Amazon.com, Inc.

ANNUAL REPORT

2 0 2 2

Dear shareholders:

As I sit down to write my second annual shareholder letter as CEO, I find myself optimistic and energized

by what lies ahead for Amazon. Despite 2022 being one of the harder macroeconomic years in recent memory,

and with some of our own operating challenges to boot, we still found a way to grow demand (on top of

the unprecedented growth we experienced in the first half of the pandemic). We innovated in our largest

businesses to meaningfully improve customer experience short and long term. And, we made important

adjustments in our investment decisions and the way in which we’ll invent moving forward, while still

preserving the long-term investments that we believe can change the future of Amazon for customers,

shareholders, and employees.

While there were an unusual number of simultaneous challenges this past year, the reality is that if you

operate in large, dynamic, global market segments with many capable and well-funded competitors (the

conditions in which Amazon operates all of its businesses), conditions rarely stay stagnant for long.

In the 25 years I’ve been at Amazon, there has been constant change, much of which we’ve initiated ourselves.

When I joined Amazon in 1997, we had booked $15M in revenue in 1996, were a books-only retailer, did

not have a third-party marketplace, and only shipped to addresses in the US. Today, Amazon sells nearly every

physical and digital retail item you can imagine, with a vibrant third-party seller ecosystem that accounts

for 60% of our unit sales, and reaches customers in virtually every country around the world. Similarly,

building a business around a set of technology infrastructure services in the cloud was not obvious in 2003

when we started pursuing AWS, and still wasn’t when we launched our first services in 2006. Having virtually

every book at your fingertips in 60 seconds, and then being able to store and retrieve them on a lightweight

digital reader was not “a thing” yet when we launched Kindle in 2007, nor was a voice-driven personal assistant

like Alexa (launched in 2014) that you could use to access entertainment, control your smart home, shop,

and retrieve all sorts of information.

There have also been times when macroeconomic conditions or operating inefficiencies have presented us

with new challenges. For instance, in the 2001 dot-com crash, we had to secure letters of credit to buy

inventory for the holidays, streamline costs to deliver better profitability for the business, yet still prioritized

the long-term customer experience and business we were trying to build (if you remember, we actually

lowered prices in most of our categories during that tenuous 2001 period). You saw this sort of balancing

again in 2008-2009 as we endured the recession provoked by the mortgage-backed securities financial crisis.

We took several actions to manage the cost structure and efficiency of our Stores business, but we also

balanced this streamlining with investment in customer experiences that we believed could be substantial

future businesses with strong returns for shareholders. In 2008, AWS was still a fairly small, fledgling business.

We knew we were on to something, but it still required substantial capital investment. There were voices

inside and outside of the company questioning why Amazon (known mostly as an online retailer then) would

be investing so much in cloud computing. But, we knew we were inventing something special that could

create a lot of value for customers and Amazon in the future. We had a head start on potential competitors;

and if anything, we wanted to accelerate our pace of innovation. We made the long-term decision to

continue investing in AWS. Fifteen years later, AWS is now an $85B annual revenue run rate business, with

strong profitability, that has transformed how customers from start-ups to multinational companies to public

sector organizations manage their technology infrastructure. Amazon would be a different company if

we’d slowed investment in AWS during that 2008-2009 period.

Change is always around the corner. Sometimes, you proactively invite it in, and sometimes it just comes

a-knocking. But, when you see it’s coming, you have to embrace it. And, the companies that do this well over

a long period of time usually succeed. I’m optimistic about our future prospects because I like the way our

team is responding to the changes we see in front of us.

Over the last several months, we took a deep look across the company, business by business, invention by

invention, and asked ourselves whether we had conviction about each initiative’s long-term potential to drive

enough revenue, operating income, free cash flow, and return on invested capital. In some cases, it led to us

shuttering certain businesses. For instance, we stopped pursuing physical store concepts like our Bookstores

and 4 Star stores, closed our Amazon Fabric and Amazon Care efforts, and moved on from some newer

devices where we didn’t see a path to meaningful returns. In other cases, we looked at some programs that

weren’t producing the returns we’d hoped (e.g. free shipping for all online grocery orders over $35) and

amended them. We also reprioritized where to spend our resources, which ultimately led to the hard decision

to eliminate 27,000 corporate roles. There are a number of other changes that we’ve made over the last

several months to streamline our overall costs, and like most leadership teams, we’ll continue to evaluate

what we’re seeing in our business and proceed adaptively.

We also looked hard at how we were working together as a team and asked our corporate employees to come

back to the office at least three days a week, beginning in May. During the pandemic, our employees rallied to

get work done from home and did everything possible to keep up with the unexpected circumstances that

presented themselves. It was impressive and I’m proud of the way our collective team came together to

overcome unprecedented challenges for our customers, communities, and business. But, we don’t think it’s the

best long-term approach. We’ve become convinced that collaborating and inventing is easier and more

effective when we’re working together and learning from one another in person. The energy and riffing on

one another’s ideas happen more freely, and many of the best Amazon inventions have had their breakthrough

moments from people staying behind after a meeting and working through ideas on a whiteboard, or

continuing the conversation on the walk back from a meeting, or just popping by a teammate’s office later

that day with another thought. Invention is often messy. It wanders and meanders and marinates.

Serendipitous interactions help it, and there are more of those in-person than virtually. It’s also significantly

easier to learn, model, practice, and strengthen our culture when we’re in the office together most of the

time and surrounded by our colleagues. Innovation and our unique culture have been incredibly important

in our first 29 years as a company, and I expect it will be comparably so in the next 29.

A critical challenge we’ve continued to tackle is the rising cost to serve in our Stores fulfillment network (i.e.

the cost to get a product from Amazon to a customer)—and we’ve made several changes that we believe will

meaningfully improve our fulfillment costs and speed of delivery.

During the early part of the pandemic, with many physical stores shut down, our consumer business grew

at an extraordinary clip, with annual revenue increasing from $245B in 2019 to $434B in 2022. This meant that

we had to double the fulfillment center footprint that we’d built over the prior 25 years and substantially

accelerate building a last-mile transportation network that’s now the size of UPS (along with a new sortation

center network to assist with efficiency and speed when items needed to traverse long distances)—all in the

span of about two years. This was no easy feat, and hundreds of thousands of Amazonians worked very hard

to make this happen. However, not surprisingly, with that rate and scale of change, there was a lot of

optimization needed to yield the intended productivity. Over the last several months, we’ve scrutinized every

process path in our fulfillment centers and transportation network and redesigned scores of processes and

mechanisms, resulting in steady productivity gains and cost reductions over the last few quarters. There’s

more work to do, but we’re pleased with our trajectory and the meaningful upside in front of us.

We also took this occasion to make larger structural changes that set us up better to deliver lower costs and

faster speed for many years to come. A good example was reevaluating how our US fulfillment network was

organized. Until recently, Amazon operated one national US fulfillment network that distributed inventory

from fulfillment centers spread across the entire country. If a local fulfillment center didn’t have the product a

customer ordered, we’d end up shipping it from other parts of the country, costing us more and increasing

delivery times. This challenge became more pronounced as our fulfillment network expanded to hundreds of

additional nodes over the last few years, distributing inventory across more locations and increasing the

complexity of connecting the fulfillment center and delivery station nodes efficiently. Last year, we started

rearchitecting our inventory placement strategy and leveraging our larger fulfillment center footprint to move

from a national fulfillment network to a regionalized network model. We made significant internal changes

(e.g. placement and logistics software, processes, physical operations) to create eight interconnected regions in

smaller geographic areas. Each of these regions has broad, relevant selection to operate in a largely self-

sufficient way, while still being able to ship nationally when necessary. Some of the most meaningful and hard

work came from optimizing the connections between this large amount of infrastructure. We also continue

to improve our advanced machine learning algorithms to better predict what customers in various parts of the

country will need so that we have the right inventory in the right regions at the right time. We’ve recently

completed this regional roll out and like the early results. Shorter travel distances mean lower cost to serve,

less impact on the environment, and customers getting their orders faster. On the latter, we’re excited about

seeing more next day and same-day deliveries, and we’re on track to have our fastest Prime delivery speeds

ever in 2023. Overall, we remain confident about our plans to lower costs, reduce delivery times, and build a

meaningfully larger retail business with healthy operating margins.

AWS has an $85B annualized revenue run rate, is still early in its adoption curve, but at a juncture where it’s

critical to stay focused on what matters most to customers over the long-haul. Despite growing 29% year-over-

year (“YoY”) in 2022 on a $62B revenue base, AWS faces short-term headwinds right now as companies

are being more cautious in spending given the challenging, current macroeconomic conditions. While some

companies might obsess over how they could extract as much money from customers as possible in these tight

times, it’s neither what customers want nor best for customers in the long term, so we’re taking a different

tack. One of the many advantages of AWS and cloud computing is that when your business grows, you can

seamlessly scale up; and conversely, if your business contracts, you can choose to give us back that capacity

and cease paying for it. This elasticity is unique to the cloud, and doesn’t exist when you’ve already made

expensive capital investments in your own on-premises datacenters, servers, and networking gear. In AWS,

like all our businesses, we’re not trying to optimize for any one quarter or year. We’re trying to build customer

relationships (and a business) that outlast all of us; and as a result, our AWS sales and support teams are

spending much of their time helping customers optimize their AWS spend so they can better weather this

uncertain economy. Many of these AWS customers tell us that they’re not cost-cutting as much as cost-

optimizing so they can take their resources and apply them to emerging and inventive new customer

experiences they’re planning. Customers have appreciated this customer-focused, long-term approach, and

we think it’ll bode well for both customers and AWS.

While these short-term headwinds soften our growth rate, we like a lot of the fundamentals that we’re seeing

in AWS. Our new customer pipeline is robust, as are our active migrations. Many companies use

discontinuous periods like this to step back and determine what they strategically want to change, and we

find an increasing number of enterprises opting out of managing their own infrastructure, and preferring to

move to AWS to enjoy the agility, innovation, cost-efficiency, and security benefits. And most importantly

for customers, AWS continues to deliver new capabilities rapidly (over 3,300 new features and services launched

in 2022), and invest in long-ter m inventions that change what’s possible.

Chip development is a good example. In last year’s letter, I mentioned the investment we were making in our

general-purpose CPU processors named Graviton. Graviton2-based compute instances deliver up to 40%

better price-performance than the comparable latest generation x86-based instances; and in 2022, we delivered

our Graviton3 chips, providing 25% better performance than the Graviton2 processors. Further, as machine

learning adoption has continued to accelerate, customers have yearned for lower-cost GPUs (the chips

most commonly used for machine learning). AWS started investing years ago in these specialized chips for

machine learning training and inference (inferences are the predictions or answers that a machine learning

model provides). We delivered our first training chip in 2022 (“Trainium”); and for the most common

machine learning models, Trainium-based instances are up to 140% faster than GPU-based instances at up

to 70% lower cost. Most companies are still in the training stage, but as they develop models that graduate to

large-scale production, they’ll find that most of the cost is in inference because models are trained

periodically whereas inferences are happening all the time as their associated application is being exercised.

We launched our f irst inference chips (“Inferentia”) in 2019, and they have saved companies like Amazon over

a hundred million dollars in capital expense already. Our Inferentia2 chip, which just launched, offers up

to four times higher throughput and ten times lower latency than our first Inferentia processor. With the

enormous upcoming growth in machine learning, customers will be able to get a lot more done with AWS’s

training and inference chips at a significantly lower cost. We’re not close to being done innovating here,

and this long-term investment should prove fruitful for both customers and AWS. AWS is still in the early

stages of its evolution, and has a chance for unusual growth in the next decade.

Similarly high potential, Amazon’s Advertising business is uniquely effective for brands, which is part of why it

continues to grow at a brisk clip. Akin to physical retailers’ advertising businesses selling shelf space, end-

caps, and placement in their circulars, our sponsored products and brands offerings have been an integral part

of the Amazon shopping experience for more than a decade. However, unlike physical retailers, Amazon

can tailor these sponsored products to be relevant to what customers are searching for given what we know

about shopping behaviors and our very deep investment in machine learning algorithms. This leads to

advertising that’s more useful for customers; and as a result, performs better for brands. This is part of why

our Advertising revenue has continued to grow rapidly (23% YoY in Q4 2022, 25% YoY overall for 2022

on a $31B revenue base), even as most large advertising-focused businesses’ growth have slowed over the last

several quarters.

We strive to be the best place for advertisers to build their brands. We have near and long-term opportunities

that will help us achieve that mission. We’re continuing to make large investments in machine learning to

keep honing our advertising selection algorithms. For the past couple of years, we’ve invested in building

comprehensive, flexible, and durable planning and measurement solutions, giving marketers greater insight

into advertising effectiveness. An example is Amazon Marketing Cloud (“AMC”). AMC is a “clean room”

(i.e. secure digital environment) in which advertisers can run custom audience and campaign analytics

across a range of first and third-party inputs, in a privacy-safe manner, to generate advertising and business

insights to inform their broader marketing and sales strategies. The Advertising and AWS teams have

collaborated to enable companies to store their data in AWS, operate securely in AMC with Amazon and

other third-party data sources, perform analytics in AWS, and have the option to activate advertising on

Amazon or third-party publishers through the Amazon Demand-Side Platform. Customers really like this

concerted capability. We also see future opportunity to thoughtfully integrate advertising into our video,

live sports, audio, and grocery products. We’ll continue to work hard to help brands uniquely engage with

the right audience, and grow this part of our business.

While it’s tempting in turbulent times only to focus on your existing large businesses, to build a sustainable,

long-lasting, growing company that helps customers across a large number of dimensions, you can’t stop

inventing and working on long-term customer experiences that can meaningfully impact customers and

your company.

When we look at new investment opportunities, we ask ourselves a few questions:

◦ If we were successful, could it be big and have a reasonable return on invested capital?

◦ Is the opportunity being well-served today?

◦ Do we have a differentiated approach?

◦ And, do we have competence in that area? And if not, can we acquire it quickly?

If we like the answers to those questions, then we’ll invest. This process has led to some expansions that

seem straightforward, and others that some folks might not have initially guessed.

The earliest example is when we chose to expand from just selling Books, to adding categories like Music,

Video, Electronics, and Toys. Back then (1998-1999), it wasn’t universally applauded, but in retrospect, it

seems fairly obvious.

The same could be said for our international Stores expansion. In 2022, our international consumer segment

drove $118B of revenue. In our larger, established international consumer businesses, we’re big enough to

be impacted by the slowing macroeconomic conditions; however, the growth in 2019-2021 on a large base was

remarkable—30% compound annual growth rate (“CAGR”) in the UK, 26% in Germany, and 21% in

Japan (excluding the impact of FX). Over the past several years, we’ve invested in new international

geographies, including India, Brazil, Mexico, Australia, various European countries, the Middle East, and

parts of Africa. These new countries take a certain amount of fixed investment to get started and to scale, but

we like the trajectory they’re on, and their growth patterns resemble what we’ve seen in North America

and our established international geographies. Emerging countries sometimes lack some of the infrastructure

and services that our business relies on (e.g. payment methods, transportation services, and internet/

telecom infrastructure). To solve these challenges, we continue to work with various partners to deliver

solutions for customers. Ultimately, we believe that this investment in serving a broader geographical footprint

will allow us to help more customers across the world, as well as build a larger free cash flow-generating

consumer business.

Beyond geographic expansion, we’ve been working to expand our customer offerings across some large,

unique product retail market segments. Grocery is an $800B market segment in the US alone, with the average

household shopping three to four times per week. Amazon has built a somewhat unusual, but significant

grocery business over nearly 20 years. Similar to how other mass merchants entered the grocery space in the

1980s, we began by adding products typically found in supermarket aisles that don’t require temperature

control such as paper products, canned and boxed food, candy and snacks, pet care, health and personal care,

and beauty. However, we offer more than three million items compared to a typical supermarket’s 30K for

the same categories. To date, we’ve also focused on larger pack sizes, given the current cost to serve online

delivery. While we’re pleased with the size and growth of our grocery business, we aspire to serve more of

our customers’ grocery needs than we do today. To do so, we need a broader physical store footprint given that

most of the grocery shopping still happens in physical venues. Whole Foods Market pioneered the natural

and organic specialty grocery store concept 40 years ago. Today, it’s a large and growing business that continues

to raise the bar for healthy and sustainable food. Over the past year, we’ve continued to invest in the

business while also making changes to drive better profitability. Whole Foods is on an encouraging path,

but to have a larger impact on physical grocery, we must find a mass grocery format that we believe is worth

expanding broadly. Amazon Fresh is the brand we’ve been experimenting with for a few years, and we’re

working hard to identify and build the right mass grocery format for Amazon scale. Grocery is a big growth

opportunity for Amazon.

Amazon Business is another example of an investment where our ecommerce and logistics capabilities

position us well to pursue this large market segment. Amazon Business allows businesses, municipalities,

and organizations to procure products like office supplies and other bulk items easily and at great savings.

While some areas of the economy have struggled over the past few years, Amazon Business has thrived. Why?

Because the team has translated what it means to deliver selection, value, and convenience into a business

procurement setting, constantly listening to and learning from customers, and innovating on their behalf.

Some people have never heard of Amazon Business, but, our business customers love it. Amazon Business

launched in 2015 and today drives roughly $35B in annualized gross sales. More than six million active

customers, including 96 of the global Fortune 100 companies, are enjoying Amazon Business’ one-stop

shopping, real-time analytics, and broad selection on hundreds of millions of business supplies. We believe

that we’ve only scratched the surface of what’s possible to date, and plan to keep building the features our

business customers tell us they need and want.

While many brands and merchants successfully sell their products on Amazon’s marketplace, there are also

a large number of brands and sellers who have launched their own direct-to-consumer websites. One of the

challenges for these merchants is driving conversion from views to purchases. We invented Buy with Prime

to help with this challenge. Buy with Prime allows third-party brands and sellers to offer their products on

their own websites to our large Amazon Prime membership, and offer those customers fast, free Prime shipping

and seamless checkout with their Amazon account. Buy with Prime provides merchants several additional

benefits, including Amazon handling the product storage, picking, packing, delivery, payment, and any

returns, all through Amazon Pay and Fulfillment by Amazon. Buy with Prime has recently been made

available to all US merchants; and so far, Buy with Prime has increased shopper conversion on third-party

shopping sites by 25% on average. Merchants are excited about converting more sales and fulfilling these

shipments more easily, Prime members love that they can use their Prime benefits on more destinations,

and Buy with Prime allows us to improve the shopping experience across more of the web.

Expanding internationally, pursuing large retail market segments that are still nascent for Amazon, and

using our unique assets to help merchants sell more effectively on their own websites are somewhat natural

extensions for us. There are also a few investments we’re making that are further from our core businesses, but

where we see unique opportunity. In 2003, AWS would have been a classic example. In 2023, Amazon

Healthcare and Kuiper are potential analogues.

Our initial efforts in Healthcare began with pharmacy, which felt less like a major departure from ecommerce.

For years, Amazon customers had asked us when we’d offer them an online pharmacy as their frustrations

mounted with current providers. Launched in 2020, Amazon Pharmacy is a full-service, online pharmacy that

offers transparent pricing, easy refills, and savings for Prime members. The business is growing quickly,

and continues to innovate. An example is Amazon Pharmacy’s recent launch of RxPass, which for a $5 per

month flat fee, enables Prime members to get as many of the eligible prescription medications as they need

for dozens of common conditions, like high blood pressure, acid reflux, and anxiety. However, our customers

have continued to express a strong desire for Amazon to provide a better alternative to the inefficient and

unsatisfying broader healthcare experience. We decided to start with primary care as it’s a prevalent first stop

in the patient journey. We evaluated and studied the existing landscape extensively, including some early

Amazon experiments like Amazon Care. During this process, we identified One Medical’s patient-focused

experience as an excellent foundation upon which to build our future business; and in July 2022, we announced

our acquisition of One Medical. There are several elements that customers love about One Medical. It has

a fantastic digital app that makes it easy for patients to discuss issues with a medical practitioner via chat or

video conference. If a physical visit is required, One Medical has offices in cities across the US where

patients can book same or next day appointments. One Medical has relationships with specialty physicians

in each of its cities and works closely with local hospital systems to make seeing specialists easy, so One

Medical members can quickly access these resources when needed. Going forward, we strongly believe

that One Medical and Amazon will continue to innovate together to change what primary care will look like

for customers.

Kuiper is another example of Amazon innovating for customers over the long term in an area where there’s

high customer need. Our vision for Kuiper is to create a low-Earth orbit satellite system to deliver high-quality

broadband internet service to places around the world that don’t currently have it. There are hundreds of

millions of households and businesses who don’t have reliable access to the internet. Imagine what they’ll be

able to do with reliable connectivity, from people taking online education courses, using financial services,

starting their own businesses, doing their shopping, enjoying entertainment, to businesses and governments

improving their coverage, efficiency, and operations. Kuiper will deliver not only accessibility, but

affordability. Our teams have developed low-cost antennas (i.e. customer terminals) that will lower the

barriers to access. We recently unveiled the new terminals that will communicate with the satellites passing

overhead, and we expect to be able to produce our standard residential version for less than $400 each. They’re

small: 11 inches square, 1 inch thick, and weigh less than 5 pounds without their mounting bracket, but

they deliver speeds up to 400 megabits per second. And they’re powered by Amazon-designed baseband chips.

We’re preparing to launch two prototype satellites to test the entire end-to-end communications network

this year, and plan to be in beta with commercial customers in 2024. The customer reaction to what we’ve

shared thus far about Kuiper has been very positive, and we believe Kuiper represents a very large potential

opportunity for Amazon. It also shares several similarities to AWS in that it’s capital intensive at the start,

but has a large prospective consumer, enterprise, and government customer base, significant revenue and

operating profit potential, and relatively few companies with the technical and inventive aptitude, as well as

the investment hypothesis to go after it.

One final investment area that I’ll mention, that’s core to setting Amazon up to invent in every area of our

business for many decades to come, and where we’re investing heavily is Large Language Models (“LLMs”)

and Generative AI. Machine learning has been a technology with high promise for several decades, but it’s

only been the last five to ten years that it’s started to be used more pervasively by companies. This shift was

driven by several factors, including access to higher volumes of compute capacity at lower prices than was ever

available. Amazon has been using machine learning extensively for 25 years, employing it in everything

from personalized ecommerce recommendations, to fulfillment center pick paths, to drones for Prime Air,

to Alexa, to the many machine learning services AWS offers (where AWS has the broadest machine learning

functionality and customer base of any cloud provider). More recently, a newer form of machine learning,

called Generative AI, has burst onto the scene and promises to significantly accelerate machine learning

adoption. Generative AI is based on very Large Language Models (trained on up to hundreds of billions

of parameters, and growing), across expansive datasets, and has radically general and broad recall and

learning capabilities. We have been working on our own LLMs for a while now, believe it will transform and

improve virtually every customer experience, and will continue to invest substantially in these models

across all of our consumer, seller, brand, and creator experiences. Additionally, as we’ve done for years in

AWS, we’re democratizing this technology so companies of all sizes can leverage Generative AI. AWS is

offering the most price-performant machine learning chips in Trainium and Inferentia so small and large

companies can afford to train and run their LLMs in production. We enable companies to choose from

various LLMs and build applications with all of the AWS security, privacy and other features that customers

are accustomed to using. And, we’re delivering applications like AWS’s CodeWhisperer, which revolutionizes

developer productivity by generating code suggestions in real time. I could write an entire letter on LLMs

and Generative AI as I think they will be that transformative, but I’ll leave that for a future letter. Let’s just

say that LLMs and Generative AI are going to be a big deal for customers, our shareholders, and Amazon.

So, in closing, I’m optimistic that we’ll emerge from this challenging macroeconomic time in a stronger

position than when we entered it. There are several reasons for it and I’ve mentioned many of them above.

But, there are two relatively simple statistics that underline our immense future opportunity. While we have a

consumer business that’s $434B in 2022, the vast majority of total market segment share in global retail

still resides in physical stores (roughly 80%). And, it’s a similar story for Global IT spending, where we have

AWS revenue of $80B in 2022, with about 90% of Global IT spending still on-premises and yet to migrate

to the cloud. As these equations steadily flip—as we’re already seeing happen—we believe our leading customer

experiences, relentless invention, customer focus, and hard work will result in significant growth in the

coming years. And, of course, this doesn’t include the other businesses and experiences we’re pursuing at

Amazon, all of which are still in their early days.

I strongly believe that our best days are in front of us, and I look forward to working with my teammates at

Amazon 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, 2022

☐

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. ☒

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, 2022

$ 944,744,113,598

Number of shares of common stock outstanding as of January 25, 2023

10,247,259,757

____________________________________

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 2023, 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, 2022

INDEX

Page

PART I

Item 1. Business 3

Item 1A. Risk Factors 6

Item 1B. Unresolved Staff Comments 16

Item 2. Properties 17

Item 3. Legal Proceedings 17

Item 4. Mine Safety Disclosures 17

PART II

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

Equity Securities

Item 6. Reserved 18

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 31

Item 8. Financial Statements and Supplementary Data 33

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 69

Item 9A. Controls and Procedures 69

Item 9B. Other Information 71

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 71

PART III

Item 10. Directors, Executive Officers, and Corporate Governance 71

Item 11. Executive Compensation 71

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters 71

Item 13. Certain Relationships and Related Transactions, and Director Independence 71

Item 14. Principal Accountant Fees and Services 71

PART IV

Item 15. Exhibits, Financial Statement Schedules 72

Item 16. Form 10-K Summary 74

Signatures 75

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 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 through

us. 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, 2022, we

employed approximately 1,541,000 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 (funded education for hourly employees) and the Amazon

Technical Academy (software development engineer training). Over 100,000 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 25, 2023:

Information About Our Executive Officers

Name Age Position

Jeffrey P. Bezos

59 Executive Chair

Andrew R. Jassy

55 President and Chief Executive Officer

Douglas J. Herrington

56 CEO Worldwide Amazon Stores

Brian T. Olsavsky

59 Senior Vice President and Chief Financial Officer

Shelley L. Reynolds

58 Vice President, Worldwide Controller, and Principal Accounting Officer

Adam N. Selipsky

56 CEO Amazon Web Services

David A. Zapolsky

59 Senior Vice President, General Counsel, and Secretary

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, and Senior Vice President, Consumables from May 2014

to December 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, General Counsel, and Secretary since May 2014,

Vice President, General Counsel, and Secretary 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

59 Executive Chair

Andrew R. Jassy

55 President and Chief Executive Officer

Keith B. Alexander

71 CEO, President, and Chair of IronNet, Inc.

Edith W. Cooper 61 Former Executive Vice President, Goldman Sachs Group, Inc.

Jamie S. Gorelick

72 Partner, Wilmer Cutler Pickering Hale and Dorr LLP

Daniel P. Huttenlocher

64 Dean, MIT Schwarzman College of Computing

Judith A. McGrath

70 Former Chair and CEO, MTV Networks

Indra K. Nooyi

67 Former Chief Executive Officer, PepsiCo, Inc.

Jonathan J. Rubinstein

66 Former co-CEO, Bridgewater Associates, LP

Patricia Q. Stonesifer

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

Wendell P. Weeks

63 Chief Executive Officer, 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—Overview,” 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, 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, 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); 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 indirect minority interests in entities that are

third-party sellers 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.

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.

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 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);

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

• increases in the prices of transportation (including fuel), energy products, 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; and

• 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 and armed hostilities),

labor or trade disputes (including restrictive governmental actions impacting us and our third-party sellers in China or

other foreign countries), and similar events.

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

Failures to adequately predict customer demand 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 or staffing in our fulfillment network increases our net shipping cost by

requiring long-zone or partial shipments. 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 currently is being affected by regional labor

market and global supply chain 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 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, sensitive, proprietary, and

business and personal information, failure to prevent or mitigate data loss, theft, misuse, 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 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. 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, 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 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 violate competition rules, including aspects of Amazon’s U.S. and European marketplace for sellers, particularly

with respect to use of data, fulfillment services, and featured offers, and legislative and regulatory initiatives in Europe and

elsewhere allow authorities to restrict or prohibit certain operations or actions pre-emptively without the need to assess specific

competitive effects. 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, 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,

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. 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. 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 currency 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, in February 2023, the Indian Tax Authority determined that tax applies to cloud

services fees paid to the U.S. We are contesting this determination; 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 2. Properties

As of December 31, 2022, we operated the following facilities (in thousands):

Description of Use

Leased Square

Footage (1)

Owned Square

Footage Location

Office space

30,611 6,792

North America

Office space 23,956 1,802 International

Physical stores (2)

22,881 662

North America

Physical stores (2)

291 —

International

Fulfillment, data centers, and other

391,598 22,058

North America

Fulfillment, data centers, and other

148,146 12,613

International

Total 617,483 43,927

___________________

(1) For leased properties, represents the total leased space excluding sub-leased space.

(2) This includes 611 North America and 32 International stores as of December 31, 2022.

Segment

Leased Square

Footage (1)

Owned Square

Footage (1)

North America

403,984 13,595

International 140,898 6,292

AWS

18,034 15,446

Total 562,916 35,333

___________________

(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 25, 2023, there were 10,845 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 and global supply chain constraints, world events, the rate of growth of the Internet, online commerce, and cloud

services, 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 content will increase over time as we add computer scientists, designers, software

and hardware engineers, and merchandising employees. Our technology and content 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 content, including AWS, and expansion of new

and existing product categories and service offerings, as well as in technology 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 10.5 billion

and 10.6 billion as of December 31, 2021 and 2022.

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 currency 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, 2021 includes a discussion and analysis of our

financial condition and results of operations for the year ended December 31, 2020 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, 2022, we would have recorded an additional cost of sales of approximately $390 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 currency 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,

2021 2022

Cash provided by (used in):

Operating activities

$ 46,327 $ 46,752

Investing activities

(58,154) (37,601)

Financing activities

6,291 9,718

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 $96.0 billion and $70.0 billion as of December 31, 2021 and 2022.

Amounts held in foreign currencies were $22.7 billion and $18.3 billion as of December 31, 2021 and 2022. Our foreign

currency balances include British Pounds, Canadian Dollars, Euros, and Japanese Yen.

Cash provided by (used in) operating activities was $46.3 billion and $46.8 billion in 2021 and 2022. 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 2022, compared to the prior year, was primarily

due to the increase in net income, excluding non-cash expenses, partially offset by 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 $(58.2) billion and $(37.6) billion in 2021 and 2022, with the

variability caused primarily by purchases, sales, and maturities of marketable securities. Cash capital expenditures were $55.4

billion, and $58.3 billion in 2021 and 2022, which primarily reflect investments in technology infrastructure (the majority of

which is to support AWS business growth) and in additional capacity to support our fulfillment network. We expect to continue

these investments over time, with increased spending on technology infrastructure. We made cash payments, net of acquired

cash, related to acquisition and other investment activity of $2.0 billion and $8.3 billion in 2021 and 2022. We funded the

acquisition of MGM Holdings Inc. with cash on hand. We expect to fund the acquisitions of 1Life Healthcare, Inc. (One

Medical) and iRobot Corporation with cash on hand.

Cash provided by (used in) financing activities was $6.3 billion and $9.7 billion in 2021 and 2022. Cash inflows from

financing activities resulted from proceeds from short-term debt, and other and long-term-debt of $27.0 billion and $62.7 billion

in 2021 and 2022. Cash outflows from financing activities resulted from repurchases of common stock, payments of short-term

debt, and other, long-term debt, finance leases, and financing obligations of $20.7 billion and $53.0 billion in 2021 and 2022.

Property and equipment acquired under finance leases was $7.1 billion and $675 million in 2021 and 2022.

We had no borrowings outstanding under the two unsecured revolving credit facilities, $6.8 billion of borrowings

outstanding under the commercial paper programs, and $1.0 billion of borrowings outstanding under the secured revolving

credit facility as of December 31, 2022. See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 6 —

Debt” for additional information.

As of December 31, 2022, 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 the

election of full expensing of qualified property, primarily equipment, through 2022. Our federal tax provision included a partial

election for 2020 and 2021, and a full election for 2022. 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 taxes

paid (net of refunds) were $3.7 billion and $6.0 billion for 2021 and 2022.

As of December 31, 2021 and 2022, restricted cash, cash equivalents, and marketable securities were $260 million and

$365 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 rising interest rates and significant capital market volatility, which, along with 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 volatility, the prolonged

COVID-19 pandemic, global supply chain constraints, and global economic and geopolitical developments, have direct and

indirect impacts on our results of operations that are difficult to isolate and quantify. These factors contributed to increases in

our operating costs during 2022, particularly across our North America and International segments, primarily due to a return to

more normal, seasonal demand volumes in relation to our fulfillment network fixed costs, increased transportation and utility

costs, and increased wage rates. In addition, rising fuel, utility, and food costs, rising interest rates, and recessionary fears 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 2023.

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 content subscriptions. Net sales information is as follows (in millions):

Year Ended December 31,

2021 2022

Net Sales:

North America

$ 279,833 $ 315,880

International

127,787 118,007

AWS

62,202 80,096

Consolidated

$ 469,822 $ 513,983

Year-over-year Percentage Growth (Decline):

North America

18 % 13 %

International

22 (8)

AWS

37 29

Consolidated

22 9

Year-over-year Percentage Growth, excluding the effect of foreign exchange rates:

North America

18 % 13 %

International

20 4

AWS

37 29

Consolidated

21 13

Net sales mix:

North America

60 % 61 %

International

27 23

AWS

13 16

Consolidated

100 % 100 %

Sales increased 9% in 2022, compared to the prior year. Changes in foreign currency exchange rates reduced net sales by

$15.5 billion in 2022. For a discussion of the effect of foreign exchange rates on sales growth, see “Effect of Foreign Exchange

Rates” below.

North America sales increased 13% in 2022, compared to the prior year. The sales growth primarily reflects increased

unit sales, including sales by third-party sellers, advertising sales, and subscription services. Increased unit sales were driven

largely by our continued focus on price, selection, and convenience for our customers, including from our shipping offers.

International sales decreased 8% in 2022, compared to the prior year, primarily due to the impact of changes in foreign

currency exchange rates, partially offset by increased unit sales, including sales by third-party sellers, advertising sales, and

subscription services. Increased unit sales were driven largely by our continued focus on price, selection, and convenience for

our customers, including from our shipping offers. Changes in foreign currency exchange rates reduced International net sales

by $15.0 billion in 2022.

AWS sales increased 29% in 2022, 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,

2021 2022

Operating Income (Loss)

North America

$ 7,271 $ (2,847)

International

(924) (7,746)

AWS

18,532 22,841

Consolidated

$ 24,879 $ 12,248

Operating income was $24.9 billion and $12.2 billion for 2021 and 2022. 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 loss in 2022, as compared to the operating income in the prior year, is primarily due to

increased fulfillment and shipping costs, due in part to increases in investments in our fulfillment network, transportation costs,

and wage rates and incentives, increased technology and content costs, and growth in certain operating expenses, partially offset

by increased unit sales, including sales by third-party sellers, and advertising sales. Changes in foreign currency exchange rates

positively impacted operating loss by $274 million in 2022.

The increase in International operating loss in absolute dollars in 2022, compared to the prior year, is primarily due to

increased fulfillment and shipping costs, due in part to increases in investments in our fulfillment network, transportation costs,

and wage rates and incentives, increased technology and content costs, and growth in certain operating expenses, partially offset

by increased advertising sales and increased unit sales, including sales by third-party sellers. Changes in foreign currency

exchange rates negatively impacted operating loss by $857 million in 2022.

The increase in AWS operating income in absolute dollars in 2022, compared to the prior year, is primarily due to

increased sales and cost structure productivity, including a reduction in depreciation and amortization expense from our change

in the estimated useful lives of our servers and networking equipment, partially offset by increased payroll and related expenses

and spending on technology infrastructure, all of which were primarily driven by additional investments to support AWS

business growth. Changes in foreign currency exchange rates positively impacted operating income by $1.4 billion in 2022.

Operating Expenses

Information about operating expenses is as follows (in millions):

Year Ended December 31,

2021 2022

Operating expenses:

Cost of sales

$ 272,344 $ 288,831

Fulfillment

75,111 84,299

Technology and content

56,052 73,213

Sales and marketing

32,551 42,238

General and administrative

8,823 11,891

Other operating expense (income), net

62 1,263

Total operating expenses

$ 444,943 $ 501,735

Year-over-year Percentage Growth (Decline):

Cost of sales

17 % 6 %

Fulfillment

28 12

Technology and content

31 31

Sales and marketing

48 30

General and administrative

32 35

Other operating expense (income), net

(183) 1,936

Percent of Net Sales:

Cost of sales

58.0 % 56.2 %

Fulfillment

16.0 16.4

Technology and content

11.9 14.2

Sales and marketing 6.9 8.2

General and administrative

1.9 2.3

Other operating expense (income), net

0.0 0.2

Cost of Sales

Cost of sales primarily consists of the purchase price of consumer products, inbound and outbound shipping costs,

including costs related to sortation and delivery centers and where we are the transportation service provider, and digital media

content costs where we record revenue gross, including video and music.

The increase in cost of sales in absolute dollars in 2022, compared to the prior year, is primarily due to increased shipping

and product costs resulting from increased sales and increases in investments in our fulfillment network, transportation costs,

and wage rates and incentives. Changes in foreign exchange rates reduced cost of sales by $10.8 billion in 2022.

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. Shipping costs, which include sortation and delivery centers and transportation costs, were

$76.7 billion and $83.5 billion in 2021 and 2022. 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, including faster

delivery, 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 content” 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

content.” 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 2022, compared to the prior year, is primarily due to increased

investments in our fulfillment network and variable costs corresponding with increased product and service sales volume and

inventory levels, and increased wage rates and incentives. Changes in foreign exchange rates reduced fulfillment costs by $2.5

billion in 2022.

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 Content

Technology and content 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 content 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 content 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 content to increase over time as we continue to add employees and technology infrastructure. These costs are

allocated to segments based on usage. The increase in technology and content costs in absolute dollars in 2022, compared to the

prior year, is primarily due to 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, and an increase in spending on

technology infrastructure, partially offset by a reduction in depreciation and amortization expense from our change in the

estimated useful lives of our servers and networking equipment. See Item 8 of Part II, “Financial Statements and Supplementary

Data — Note 1 — Description of Business, Accounting Policies, and Supplemental Disclosures — Use of Estimates” for

additional information on the change in estimated useful lives of our servers and networking equipment.

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 2022, compared to the prior year, is primarily due to

increased payroll and related expenses for personnel engaged in marketing and selling activities and higher marketing spend.

While costs associated with Amazon Prime membership benefits and other shipping offers are not included in sales and

marketing expense, we view these offers as effective worldwide marketing tools, and intend to continue offering them

indefinitely.

General and Administrative

The increase in general and administrative costs in absolute dollars in 2022, compared to the prior year, is primarily due

to increases in payroll and related expenses and professional fees.

Other Operating Expense (Income), Net

Other operating expense (income), net was $62 million and $1.3 billion during 2021 and 2022, and was primarily related

to the amortization of intangible assets and, for 2022, $1.1 billion of impairments of property and equipment and operating

leases.

Interest Income and Expense

Our interest income was $448 million and $989 million during 2021 and 2022, 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

fixed income 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 $1.8 billion and $2.4 billion in 2021 and 2022 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 $67.7 billion and $73.0 billion as of December 31, 2021 and 2022. Our long-term

debt was $48.7 billion and $67.1 billion as of December 31, 2021 and 2022. 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 $14.6 billion and $(16.8) billion during 2021 and 2022. 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 2021 and 2022 is a marketable equity securities valuation gain (loss) of

$11.8 billion and $(12.7) billion 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 $4.8 billion and $(3.2) billion in 2021 and 2022. 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 2021 and 2022 (in millions):

Year Ended December 31,

2021 2022

Net cash provided by (used in) operating activities

$ 46,327 $ 46,752

Purchases of property and equipment, net of proceeds from sales and incentives

(55,396) (58,321)

Free cash flow

$ (9,069) $ (11,569)

Net cash provided by (used in) investing activities

$ (58,154) $ (37,601)

Net cash provided by (used in) financing activities

$ 6,291 $ 9,718

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 2021 and 2022 (in millions):

Year Ended December 31,

2021 2022

Net cash provided by (used in) operating activities

$ 46,327 $ 46,752

Purchases of property and equipment, net of proceeds from sales and incentives

(55,396) (58,321)

Free cash flow

(9,069) (11,569)

Principal repayments of finance leases

(11,163) (7,941)

Principal repayments of financing obligations

(162) (248)

Free cash flow less principal repayments of finance leases and financing obligations

$ (20,394) $ (19,758)

Net cash provided by (used in) investing activities

$ (58,154) $ (37,601)

Net cash provided by (used in) financing activities

$ 6,291 $ 9,718

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 2021 and 2022 (in millions):

Year Ended December 31,

2021 2022

Net cash provided by (used in) operating activities

$ 46,327 $ 46,752

Purchases of property and equipment, net of proceeds from sales and incentives

(55,396) (58,321)

Free cash flow

(9,069) (11,569)

Equipment acquired under finance leases (1)

(4,422) (299)

Principal repayments of all other finance leases (2)

(687) (670)

Principal repayments of financing obligations

(162) (248)

Free cash flow less equipment finance leases and principal repayments of all other finance

leases and financing obligations

$ (14,340) $ (12,786)

Net cash provided by (used in) investing activities

$ (58,154) $ (37,601)

Net cash provided by (used in) financing activities

$ 6,291 $ 9,718

___________________

(1) For the year ended December 31, 2021 and 2022, this amount relates to equipment included in “Property and equipment

acquired under finance leases, net of remeasurements and modifications” of $7,061 million and $675 million.

(2) For the year ended December 31, 2021 and 2022, this amount relates to property included in “Principal repayments of

finance leases” of $11,163 million and $7,941 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, 2021 Year Ended December 31, 2022

Reported

Exchange

Rate

Effect (1)

At Prior

Year

Rates (2)

Reported

Exchange

Rate

Effect (1)

At Prior

Year

Rates (2)

Net sales

$ 469,822 $ (3,804)

$ 466,018

$ 513,983 $ 15,495 $ 529,478

Operating expenses

444,943 (3,653) 441,290 501,735 16,356 518,091

Operating income

24,879 (151) 24,728 12,248 (861) 11,387

___________________

(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 2, 2023, 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 2, 2023, and are subject to substantial

uncertainty. Our results are inherently unpredictable and may be materially affected by many factors, such as uncertainty

regarding the impacts of the COVID-19 pandemic, 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 and global supply chain constraints, world events, the rate of growth of the Internet, online commerce,

and cloud services, as well as those outlined in Item 1A of Part I, “Risk Factors.”

First Quarter 2023 Guidance

• Net sales are expected to be between $121.0 billion and $126.0 billion, or to grow between 4% and 8% compared

with first quarter 2022. This guidance anticipates an unfavorable impact of approximately 210 basis points from

foreign exchange rates.

• Operating income is expected to be between $0 and $4.0 billion, compared with $3.7 billion in first quarter 2022.

• 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

fixed income securities. Fixed income securities 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 fixed income securities,

including principal cash flows by expected maturity and the related weighted-average interest rates as of December 31, 2022 (in

millions, except percentages):

2023 2024 2025 2026 2027 Thereafter Total

Estimated

Fair Value

as of

December

31, 2022

Money market funds

$ 27,899 $ — $ — $ — $ — $ — $ 27,899 $ 27,899