What changed in this filing

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Item 1. Financial Statements

2022-04-29 compared with 2021-10-29 · 158 added, 132 removed, 412 unchanged (41% of the section changed)

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30, Twelve Months Ended

September 30,

March 31, Twelve Months Ended

2021 2022 2021 2022

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OPERATING ACTIVITIES:

Net income 6,331 3,156 14,109 19,041 17,377 26,263

Adjustments to reconcile net income to net cash from operating activities:

Net income (loss) 8,107 ( 3,844 ) 26,903 21,413

Adjustments to reconcile net income (loss) to net cash from operating activities:

Depreciation and amortization of property and equipment and capitalized content costs, operating lease assets, and other 7,508 8,978 27,397 35,766

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FINANCING ACTIVITIES:

Common stock repurchased — ( 2,666 ) — ( 2,666 )

Proceeds from short-term debt, and other 1,926 13,743 8,105 19,773

13 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2021 2020 2021

Net product sales $ 57,491 $ 56,455

5 unchanged sentences

Technology and content 12,488 14,842

Marketing 5,434 8,010 14,605 21,741

Sales and marketing 6,207 8,320

General and administrative 1,987 2,594

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Total non-operating income (expense) 1,403 ( 8,934 )

Income before income taxes 6,809 4,315 16,413 23,217

Provision for income taxes ( 569 ) ( 1,155 ) ( 2,298 ) ( 4,179 )

Income (loss) before income taxes 10,268 ( 5,265 )

Benefit (provision) for income taxes ( 2,156 ) 1,422

Equity-method investment activity, net of tax ( 5 ) ( 1 )

Net income $ 6,331 $ 3,156 $ 14,109 $ 19,041

Net income (loss) $ 8,107 $ ( 3,844 )

Basic earnings per share $ 16.09 $ ( 7.56 )

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AMAZON.COM, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2021 2020 2021

Net income $ 6,331 $ 3,156 $ 14,109 $ 19,041

Net income (loss) $ 8,107 $ ( 3,844 )

Other comprehensive income (loss):

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Reclassification adjustment for losses (gains) included in “Other income (expense), net,” net of tax of $ 4 and $ 0

( 17 ) ( 8 ) ( 22 ) ( 34 )

Net unrealized gains (losses) on available-for-sale debt securities ( 112 ) ( 656 )

Total other comprehensive income (loss) ( 486 ) ( 989 )

Comprehensive income $ 6,757 $ 2,606 $ 14,066 $ 18,146

Comprehensive income (loss) $ 7,621 $ ( 4,833 )

See accompanying notes to consolidated financial statements.

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(in millions, except per share data)

December 31, 2020 September 30, 2021

December 31, 2021 March 31, 2022

Current assets:

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Actual results could differ materially from these estimates.

We review the useful lives of equipment on an ongoing basis, and effective January 1, 2022 we changed our estimate of the useful lives for our servers from four to five years and for our networking equipment from five to six years .

The longer useful lives are due to continuous improvements in our hardware, software, and data center designs.

The effect of this change in estimate for Q1 2022, based on servers and networking equipment that were included in “Property and equipment, net” as of December 31, 2021 and those acquired during the quarter ended March 31, 2022, was a reduction in depreciation and amortization expense of $ 973 million and a benefit to net loss of $ 769 million, or $ 1.51 per basic share and $ 1.51 per diluted share.

Supplemental Cash Flow Information

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Three Months Ended

September 30, Nine Months Ended

September 30, Twelve Months Ended

September 30,

March 31, Twelve Months Ended

2021 2022 2021 2022

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Property and equipment acquired under finance leases 2,067 166 11,489 5,160

Property and equipment acquired under build-to-suit arrangements 366 1,721 1,228 3,702 1,480 4,742

Property and equipment acquired under build-to-suit lease arrangements 887 1,332 2,775 6,061

Earnings Per Share

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2021 2020 2021

Shares used in computation of basic earnings per share 504 509

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2021 2020 2021

Marketable equity securities valuation gains (losses) $ ( 76 ) $ ( 8,245 )

4 unchanged sentences

Total other income (expense), net 1,697 ( 8,570 )

Included in other income (expense), net for the three months ended March 31, 2022 is a marketable equity securities valuation loss of $ 7.6 billion from our equity investment in Rivian Automotive, Inc.

Our investment in Rivian’s preferred stock was accounted for at cost, with adjustments for observable changes in prices or impairments, prior to Rivian’s initial public offering in November 2021, which resulted in the conversion of our preferred stock to Class A common stock.

As of March 31, 2022, we held 158 million shares of Rivian’s Class A common stock, representing an approximate 18 % ownership interest, and an approximate 16 % voting interest.

We determined that we have the ability to exercise significant influence over Rivian through our equity investment, our commercial arrangement for the purchase of electric vehicles, and one of our employees serving on Rivian’s board of directors.

We elected the fair value option to account for our equity investment in Rivian, which is included in “Marketable securities” on our consolidated balance sheets.

Required summarized financial information of Rivian as disclosed in its most recent SEC filings is as follows (in millions):

December 31, 2020 Year Ended

December 31, 2021

Revenues $ — $ 55

Gross profit — ( 465 )

Loss from operations ( 1,021 ) ( 4,220 )

Net loss ( 1,018 ) ( 4,688 )

Inventories, consisting of products available for sale, are primarily accounted for using the first-in, first-out method, and are valued at the lower of cost and net realizable value.

This valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable values of each disposition category.

The inventory valuation allowance, representing a write-down of inventory, was $ 2.3 billion and $ 2.4 billion as of December 31, 2020 and September 30, 2021.

The inventory valuation allowance, representing a write-down of inventory, was $ 2.6 billion and $ 2.5 billion as of December 31, 2021 and March 31, 2022.

Accounts Receivable, Net and Other

Included in “Accounts receivable, net and other” on our consolidated balance sheets are amounts primarily related to customers, vendors, and sellers.

As of December 31, 2020 and September 30, 2021, customer receivables, net, were $ 14.8 billion and $ 17.7 billion, vendor receivables, net, were $ 4.8 billion and $ 4.0 billion, and seller receivables, net, were $ 381 million and $ 858 million.

As of December 31, 2021 and March 31, 2022, customer receivables, net, were $ 20.2 billion and $ 20.9 billion, vendor receivables, net, were $ 5.3 billion and $ 4.2 billion, and seller receivables, net, were $ 1.0 billion and $ 1.1 billion.

Seller receivables are amounts due from sellers related to our seller lending program, which provides funding to sellers primarily to procure inventory.

We estimate losses on receivables based on expected losses, including our historical experience of actual losses.

The allowance for doubtful accounts was $ 1.1 billion and $ 951 million as of December 31, 2020 and September 30, 2021.

The allowance for doubtful accounts was $ 1.1 billion as of December 31, 2021 and March 31, 2022.

Digital Video and Music Content

The total capitalized costs of video, which is primarily released content, and music as of December 31, 2020 and September 30, 2021 were $ 6.8 billion and $ 10.1 billion.

Total video and music expense was $ 2.8 billion and $ 3.3 billion in Q3 2020 and Q3 2021, and $ 8.0 billion and $ 9.4 billion for the nine months ended September 30, 2020 and 2021.

The total capitalized costs of video, which is primarily released content, and music as of December 31, 2021 and March 31, 2022 were $ 10.7 billion and $ 14.5 billion.

Total video and music expense was $ 3.0 billion and $ 3.5 billion in Q1 2021 and Q1 2022.

Unearned Revenue

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Unearned revenue primarily relates to prepayments of AWS services and Amazon Prime memberships.

Our total unearned revenue as of December 31, 2020 was $ 11.6 billion, of which $ 8.4 billion was recognized as revenue during the nine months ended September 30, 2021.

Included in “Other long-term liabilities” on our consolidated balance sheets was $ 1.9 billion and $ 2.0 billion of unearned revenue as of December 31, 2020 and September 30, 2021.

Our total unearned revenue as of December 31, 2021 was $ 14.0 billion, of which $ 5.1 billion was recognized as revenue during the three months ended March 31, 2022.

Included in “Other long-term liabilities” on our consolidated balance sheets was $ 2.2 billion and $ 2.5 billion of unearned revenue as of December 31, 2021 and March 31, 2022.

Additionally, we have performance obligations, primarily related to AWS, associated with commitments in customer contracts for future services that have not yet been recognized in our consolidated financial statements.

For contracts with original terms that exceed one year, those commitments not yet recognized were $ 66.3 billion as of September 30, 2021.

For contracts with original terms that exceed one year, those commitments not yet recognized were $ 88.9 billion as of March 31, 2022.

The weighted-average remaining life of our long-term contracts is 3.8 years.

However, the amount and timing of revenue recognition is largely driven by customer usage, which can extend beyond the original contractual term.

Acquisition Activity

On March 17, 2022, we acquired MGM Holdings Inc.

(“MGM”), for cash consideration of approximately $ 6.1 billion, net of cash acquired, to provide more digital media content options for customers.

We also assumed $ 2.5 billion of debt, which we repaid immediately after closing.

The acquired assets primarily consist of $ 3.4 billion of video content and $ 4.9 billion of goodwill, the majority of which is allocated to our North America segment.

Due to the limited amount of time since the MGM acquisition, the valuation of certain assets and liabilities is preliminary and subject to change.

Pro forma results of operations have not been presented because the effects of the MGM acquisition were not material to our consolidated results of operations.

Acquisition-related costs were expensed as incurred and were not significant.

Note 2 — FINANCIAL INSTRUMENTS

Cash, Cash Equivalents, Restricted Cash, and Marketable Securities

As of December 31, 2020 and September 30, 2021, our cash, cash equivalents, restricted cash, and marketable securities primarily consisted of cash, AAA-rated money market funds, U.S.

As of December 31, 2021 and March 31, 2022, our cash, cash equivalents, restricted cash, and marketable securities primarily consisted of cash, AAA-rated money market funds, U.S.

and foreign government and agency securities, other investment grade securities, and marketable equity securities.

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We measure the fair value of money market funds and certain marketable equity securities based on quoted prices in active markets for identical assets or liabilities.

Other marketable securities were valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data.

We did not hold significant amounts of marketable securities categorized as Level 3 assets as of December 31, 2020 and September 30, 2021.

or corroborated by observable market data.

We did not hold significant amounts of marketable securities categorized as Level 3 assets as of December 31, 2021 and March 31, 2022.

The following table summarizes, by major security type, our cash, cash equivalents, restricted cash, and marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in millions):

December 31, 2020 September 30, 2021

December 31, 2021 March 31, 2022

Fair Value Cost or

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___________________

(1) The related unrealized gain (loss) recorded in “Other income (expense), net” was $ 150 million and $( 116 ) million in Q3 2020 and Q3 2021, and $ 351 million and $ 6 million for the nine months ended September 30, 2020 and 2021.

(2) We are required to pledge or otherwise restrict a portion of our cash, cash equivalents, and marketable securities primarily as collateral for real estate, amounts due to third-party sellers in certain jurisdictions, debt, and standby and trade letters of credit.

We classify cash, cash equivalents, and marketable securities with use restrictions of less than twelve months as “Accounts receivable, net and other” and of twelve months or longer as non-current “Other assets” on our consolidated balance sheets.

(1) The related unrealized gain (loss) recorded in “Other income (expense), net” was $ 3 million and $( 8.1 ) billion in Q1 2021 and Q1 2022.

(2) We are required to pledge or otherwise restrict a portion of our cash, cash equivalents, and marketable fixed income securities primarily as collateral for real estate, amounts due to third-party sellers in certain jurisdictions, debt, and standby and trade letters of credit.

We classify cash, cash equivalents, and marketable fixed income securities with use restrictions of less than twelve months as “Accounts receivable, net and other” and of twelve months or longer as non-current “Other assets” on our consolidated balance sheets.

See “Note 4 — Commitments and Contingencies.”

The following table summarizes the remaining contractual maturities of our cash equivalents and marketable fixed income securities as of September 30, 2021 (in millions):

(3) Our equity investment in Rivian had a fair value of $ 15.6 billion and $ 8.0 billion as of December 31, 2021 and March 31, 2022, respectively.

The investment was subject to regulatory sales restrictions resulting in a discount for lack of marketability of approximately $ 800 million as of December 31, 2021, which expired in Q1 2022.

In addition, we are subject to contractual sales restrictions that expire in May 2022.

The following table summarizes the remaining contractual maturities of our cash equivalents and marketable fixed income securities as of March 31, 2022 (in millions):

Cost Estimated

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We hold equity warrants giving us the right to acquire stock of other companies.

As of December 31, 2020 and September 30, 2021, these warrants had a fair value of $ 3.0 billion and $ 3.4 billion, and are recorded within “Other assets” on our consolidated balance sheets with gains and losses recognized in “Other income (expense), net” on our consolidated statements of operations.

As of December 31, 2021 and March 31, 2022, these warrants had a fair value of $ 3.4 billion and $ 3.3 billion, and are recorded within “Other assets” on our consolidated balance sheets with gains and losses recognized in “Other income (expense), net” on our consolidated statements of operations.

These warrants are primarily classified as Level 2 assets.

As of December 31, 2020 and September 30, 2021, equity investments not accounted for under the equity-method and without readily determinable fair values, including preferred stock of Rivian Automotive, Inc.

representing an approximately 20 % ownership interest, had a carrying value of $ 2.7 billion and $ 3.8 billion, and are recorded within “Other assets” on our consolidated balance sheets with adjustments recognized in “Other income (expense), net” on our consolidated statements of operations.

As of December 31, 2021 and March 31, 2022, equity investments not accounted for under the equity-method and without readily determinable fair values had a carrying value of $ 603 million and $ 657 million, and are recorded within “Other assets” on our consolidated balance sheets with adjustments recognized in “Other income (expense), net” on our consolidated statements of operations.

Consolidated Statements of Cash Flows Reconciliation

The following table provides a reconciliation of the amount of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets to the total of the same such amounts shown in the consolidated statements of cash flows (in millions):

December 31, 2020 September 30, 2021

December 31, 2021 March 31, 2022

Cash and cash equivalents $ 36,220 $ 36,393

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We have entered into non-cancellable operating and finance leases for fulfillment, delivery, office, physical store, data center, and sortation facilities as well as server and networking equipment, vehicles, and aircraft.

Gross assets acquired under finance leases, inclusive of those where title transfers at the end of the lease, are recorded in “ Property and equipment, net ” and were $ 68.1 billion and $ 71.3 billion as of December 31, 2020 and September 30, 2021.

Accumulated amortization associated with finance leases was $ 36.5 billion and $ 41.7 billion as of December 31, 2020 and September 30, 2021.

Gross assets acquired under finance leases, inclusive of those where title transfers at the end of the lease, are recorded in “ Property and equipment, net ” and were $ 72.2 billion and $ 71.0 billion as of December 31, 2021 and March 31, 2022.

Accumulated amortization associated with finance leases was $ 43.4 billion and $ 43.8 billion as of December 31, 2021 and March 31, 2022.

Lease cost recognized in our consolidated statements of operations is summarized as follows (in millions):

Three Months Ended September 30, Nine Months Ended September 30,

2020 2021 2020 2021

Three Months Ended March 31,

Operating lease cost $ 1,556 $ 2,103

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Other information about lease amounts recognized in our consolidated financial statements is as follows:

December 31, 2020 September 30, 2021

December 31, 2021 March 31, 2022

Weighted-average remaining lease term – operating leases 11.3 years 11.1 years

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Total long-term lease liabilities $ 51,981 $ 15,670 $ 67,651

September 30, 2021

March 31, 2022

Operating Leases Finance Leases Total

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Note 4 — COMMITMENTS AND CONTINGENCIES

The following summarizes our principal contractual commitments, excluding open orders for purchases that support normal operations and are generally cancellable, as of September 30, 2021 (in millions):

Three Months Ended December 31, Year Ended December 31,

The following summarizes our principal contractual commitments, excluding open orders for purchases that support normal operations and are generally cancellable, as of March 31, 2022 (in millions):

Nine Months Ended December 31, Year Ended December 31,

2022 2023 2024 2025 2026 Thereafter Total

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(1) Includes non-cancellable financing obligations for fulfillment, sortation, and data center facilities.

Excluding interest, current financing obligations of $ 111 million and $ 185 million are recorded within “Accrued expenses and other” and $ 3.4 billion and $ 5.8 billion are recorded within “Other long-term liabilities” as of December 31, 2020 and September 30, 2021.

The weighted-average remaining term of the financing obligations was 19.0 and 19.1 years and the weighted-average imputed interest rate was 3.8 % and 3.4 % as of December 31, 2020 and September 30, 2021.

(2) Includes unconditional purchase obligations related to certain products offered in our Whole Foods Market stores and long-term agreements to acquire and license digital media content that are not reflected on the consolidated balance sheets.

Excluding interest, current financing obligations of $ 196 million and $ 217 million are recorded within “Accrued expenses and other” and $ 6.2 billion and $ 6.8 billion are recorded within “Other long-term liabilities” as of December 31, 2021 and March 31, 2022.

The weighted-average remaining term of the financing obligations was 18.8 years and the weighted-average imputed interest rate was 3.2 % and 3.3 % as of December 31, 2021 and March 31, 2022.

(2) Includes unconditional purchase obligations related to long-term agreements to acquire and license digital media content that are not reflected on the consolidated balance sheets and certain products offered in our Whole Foods Market stores.

For those digital media content agreements with variable terms, we do not estimate the total obligation beyond any minimum quantities and/or pricing as of the reporting date.

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(4) Excludes approximately $ 3.3 billion of accrued tax contingencies for which we cannot make a reasonably reliable estimate of the amount and period of payment, if any.

In addition, in May 2021, we entered into an agreement to acquire MGM Holdings Inc.

(“MGM”) for approximately $ 8.5 billion, including MGM’s debt, subject to customary closing conditions.

We expect to fund this acquisition with cash on hand.

In addition, we expect to pay the previously disclosed € 1.13 billion fine imposed by the Italian Competition Authority in December 2021, which we will seek to recover pending conclusion of all appeals.

Other Contingencies

We are disputing claims and denials of refunds or credits related to various indirect taxes (such as sales, value added, consumption, service, and similar taxes), including in jurisdictions in which we already collect and remit these taxes.

If the relevant taxing authorities were to prevail, we could be subject to significant additional tax costs.

For example, in June 2017, the State of South Carolina issued an assessment for uncollected sales and use taxes for the period from January 2016 to March 2016, including interest and penalties.

South Carolina is alleging that we should have collected sales and use taxes on transactions by our third-party sellers.

In September 2019, the South Carolina Administrative Law Court ruled in favor of the Department of Revenue and we have appealed the decision to the state Court of Appeals.

We believe the assessment is without merit and intend to defend ourselves vigorously in this matter.

We are disputing claims and denials of refunds or credits related to various non-income taxes (such as sales, value added, consumption, service, and similar taxes), including in jurisdictions in which we already collect and remit these taxes.

These non-income tax controversies typically relate to (i) the taxability of products and services, including cross-border intercompany transactions, (ii) collection and withholding on transactions with third parties, and (iii) the adequacy of compliance with reporting obligations, including evolving documentation requirements.

Due to the inherent complexity and uncertainty of these matters and the judicial and regulatory processes in certain jurisdictions, the final outcome of any such controversies may be materially different from our expectations.

Legal Proceedings

The Company is involved from time to time in claims, proceedings, and litigation, including the matters described in Item 8 of Part II, “Financial Statements and Supplementary Data — Note 7 — Commitments and Contingencies — Legal Proceedings” of our 2020 Annual Report on Form 10-K and in Item 1 of Part I, “Financial Statements — Note 4 — Commitments and Contingencies — Legal Proceedings” of our Quarterly Report on Form 10-Q for the period ended June 30, 2021, as supplemented by the following:

Following an investigation that included an initial Statement of Objections, in September 2021 the Italian Competition Authority issued a subsequent Statement of Objections against Amazon Services Europe S.à r.l., Amazon Europe Core S.à r.l., Amazon EU S.à r.l., Amazon Italia Services S.r.l., and Amazon Italia Logistica S.r.l.

alleging that certain of our marketplace and logistics practices in Italy infringe EU competition rules.

The subsequent Statement of Objections seeks to impose unspecified fines and remedial actions that could materially impact our operations in Italy.

We disagree with the allegations and intend to defend ourselves vigorously in this matter.

In December 2018, Kove IO, Inc.

filed a complaint against Amazon Web Services, Inc.

in the United States District Court for the Northern District of Illinois.

The complaint alleges, among other things, that Amazon S3 and DynamoDB infringe U.S.

7,814,170 and 7,103,640, both entitled “Network Distributed Tracking Wire Transfer Protocol,” and 7,233,978, entitled “Method And Apparatus For Managing Location Information In A Network Separate From The Data To Which The Location Information Pertains.” The complaint seeks an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, interest, and injunctive relief.

In March 2022, the case was stayed pending resolution of review petitions we filed with the United States Patent and Trademark Office.

We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.

Beginning in March 2020, with Frame-Wilson v.

Amazon.com, Inc.

filed in the United States District Court for the Western District of Washington, a number of cases have been filed in the U.S.

and Canada alleging, among other things, price fixing arrangements between Amazon.com, Inc.

and third-party sellers in Amazon’s stores, monopolization and attempted monopolization, and consumer protection and unjust enrichment claims.

Some of the cases include allegations of several distinct purported classes, including consumers who purchased a product through Amazon’s stores and consumers who purchased a product offered by Amazon through another e-commerce retailer.

The complaints seek billions of dollars of alleged actual damages, treble damages, punitive damages, and injunctive relief.

Individuals have also initiated arbitrations based on substantially similar allegations.

In March 2022, the court in the Frame-Wilson case granted Amazon’s motion to dismiss claims alleging that Amazon’s pricing policies are inherently illegal under federal law and claims alleging competition and consumer protection violations under state law, and denied Amazon’s motion to dismiss claims alleging that Amazon’s pricing policies are an unlawful restraint of trade under federal law.

We dispute the remaining allegations of wrongdoing and intend to defend ourselves vigorously in these matters.

In November 2021, Jawbone Innovations, LLC filed a complaint against Amazon.com, Inc.

and Amazon.com Services, Inc.

in the United States District Court for the Eastern District of Texas.

The complaint alleges, among other things, that Amazon Echo smart speakers and displays, Fire TV Cube, and Echo Buds infringe U.S.

7,246,058, entitled “Detecting Voiced and Unvoiced Speech Using Both Acoustic and Nonacoustic Sensors”;

8,019,091, entitled “Voice Activity Detector (VAD)-Based Multiple-Microphone Acoustic Noise Suppression”;

8,280,072, entitled “Microphone Array with Rear Venting”;

8,321,213 and 8,326,611, both entitled “Acoustic Voice Activity Detection (AVAD) for Electronic Systems”;

8,467,543, entitled “Microphone and Voice Activity Detection (VAD) Configurations for Use with Communications Systems”;

8,503,691, entitled “Virtual Microphone Arrays Using Dual Omnidirectional Microphone Array (DOMA)”;

10,779,080, entitled “Dual Omnidirectional Microphone Array (DOMA)”;

and 11,122,357, entitled “Forming Virtual Microphone Arrays Using Dual Omnidirectional Microphone Array (DOMA).” The complaint seeks an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, interest, and injunctive relief.

We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.

In addition, we are regularly subject to claims, litigation, and other proceedings, including potential regulatory proceedings, involving patent and other intellectual property matters, taxes, labor and employment, competition and antitrust, privacy and data protection, consumer protection, commercial disputes, goods and services offered by us and by third parties, and other matters.

The outcomes of our legal proceedings and other contingencies are inherently unpredictable, subject to significant uncertainties, and could be material to our operating results and cash flows for a particular period.

We evaluate, on a regular basis, developments in our legal proceedings and other contingencies that could affect the amount of liability, including amounts in excess of any previous accruals and reasonably possible losses disclosed, and make adjustments and changes to our accruals and disclosures as appropriate.

We evaluate, on a regular basis, developments in our legal proceedings and other contingencies that could affect the amount of liability, including

amounts in excess of any previous accruals and reasonably possible losses disclosed, and make adjustments and changes to our accruals and disclosures as appropriate.

For the matters we disclose that do not include an estimate of the amount of loss or range of losses, such an estimate is not possible or is immaterial, and we may be unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies.

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Note 5 — DEBT

As of September 30, 2021, we had $ 50.7 billion of unsecured senior notes outstanding (the “Notes”).

We issued $ 18.5 billion of Notes in May 2021, of which $ 1.0 billion was issued for green or social projects, such as projects related to clean transportation, renewable energy, sustainable buildings, affordable housing, or socioeconomic advancement and empowerment, and the remainder for general corporate purposes.

We also had other long-term debt and borrowings under our credit facility of $ 924 million and $ 626 million as of December 31, 2020 and September 30, 2021.

As of March 31, 2022, we had $ 49.7 billion of unsecured senior notes outstanding (the “Notes”) and $ 803 million of borrowings under our credit facility.

Our total long-term debt obligations are as follows (in millions):

Maturities (1) Stated Interest Rates Effective Interest Rates December 31, 2020 September 30, 2021

Maturities (1) Stated Interest Rates Effective Interest Rates December 31, 2021 March 31, 2022

2012 Notes issuance of $ 3.0 billion

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0.35 % - 3.31 %

18,500 18,500

Credit Facility 803 803

Other long-term debt 586 —

Total face value of long-term debt 50,553 50,553

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(1) The weighted-average remaining lives of the 2012, 2014, 2017, 2020, and 2021 Notes were 1.2 , 11.1 , 15.5 , 18.0 , and 14.6 years as of September 30, 2021.

The combined weighted-average remaining life of the Notes was 14.8 years as of September 30, 2021.

(1) The weighted-average remaining lives of the 2012, 2014, 2017, 2020, and 2021 Notes were 0.7 , 13.3 , 15.0 , 17.5 , and 14.1 years as of March 31, 2022.

The combined weighted-average remaining life of the Notes was 14.6 years as of March 31, 2022.

Interest on the Notes is payable semi-annually in arrears.

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We are not subject to any financial covenants under the Notes.

The estimated fair value of the Notes was approximately $ 37.7 billion and $ 54.3 billion as of December 31, 2020 and September 30, 2021, which is based on quoted prices for our debt as of those dates.

We have a $ 740 million secured revolving credit facility with a lender that is secured by certain seller receivables, which we may from time to time increase in the future subject to lender approval (the “Credit Facility”).

The estimated fair value of the Notes was approximately $ 53.3 billion and $ 49.0 billion as of December 31, 2021 and March 31, 2022, which is based on quoted prices for our debt as of those dates.

We issued $ 12.8 billion of notes in April 2022 for general corporate purposes with maturities between 2024 and 2062, stated interest rates between 2.73 % and 4.10 %, and effective interest rates between 2.83 % and 4.15 %.

We have a $ 1.0 billion secured revolving credit facility with a lender that is secured by certain seller receivables, which we may from time to time increase in the future subject to lender approval (the “Credit Facility”).

The Credit Facility is available until October 2022, bears interest at the London interbank offered rate (“LIBOR”) plus 1.40 %, and has a commitment fee of 0.50 % on the undrawn portion.

There were $ 338 million and $ 626 million of borrowings outstanding under the Credit Facility as of December 31, 2020 and September 30, 2021, which had a weighted-average interest rate of 3.0 % and 2.8 %, respectively.

As of December 31, 2020 and September 30, 2021, we have pledged $ 398 million and $ 719 million of our cash and seller receivables as collateral for debt related to our Credit Facility.

The estimated fair value of the Credit Facility, which is based on Level 2 inputs, approximated its carrying value as of December 31, 2020 and September 30, 2021.

There were $ 803 million of borrowings outstanding under the Credit Facility as of December 31, 2021 and March 31, 2022, which had a weighted-average interest rate of 2.7 %.

As of December 31, 2021 and March 31, 2022, we have pledged $ 918 million of our cash and seller receivables as collateral for debt related to our Credit Facility.

The estimated fair value of the Credit Facility, which is based on Level 2 inputs, approximated its carrying value as of December 31, 2021 and March 31, 2022.

Dollar and Euro commercial paper programs (the “Commercial Paper Programs”) under which we may from time to time issue unsecured commercial paper up to a total of $ 20.0 billion (including up to € 3.0 billion) at the date of issue, with individual maturities that may vary but will not exceed 397 days from the date of issue.

There were $ 725 million of borrowings outstanding under the Commercial Paper Programs as of December 31, 2020 and September 30, 2021, which were included in “Accrued expenses and other” on our consolidated balance sheets and had a weighted-average effective interest rate, including issuance costs, of 0.11 % and 0.07 %, respectively.

In March 2022, we increased the size of the Commercial Paper Programs from $ 10.0 billion to $ 20.0 billion.

There were $ 725 million and $ 10.8 billion of borrowings outstanding under the Commercial Paper Programs as of December 31, 2021 and March 31, 2022, which were included in “Accrued expenses and other” on our consolidated balance sheets and had a weighted-average effective interest rate, including issuance costs, of 0.08 % and 0.56 %, respectively.

We use the net proceeds from the issuance of commercial paper for general corporate purposes.

We also have a $ 7.0 billion unsecured revolving credit facility with a syndicate of lenders with a term that extends to June 2023 (the “Credit Agreement”).

We also have a $ 10.0 billion unsecured revolving credit facility with a syndicate of lenders (the “Credit Agreement”), which was amended and restated in March 2022 to increase the borrowing capacity from $ 7.0 billion to $ 10.0 billion and to

extend the term to March 2025.

It may be extended for up to three additional one year terms if approved by the lenders.

The interest rate applicable to outstanding balances under the amended and restated Credit Agreement is LIBOR plus 0.50 %, with a commitment fee of 0.04 % on the undrawn portion of the credit facility.

There were no borrowings outstanding under the Credit Agreement as of December 31, 2020 and September 30, 2021.

The interest rate applicable to outstanding balances under the Credit Agreement is the applicable benchmark rate specified in the Credit Agreement plus 0.45 %, with a commitment fee of 0.03 % on the undrawn portion of the credit facility.

There were no borrowings outstanding under the Credit Agreement as of December 31, 2021 and March 31, 2022.

We also utilize other short-term credit facilities for working capital purposes.

These amounts are included in “Accrued expenses and other” on our consolidated balance sheets.

In addition, we had $ 6.9 billion of unused letters of credit as of September 30, 2021.

In addition, we had $ 10.2 billion of unused letters of credit as of March 31, 2022.

Note 6 — STOCKHOLDERS’ EQUITY

Stock Repurchase Activity

In February 2016, the Board of Directors authorized a program to repurchase up to $ 5.0 billion of our common stock, with no fixed expiration.

There were no repurchases of common stock during the nine months ended September 30, 2020 or 2021.

In March 2022, the Board of Directors authorized a program to repurchase up to $ 10.0 billion of our common stock, with no fixed expiration, which replaced the previous $ 5.0 billion stock repurchase authorization, approved by the Board of Directors in February 2016.

We repurchased 0.9 million shares of our common stock for $ 2.7 billion during the three months ended March 31, 2022 under these programs.

As of March 31, 2022, we have $ 9.5 billion remaining under the repurchase program.

Stock Award Activity

Common shares outstanding plus shares underlying outstanding stock awards totaled 518 million and 523 million as of December 31, 2020 and September 30, 2021.

Common shares outstanding plus shares underlying outstanding stock awards totaled 523 million as of December 31, 2021 and March 31, 2022.

These totals include all vested and unvested stock awards outstanding, including those awards we estimate will be forfeited.

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2021 2020 2021

Cost of sales $ 90 $ 146

1 unchanged sentence

Technology and content 1,228 1,645

Marketing 446 657 1,233 1,804

Sales and marketing 456 665

General and administrative 190 296

Total stock-based compensation expense $ 2,306 $ 3,250

The following table summarizes our restricted stock unit activity for the nine months ended September 30, 2021 (in millions):

The following table summarizes our restricted stock unit activity for the three months ended March 31, 2022 (in millions):

Number of Units Weighted-Average

3 unchanged sentences

Units forfeited ( 0.6 ) 2,670

Outstanding as of September 30, 2021 15.6 2,552

Scheduled vesting for outstanding restricted stock units as of September 30, 2021, is as follows (in millions):

Three Months Ended December 31, Year Ended December 31,

Outstanding as of March 31, 2022 14.1 2,768

Scheduled vesting for outstanding restricted stock units as of March 31, 2022, is as follows (in millions):

Nine Months Ended December 31, Year Ended December 31,

2022 2023 2024 2025 2026 Thereafter Total

Scheduled vesting — restricted stock units 4.7 5.2 2.6 1.3 0.2 0.1 14.1

As of September 30, 2021, there was $ 18.2 billion of net unrecognized compensation cost related to unvested stock-based compensation arrangements.

As of March 31, 2022, there was $ 16.4 billion of net unrecognized compensation cost related to unvested stock-based compensation arrangements.

This compensation is recognized on an accelerated basis with approximately half of the compensation expected to be expensed in the next twelve months, and has a remaining weighted-average recognition period of 1.1 years.

The estimated forfeiture rate as of December 31, 2020 and September 30, 2021 was 27 %.

The estimated forfeiture rate as of December 31, 2021 and March 31, 2022 was 27 %.

Changes in our estimates and assumptions relating to forfeitures may cause us to realize material changes in stock-based compensation expense in the future.

2 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2021 2020 2021

Total beginning stockholders’ equity $ 93,404 $ 138,245

Beginning and ending common stock 5 5

Beginning and ending treasury stock ( 1,837 ) ( 1,837 ) ( 1,837 ) ( 1,837 )

Beginning treasury stock ( 1,837 ) ( 1,837 )

Common stock repurchased — ( 2,666 )

Ending treasury stock ( 1,837 ) ( 4,503 )

Beginning additional paid-in capital 42,865 55,538

5 unchanged sentences

Beginning retained earnings 52,551 85,915

Net income 6,331 3,156 14,109 19,041

Net income (loss) 8,107 ( 3,844 )

Ending retained earnings 60,658 82,071

6 unchanged sentences

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, and the effects of the COVID-19 pandemic on our business make estimates of future income more challenging.

Since Q2 2017, we have recorded a valuation allowance against our net deferred tax assets in Luxembourg.

There is still significant uncertainty whether our income in Luxembourg is sustainable in the future and we will maintain the valuation allowance until sufficient positive evidence exists to support a release of the valuation allowance.

In addition, we record valuation allowances against deferred tax assets when there is uncertainty about our ability to generate future income in relevant jurisdictions.

For 2022, we estimate that our effective tax rate will be favorably affected by the impact of excess tax benefits from stock-based compensation and the U.S.

federal research and development credit and adversely affected by state income taxes.

Our income tax provisions for the nine months ended September 30, 2020 and 2021 were $ 2.3 billion and $ 4.2 billion, which included $ 1.5 billion and $ 1.7 billion of net discrete tax benefits primarily attributable to excess tax benefits from stock-based compensation and audit-related developments.

Cash paid for income taxes, net of refunds was $ 502 million and $ 750 million in Q3 2020 and Q3 2021, and $ 1.3 billion and $ 3.4 billion for the nine months ended September 30, 2020 and 2021.

As of December 31, 2020 and September 30, 2021, tax contingencies were approximately $ 2.8 billion and $ 2.9 billion.

In addition, valuation gains and losses from our equity investment in Rivian impact our pre-tax income and may cause variability in our effective tax rate.

Our income tax provision for the three months ended March 31, 2021 was $ 2.2 billion, which included $ 349 million of net discrete tax benefits primarily attributable to excess tax benefits from stock-based compensation.

Our income tax benefit for the three months ended March 31, 2022 was $ 1.4 billion, which included $ 2.1 billion of net discrete tax benefits primarily attributable to a valuation loss related to our equity investment in Rivian.

Cash paid for income taxes, net of refunds was $ 801 million and $ 453 million in Q1 2021 and Q1 2022.

As of December 31, 2021 and March 31, 2022, tax contingencies were approximately $ 3.2 billion and $ 3.3 billion.

Changes in tax laws, regulations, administrative practices, principles, and interpretations may impact our tax contingencies.

The timing of the resolution of income tax controversies is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued.

Due to various factors, including the inherent complexities and uncertainties of the judicial, administrative, and regulatory processes in certain jurisdictions, the timing of the resolution of income tax controversies is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued.

It is reasonably possible that within the next twelve months we will receive additional assessments by various tax authorities or possibly reach resolution of income tax controversies in one or more jurisdictions.

2 unchanged sentences

These examinations may lead to ordinary course adjustments or proposed adjustments to our taxes or our net operating losses with respect to years under examination as well as subsequent periods.

We are also subject to taxation in various states and other foreign jurisdictions including China, France, Germany, India, Japan, Luxembourg, and the United Kingdom.

We are under, or may be subject to, audit or examination and additional assessments by the relevant authorities in respect of these particular jurisdictions primarily for 2009 and thereafter.

We are currently disputing tax assessments in multiple jurisdictions, including with respect to the allocation and characterization of income.

In October 2014, the European Commission opened a formal investigation to examine whether decisions by the tax authorities in Luxembourg with regard to the corporate income tax paid by certain of our subsidiaries comply with European Union rules on state aid.

7 unchanged sentences

We will continue to defend ourselves vigorously in this matter.

We are also subject to taxation in various states and other foreign jurisdictions including China, Germany, India, Japan, Luxembourg, and the United Kingdom.

We are under, or may be subject to, audit or examination and additional assessments by the relevant authorities in respect of these particular jurisdictions primarily for 2009 and thereafter.

Note 8 — SEGMENT INFORMATION

1 unchanged sentence

North America, International, and AWS.

We allocate to segment results the operating expenses “Fulfillment,” “Technology and content,” “Marketing,” and “General and administrative” based on usage, which is generally reflected in the segment in which the costs are incurred.

We allocate to segment results the operating expenses “Fulfillment,” “Technology and content,” “Sales and marketing,” and “General and administrative” based on usage, which is generally reflected in the segment in which the costs are incurred.

The majority of technology infrastructure costs are allocated to the AWS segment based on usage.

10 unchanged sentences

The AWS segment consists of amounts earned from global sales of compute, storage, database, and other services for start-ups, enterprises, government agencies, and academic institutions.

Information on reportable segments and reconciliation to consolidated net income is as follows (in millions):

Information on reportable segments and reconciliation to consolidated net income (loss) is as follows (in millions):

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2021 2020 2021

North America

1 unchanged sentence

Operating expenses 60,916 70,812

Operating income $ 2,252 $ 880 $ 5,704 $ 7,477

Operating income (loss) $ 3,450 $ ( 1,568 )

International

9 unchanged sentences

Total non-operating income (expense) 1,403 ( 8,934 )

Provision for income taxes ( 569 ) ( 1,155 ) ( 2,298 ) ( 4,179 )

Benefit (provision) for income taxes ( 2,156 ) 1,422

Equity-method investment activity, net of tax ( 5 ) ( 1 )

Net income $ 6,331 $ 3,156 $ 14,109 $ 19,041

Net income (loss) $ 8,107 $ ( 3,844 )

Net sales by groups of similar products and services, which also have similar economic characteristics, is as follows (in millions):

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2021 2020 2021

Online stores (1) $ 52,901 $ 51,129

2 unchanged sentences

Subscription services (4) 7,580 8,410

Advertising services (5) 6,381 7,877

AWS 13,503 18,441

10 unchanged sentences

(4) Includes annual and monthly fees associated with Amazon Prime memberships, as well as digital video, audiobook, digital music, e-book, and other non-AWS subscription services.

(5) Primarily includes sales of advertising services, as well as sales related to our other service offerings.

(5) Includes sales of advertising services to sellers, vendors, publishers, authors, and others, through programs such as sponsored ads, display, and video advertising.

(6) Includes sales related to various other service offerings.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements