 2024 Guidance

• Net sales are expected to be between $138.0 billion and $143.5 billion, or to grow between 8% and 13% compared

with first quarter 2023. This guidance anticipates a favorable impact of approximately 40 basis points from foreign

exchange rates.

• Operating income is expected to be between $8.0 billion and $12.0 billion, compared with $4.8 billion in first quarter

2023. This guidance includes approximately $0.9 billion lower depreciation expense due to an increase in the

estimated useful life of our servers beginning on January 1, 2024.

• This guidance assumes, among other things, that no additional business acquisitions, restructurings, or legal

settlements are concluded.

Item 7A. 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 7 of Part II, “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. The following table provides information about our cash equivalents and

marketable debt securities, including principal cash flows by expected maturity and the related weighted-average interest rates

as of December 31, 2023 (in millions, except percentages):

2024 2025 2026 2027 2028 Thereafter Total

Estimated

Fair Value

as of

December

31, 2023

Money market funds

$ 39,160 $ — $ — $ — $ — $ — $ 39,160 $ 39,160