What changed in this filing

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Item 1. Financial Statements

2023-04-28 compared with 2022-10-28 · 131 added, 160 removed, 465 unchanged (38% 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

2022 2023 2022 2023

5 unchanged sentences

Stock-based compensation 3,250 4,748 13,701 21,119

Other operating expense (income), net 24 123 72 460 ( 415 ) 525

Other expense (income), net 8,689 534 ( 4,161 ) 8,811

31 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2022 2021 2022

Net product sales $ 56,455 $ 56,981

13 unchanged sentences

Other income (expense), net ( 8,570 ) ( 443 )

Total non-operating income (expense) ( 537 ) 419 1,798 ( 14,485 )

Total non-operating expense ( 8,934 ) ( 655 )

Income (loss) before income taxes ( 5,265 ) 4,119

12 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2022 2021 2022

Net income (loss) $ ( 3,844 ) $ 3,172

1 unchanged sentence

Foreign currency translation adjustments, net of tax of $( 16 ) and $( 10 )

( 537 ) ( 2,142 ) ( 752 ) ( 4,661 )

Net change in unrealized gains (losses) on available-for-sale debt securities:

Unrealized gains (losses), net of tax of $ 1 and $( 29 )

( 5 ) ( 195 ) ( 109 ) ( 1,095 )

Reclassification adjustment for losses (gains) included in “Other income (expense), net,” net of tax of $ 0 and $( 10 )

( 8 ) 4 ( 34 ) 17

Net unrealized gains (losses) on available-for-sale debt securities ( 656 ) 128

5 unchanged sentences

(in millions, except per share data)

December 31, 2021 September 30, 2022

December 31, 2022 March 31, 2023

Current assets:

48 unchanged sentences

Accordingly, an amount equal to the par value of the increased shares resulting from the stock split was reclassified from “Additional paid-in capital” to “Common stock.”

Prior Period Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

“Other operating expense (income), net” was reclassified into “Depreciation and amortization of property and equipment and capitalized content costs, operating lease assets, and other” on our consolidated statements of cash flows.

Principles of Consolidation

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The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes.

Estimates are used for, but not limited to, income taxes, useful lives of equipment, commitments and contingencies, valuation of acquired intangibles and goodwill, stock-based compensation forfeiture rates, vendor funding, inventory valuation, collectability of receivables, impairment of property and equipment and operating leases, and valuation and impairment of investments.

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 Q3 2022, based on servers and networking equipment that were included in “ Property and equipment, net ” as of June 30, 2022 and those acquired during the three months ended September 30, 2022, was a reduction in depreciation and amortization expense of $ 882 million and a benefit to net income of $ 665 million, or $ 0.07 per basic share and $ 0.06 per diluted share.

The effect of this change in estimate for the nine months ended September 30, 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 nine months ended September 30, 2022, was a reduction in depreciation and amortization expense of $ 2.8 billion and a benefit to net loss of $ 2.2 billion, or $ 0.21 per basic share and $ 0.21 per diluted share.

For the three months ended March 31, 2023, we recorded approximately $ 470 million of estimated severance costs primarily related to planned role eliminations.

These charges were recorded primarily in “Sales and marketing,” “Technology and content,” and “General and administrative” on our consolidated statements of operations and included approximately $ 270 million recorded within our AWS segment.

For the three months ended March 31, 2022 and 2023, we recorded approximately $ 190 million and $ 180 million of impairments of property and equipment and operating leases primarily related to physical stores in Q1 2022 and fulfillment network facilities in Q1 2023.

These charges were recorded in “Other operating expense (income), net” on our consolidated statements of operations and primarily impacted our North America segment.

Supplemental Cash Flow Information

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30, Twelve Months Ended

September 30,

March 31, Twelve Months Ended

2022 2023 2022 2023

16 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2022 2021 2022

Shares used in computation of basic earnings per share 10,171 10,250

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2022 2021 2022

Marketable equity securities valuation gains (losses) $ ( 8,245 ) $ ( 480 )

4 unchanged sentences

Total other income (expense), net ( 8,570 ) ( 443 )

Included in other income (expense), net is a marketable equity securities valuation gain (loss) of $ 1.1 billion in Q3 2022, and $( 10.4 ) billion for the nine months ended September 30, 2022, from our equity investment in Rivian Automotive, Inc.

Included in other income (expense), net is a marketable equity securities valuation gain (loss) of $( 7.6 ) billion and $( 467 ) million in Q1 2022 and Q1 2023, 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 September 30, 2022, we held 158 million shares of Rivian’s Class A common stock, representing an approximate 17 % ownership interest, and an approximate 16 % voting interest.

As of March 31, 2023, we held 158 million shares of Rivian’s Class A common stock, representing an approximate 17 % 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.

We elected the fair value option to account for our equity investment in Rivian, which is included in “Marketable securities” on our consolidated balance sheets, and had a fair value of $ 2.9 billion and

$ 2.5 billion as of December 31, 2022 and March 31, 2023.

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.

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

Six Months Ended June 30,

December 31, 2021 Year Ended

December 31, 2022

Revenues $ 55 $ 1,658

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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 $ 2.6 billion and $ 2.3 billion as of December 31, 2021 and September 30, 2022.

The inventory valuation allowance, representing a write-down of inventory, was $ 2.8 billion as of December 31, 2022 and March 31, 2023.

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, 2021 and September 30, 2022, customer receivables, net, were $ 20.2 billion and $ 22.8 billion, vendor receivables, net, were $ 5.3 billion and $ 4.9 billion, and seller receivables, net, were $ 1.0 billion and $ 1.4 billion.

As of December 31, 2022 and March 31, 2023, customer receivables, net, were $ 26.6 billion and $ 24.3 billion, vendor receivables, net, were $ 6.9 billion and $ 5.0 billion, and seller receivables, net, were $ 1.3 billion and $ 1.2 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 $ 1.3 billion as of December 31, 2021 and September 30, 2022.

The allowance for doubtful accounts was $ 1.4 billion as of December 31, 2022 and March 31, 2023.

Digital Video and Music Content

The total capitalized costs of video, which is primarily released content, and music as of December 31, 2021 and September 30, 2022 were $ 10.7 billion and $ 16.3 billion.

Total video and music expense was $ 3.3 billion and $ 4.2 billion in Q3 2021 and Q3 2022, and $ 9.4 billion and $ 11.4 billion for the nine months ended September 30, 2021 and 2022.

The total capitalized costs of video, which is primarily released content, and music as of December 31, 2022 and March 31, 2023 were $ 16.7 billion and $ 17.4 billion.

The weighted average remaining life of our capitalized video content is 3.5 years.

Total video and music expense was $ 3.5 billion and $ 4.0 billion in Q1 2022 and Q1 2023.

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, 2021 was $ 14.0 billion, of which $ 10.1 billion was recognized as revenue during the nine months ended September 30, 2022.

Included in “Other long-term liabilities” on our consolidated balance sheets was $ 2.2 billion and $ 2.7 billion of unearned revenue as of December 31, 2021 and September 30, 2022.

Our total unearned revenue as of December 31, 2022 was $ 16.1 billion, of which $ 5.3 billion was recognized as revenue during the three months ended March 31, 2023.

Included in “Other long-term liabilities” on our consolidated balance sheets was $ 2.9 billion and $ 2.8 billion of unearned revenue as of December 31, 2022 and March 31, 2023.

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 $ 104.3 billion as of September 30, 2022.

For contracts with original terms that exceed one year, those commitments not yet recognized were $ 122.0 billion as of March 31, 2023.

The weighted-average remaining life of our long-term contracts is 3.9 years.

1 unchanged sentence

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.

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.

On February 22, 2023, we acquired 1Life Healthcare, Inc.

(“One Medical”), for cash consideration of approximately $ 3.5 billion, net of cash acquired, to provide health care options for customers.

The acquired assets primarily consist of $ 1.3 billion of intangible assets and $ 2.5 billion of goodwill, which is allocated to our North America segment.

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 One Medical acquisition were not material to our consolidated results of operations.

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

1 unchanged sentence

Cash, Cash Equivalents, Restricted Cash, and Marketable Securities

As of December 31, 2021 and September 30, 2022, our cash, cash equivalents, restricted cash, and marketable securities primarily consisted of cash, AAA-rated money market funds, U.S.

As of December 31, 2022 and March 31, 2023, 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.

8 unchanged sentences

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, 2021 and September 30, 2022.

We did not hold significant amounts of marketable securities categorized as Level 3 assets as of December 31, 2022 and March 31, 2023.

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, 2021 September 30, 2022

December 31, 2022 March 31, 2023

Fair Value Cost or

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Other fixed income securities 237 237 — ( 9 ) 228

Equity securities (1)(3) 15,740 19

$ 70,391 $ 62,200 $ 1 $ ( 636 ) $ 64,796

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___________________

(1) The related unrealized gain (loss) recorded in “Other income (expense), net” was $( 116 ) million and $ 1.0 billion in Q3 2021 and Q3 2022, and $ 6 million and $( 11.3 ) billion for the nine months ended September 30, 2021 and 2022.

(1) The related unrealized gain (loss) recorded in “Other income (expense), net” was $( 8.1 ) billion and $( 479 ) million in Q1 2022 and Q1 2023.

(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.

1 unchanged sentence

See “Note 4 — Commitments and Contingencies.”

(3) Our equity investment in Rivian had a fair value of $ 15.6 billion and $ 5.2 billion as of December 31, 2021 and September 30, 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.

The following table summarizes the remaining contractual maturities of our cash equivalents and marketable fixed income securities as of September 30, 2022 (in millions):

The following table summarizes the remaining contractual maturities of our cash equivalents and marketable fixed income securities as of March 31, 2023 (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, 2021 and September 30, 2022, these warrants had a fair value of $ 3.4 billion and $ 2.5 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, 2022 and March 31, 2023, these warrants had a fair value of $ 2.1 billion and $ 2.0 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, 2021 and September 30, 2022, equity investments not accounted for under the equity-method and without readily determinable fair values had a carrying value of $ 603 million and $ 831 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.

As of December 31, 2022 and March 31, 2023, equity investments not accounted for under the equity-method and without readily determinable fair values had a carrying value of $ 715 million and $ 707 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, 2021 September 30, 2022

December 31, 2022 March 31, 2023

Cash and cash equivalents $ 53,888 $ 49,343

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Note 3 — LEASES

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 $ 72.2 billion and $ 66.6 billion as of December 31, 2021 and September 30, 2022.

Accumulated amortization associated with finance leases was $ 43.4 billion as of December 31, 2021 and September 30, 2022.

We have entered into non-cancellable operating and finance leases for fulfillment network, office, data center, and physical store 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 $ 68.0 billion and $ 66.5 billion as of December 31, 2022 and March 31, 2023.

Accumulated amortization associated with finance leases was $ 45.2 billion as of December 31, 2022 and March 31, 2023.

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,

2021 2022 2021 2022

Three Months Ended March 31,

Operating lease cost $ 2,103 $ 2,512

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

December 31, 2021 September 30, 2022

December 31, 2022 March 31, 2023

Weighted-average remaining lease term – operating leases 11.6 years 11.5 years

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Total long-term lease liabilities $ 61,582 $ 11,386 $ 72,968

September 30, 2022

March 31, 2023

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, 2022 (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, 2023 (in millions):

Nine Months Ended December 31, Year Ended December 31,

2023 2024 2025 2026 2027 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 $ 196 million and $ 254 million are recorded within “Accrued expenses and other” and $ 6.2 billion and $ 6.7 billion are recorded within “Other long-term liabilities” as of December 31, 2021 and September 30, 2022.

The weighted-average remaining term of the financing obligations was 18.8 years and 18.2 years and the weighted-average imputed interest rate was 3.2 % as of December 31, 2021 and September 30, 2022.

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

Excluding interest, current financing obligations of $ 266 million and $ 268 million are recorded within “Accrued expenses and other” and $ 6.7 billion and $ 6.6 billion are recorded within “Other long-term liabilities” as of December 31, 2022 and March 31, 2023.

The weighted-average remaining term of the financing obligations was 17.9 years and 17.7 years and the weighted-average imputed interest rate was 3.1 % as of December 31, 2022 and March 31, 2023.

(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.

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Purchase obligations associated with renewal provisions solely at the option of the content provider are included to the extent such commitments are fixed or a minimum amount is specified.

(3) Includes asset retirement obligations, the estimated timing and amounts of payments for rent and tenant improvements associated with build-to-suit lease arrangements that are under construction, and liabilities associated with digital media content agreements with initial terms greater than one year.

(3) Includes asset retirement obligations, liabilities associated with digital media content agreements with initial terms greater than one year, and the estimated timing and amounts of payments for rent and tenant improvements associated with build-to-suit lease arrangements that are under construction.

(4) Excludes approximately $ 4.2 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, we are paying 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.

In July 2022, we entered into an agreement to acquire 1Life Healthcare, Inc.

(One Medical) for approximately $ 3.9 billion, including its debt, subject to customary closing conditions.

In August 2022, we entered into an agreement to acquire iRobot Corporation for approximately $ 1.7 billion, including its debt, subject to customary closing conditions.

We expect to fund these acquisitions with cash on hand.

We expect to fund this acquisition with cash on hand.

Other Contingencies

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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 2021 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 Reports on Form 10-Q for the periods ended March 31, 2022 and June 30, 2022, as supplemented by the following:

In May 2018, Rensselaer Polytechnic Institute and CF Dynamic Advances LLC filed a complaint against Amazon.com, Inc.

in the United States District Court for the Northern District of New York.

The complaint alleges, among other things, that “Alexa Voice Software and Alexa enabled devices” infringe U.S.

7,177,798, entitled “Natural Language Interface Using Constrained Intermediate Dictionary of Results.” The complaint seeks an injunction, an unspecified amount of damages, enhanced damages, an ongoing royalty, interest, attorneys’ fees, and costs.

In March 2023, the plaintiffs alleged in their damages report that in the event of a finding of liability Amazon could be subject to $ 140 million to $ 267 million in damages.

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, private litigants have filed a number of cases in the U.S.

filed in the United States District Court for the Western District of Washington (“W.D.

Wash.”), private litigants have filed a number of cases in the U.S.

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

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The complaints seek billions of dollars of alleged actual damages, treble damages, punitive damages, injunctive relief, civil penalties, attorneys’ fees, and costs.

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.

In the same month, the DC Superior Court dismissed the DC Attorney General’s lawsuit in its entirety;

the dismissal is subject to appeal.

Amazon’s motions to dismiss were granted in part and denied in part in Frame-Wilson in March 2022 and March 2023, De Coster v.

Amazon.com, Inc.

Wash.) in January 2023, and the California Attorney General’s lawsuit in March 2023.

All three courts dismissed claims alleging that Amazon’s pricing policies are inherently illegal and denied dismissal of claims alleging that Amazon’s pricing policies are an unlawful restraint of trade.

In March 2022, the DC Superior Court dismissed the DC Attorney General’s lawsuit in its entirety;

the dismissal is under appeal as of January 2023.

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

In October 2020, BroadbandiTV, Inc.

filed a complaint against Amazon.com, Inc., Amazon.com Services LLC, and Amazon Web Services, Inc.

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

The complaint alleges, among other things, that certain Amazon Prime Video features and services infringe U.S.

9,648,388, 10,546,750, and 10,536,751, each entitled “Video-On-Demand Content Delivery System For Providing Video-On-Demand Services To TV Services Subscribers”;

10,028,026, entitled “System For Addressing On-Demand TV Program Content On TV Services Platform Of A Digital TV Services Provider”;

and 9,973,825, entitled “Dynamic Adjustment Of Electronic Program Guide Displays Based On Viewer Preferences For Minimizing Navigation In VOD Program Selection.” The complaint seeks an unspecified amount of damages.

In April 2022, BroadbandiTV alleged in its damages report that, in the event of a finding of liability, Amazon.com, Inc., Amazon.com Services LLC, and Amazon Web Services, Inc.

could be subject to $ 166 -$ 986 million in damages.

In September 2022, the court granted summary judgment, holding that the patents are invalid.

This decision is subject to appeal.

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

In January 2022, VideoLabs, Inc.

and VL Collective IP LLC filed a complaint against Amazon.com, Inc.

and Amazon Web Services, Inc.

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

The complaint alleges, among other things, that Amazon Prime Video, Amazon Glow, Amazon Echo Show, Fire TV, Fire TV Cube, Fire TV Stick, Fire Tablets, AWS Elemental MediaConvert, AWS Elemental Live, AWS Elemental Server, AWS Elemental MediaPackage, AWS Elemental MediaLive, and Amazon Elastic Transcoder infringe U.S.

7,769,238 and 8,139,878;

both entitled “Picture Coding Method and Picture Decoding Method”, and 7,970,059, entitled “Variable Length Coding Method and Variable Length Decoding Method”;

that Amazon Prime Video, AWS Elemental MediaConvert, AWS Elemental Live, AWS Elemental Server, AWS Elemental MediaPackage, AWS Elemental MediaLive, Amazon Elastic Transcoder, and Amazon Kinesis Video Streams infringe U.S.

8,605,794, entitled “Method for Synchronizing Content-Dependent Data Segments of Files”;

that Amazon Echo Show, Amazon Echo Spot, Amazon Connect, Amazon Chime, and Amazon Kinesis Video Streams infringe U.S.

7,266,682, entitled “Method and System for Transmitting Data from a Transmitter to a Receiver and Transmitter and Receiver Therefore”;

that AWS Auto Scaling and Amazon EC2 Auto Scaling infringe U.S.

6,880,156, entitled “Demand Responsive Method and Apparatus to Automatically Activate Spare Servers”;

and that Amazon Prime Video infringes U.S.

7,440,559, entitled “System and Associated Terminal, Method and Computer Program Product for Controlling the Flow of Content.” The complaint seeks an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, interest, and injunctive relief.

In October 2022, the case was transferred to the United States District Court for the Western District of Washington.

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

Beginning in May 2021, Angela Hogan and her minor child filed purported class-action complaints against Amazon.com, Inc.

in the Circuit Court of Cook County, Illinois, and against Amazon.com, Inc.

and Amazon.com Services LLC in the United States District Court for the Northern District of Illinois.

The complaints allege, among other things, that Amazon’s collection, storage, use, retention, and protection of biometric identifiers violated the Illinois Biometric Information Privacy Act.

The complaints allege similar purported classes of Illinois residents who allegedly had biometric identifiers collected from photographs stored in an Amazon Photos account.

The complaints seek certification as class actions, an unspecified amount of damages, injunctive relief, attorneys’ fees, costs, and interest.

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

In December 2021, the Italian Competition Authority (the “ICA”) issued a decision 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.

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

The decision imposes remedial actions and a fine of € 1.13 billion, which we have paid and will seek to recover pending conclusion of all appeals.

We believe the ICA’s decision to be without merit 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, 2022, we had $ 62.5 billion of unsecured senior notes outstanding (the “Notes”), including $ 12.8 billion issued in April 2022 for general corporate purposes, and $ 1.0 billion of borrowings under our credit facility.

As of March 31, 2023, we had $ 68.5 billion of unsecured senior notes outstanding (the “Notes”) and $ 972 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, 2021 September 30, 2022

Maturities (1) Stated Interest Rates Effective Interest Rates December 31, 2022 March 31, 2023

2014 Notes issuance of $ 6.0 billion

2024 - 2044 3.80 % - 4.95 %

3.90 % - 5.12 %

2017 Notes issuance of $ 17.0 billion

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2.95 % - 4.33 %

16,000 15,000

2020 Notes issuance of $ 10.0 billion

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18,500 18,500

2021 Notes issuance of $ 18.5 billion

April 2022 Notes issuance of $ 12.8 billion

2024 - 2062 2.73 % - 4.10 %

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12,750 12,750

2022 Notes Issuance of $ 12.8 billion

December 2022 Notes issuance of $ 8.3 billion

2024 - 2032 4.55 % - 4.70 %

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(1) The weighted-average remaining lives of the 2012, 2014, 2017, 2020, 2021, and 2022 Notes were 0.2 , 12.8 , 14.5 , 17.0 , 13.6 , and 13.5 years as of September 30, 2022.

The combined weighted-average remaining life of the Notes was 14.0 years as of September 30, 2022.

(1) The weighted-average remaining lives of the 2014, 2017, 2020, 2021, April 2022, and December 2022 Notes were 12.3 , 14.9 , 16.5 , 13.1 , 13.0 , and 5.6 years as of March 31, 2023.

The combined weighted-average remaining life of the Notes was 13.0 years as of March 31, 2023.

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 $ 53.3 billion and $ 53.7 billion as of December 31, 2021 and September 30, 2022, which is based on quoted prices for our debt as of those dates.

We have a $ 1.5 billion secured revolving credit facility with a lender that is secured by certain seller receivables, which we increased from $ 1.0 billion to $ 1.5 billion in August 2022 and 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 $ 61.4 billion and $ 62.4 billion as of December 31, 2022 and March 31, 2023, which is based on quoted prices for our debt as of those dates.

In January 2023, we entered into an $ 8.0 billion unsecured 364-day term loan with a syndicate of lenders (the “Term Loan”), which matures in January 2024 and bears interest at the Secured Overnight Financing Rate specified in the Term Loan plus 0.75 %.

If we exercise our option to extend the Term Loan’s maturity to January 2025, the interest rate spread will increase from 0.75 % to 1.05 %.

As of March 31, 2023, $ 8.0 billion of the Term Loan was outstanding, which was included in “Accrued expenses and other” on our consolidated balance sheets and had an interest rate of 5.7 %.

We have a $ 1.5 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 August 2025, bears interest based on the daily Secured Overnight Financing Rate plus 1.25 %, and has a commitment fee of up to 0.45 % on the undrawn portion.

There were $ 803 million and $ 1.0 billion of borrowings outstanding under the Credit Facility as of December 31, 2021 and September 30, 2022, which had a weighted-average interest rate of 2.7 %.

As of December 31, 2021 and September 30, 2022, we have pledged $ 918 million and $ 1.2 billion 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 September 30, 2022.

There were $ 1.0 billion and $ 972 million of borrowings outstanding under the Credit Facility as of December 31, 2022 and March 31, 2023, which had an interest rate of 5.6 % and 6.1 %, respectively.

As of December 31, 2022 and March 31, 2023, we have pledged $ 1.2 billion and $ 1.1 billion 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, 2022 and March 31, 2023.

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.

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 $ 11.7 billion of borrowings outstanding under the Commercial Paper Programs as of December 31, 2021 and September 30, 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 2.54 %, respectively.

There were $ 6.8 billion and $ 7.8 billion of borrowings outstanding under the Commercial Paper Programs as of December 31, 2022 and March 31, 2023, 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 4.5 % and 4.7 %, respectively.

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

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.

We have a $ 10.0 billion unsecured revolving credit facility with a syndicate of lenders (the “Credit Agreement”), with a term that extends 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 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 September 30, 2022.

There were no borrowings outstanding under the Credit Agreement as of December 31, 2022 and March 31, 2023.

We have a $ 10.0 billion unsecured 364-day revolving credit facility with a syndicate of lenders (the “Short-Term Credit Agreement”), which matures in November 2023 and may be extended for one additional period of 364 days if approved by the lenders.

The interest rate applicable to outstanding balances under the Short-Term Credit Agreement is the Secured Overnight Financing Rate specified in the Short-Term Credit Agreement plus 0.45 %, with a commitment fee of 0.05 % on the undrawn portion.

There were no borrowings outstanding under the Short-Term Credit Agreement as of December 31, 2022 and March 31, 2023.

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

There were $ 318 million and $ 1.1 billion of borrowings outstanding under these facilities as of December 31, 2021 and September 30, 2022, which were included in “Accrued expenses and other” on our consolidated balance sheets.

In addition, we had $ 10.0 billion of unused letters of credit as of September 30, 2022.

There were $ 1.2 billion and $ 1.1 billion of borrowings outstanding under these facilities as of December 31, 2022 and March 31, 2023, which were included in “Accrued expenses and other” on our consolidated balance sheets.

In addition, we had $ 8.5 billion of unused letters of credit as of March 31, 2023.

Note 6 — STOCKHOLDERS’ EQUITY

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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 46.2 million shares of our common stock for $ 6.0 billion during the nine months ended September 30, 2022 under these programs.

As of September 30, 2022, we have $ 6.1 billion remaining under the repurchase program.

We repurchased 18.6 million shares of our common stock for $ 2.7 billion during the three months ended March 31, 2022 under these programs.

There were no repurchases of our common stock during the three months ended March 31, 2023.

As of March 31, 2023, we have $ 6.1 billion remaining under the repurchase program.

Stock Award Activity

Common shares outstanding plus shares underlying outstanding stock awards totaled 10.5 billion and 10.6 billion as of December 31, 2021 and September 30, 2022.

Common shares outstanding plus shares underlying outstanding stock awards totaled 10.6 billion as of December 31, 2022 and March 31, 2023.

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

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2022 2021 2022

Cost of sales $ 146 $ 165

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Total stock-based compensation expense $ 3,250 $ 4,748

The following table summarizes our restricted stock unit activity for the nine months ended September 30, 2022 (in millions):

The following table summarizes our restricted stock unit activity for the three months ended March 31, 2023 (in millions):

Number of Units Weighted-Average

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Units forfeited ( 15.5 ) 144

Outstanding as of September 30, 2022 399.3 147

Scheduled vesting for outstanding restricted stock units as of September 30, 2022, is as follows (in millions):

Three Months Ended December 31, Year Ended December 31,

Outstanding as of March 31, 2023 366.7 144

Scheduled vesting for outstanding restricted stock units as of March 31, 2023, is as follows (in millions):

Nine Months Ended December 31, Year Ended December 31,

2023 2024 2025 2026 2027 Thereafter Total

Scheduled vesting — restricted stock units 124.5 133.6 67.0 37.2 2.5 1.9 366.7

As of September 30, 2022, there was $ 26.9 billion of net unrecognized compensation cost related to unvested stock-based compensation arrangements.

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

estimated forfeiture rate as of December 31, 2021 and September 30, 2022 was 27 % and 26 %.

As of March 31, 2023, there was $ 19.9 billion of net unrecognized compensation cost related to unvested stock-based compensation arrangements.

The estimated forfeiture rate as of December 31, 2022 and March 31, 2023 was 26.5 %.

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

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2022 2021 2022

Total beginning stockholders’ equity $ 138,245 $ 146,043

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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 impacted by the U.S.

federal research and development credit.

For 2023, we estimate that our effective tax rate will be favorably impacted by the foreign income deduction and U.S.

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

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

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

Our income tax benefit for the nine months ended September 30, 2022 was $ 2.0 billion, which included $ 3.3 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 $ 750 million and $ 742 million in Q3 2021 and Q3 2022, and $ 3.4 billion and $ 4.3 billion for the nine months ended September 30, 2021 and 2022.

As of December 31, 2021 and September 30, 2022, tax contingencies were approximately $ 3.2 billion and $ 3.4 billion.

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.

Our income tax provision for the three months ended March 31, 2023 was $ 948 million, which included $ 48 million of net discrete tax expense.

Cash paid for income taxes, net of refunds was $ 453 million and $ 619 million in Q1 2022 and Q1 2023.

As of December 31, 2022 and March 31, 2023, tax contingencies were approximately $ 4.0 billion and $ 4.2 billion.

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

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We believe the LTA’s position is without merit and intend to defend ourselves vigorously in this matter.

In February 2023, we received a decision by the Indian tax authority (“ITA”) that tax applies to cloud services fees paid to Amazon in the U.S.

We will need to remit taxes on the services in question, including for a portion of prior years, until this matter is resolved, which payments could be significant in the aggregate.

We believe the ITA’s decision is without merit, we are defending our position vigorously in the Indian courts, and we expect to recoup taxes paid.

If this matter is adversely resolved, we could recognize significant additional tax expense, including for taxes previously paid.

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.

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Luxembourg computed an initial recovery amount, consistent with the European Commission’s decision, which we deposited into escrow in March 2018, subject to adjustment pending conclusion of all appeals.

In December 2017, Luxembourg appealed the European Commission’s decision.

In December 2017, Luxembourg

appealed the European Commission’s decision.

In May 2018, we appealed.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2022 2021 2022

North America

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Operating expenses 30,040 30,370

Operating income (loss) $ ( 911 ) $ ( 2,466 ) $ 703 $ ( 5,518 )

Operating loss $ ( 1,281 ) $ ( 1,247 )

Net sales $ 18,441 $ 21,354

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Operating income 3,669 4,774

Total non-operating income (expense) ( 537 ) 419 1,798 ( 14,485 )

Total non-operating expense ( 8,934 ) ( 655 )

Benefit (provision) for income taxes 1,422 ( 948 )

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Three Months Ended

September 30, Nine Months Ended

September 30,

2021 2022 2021 2022

Online stores (1) $ 51,129 $ 51,096

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(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 offerings, such as certain licensing and distribution of video content and shipping services, and our co-branded credit card agreements.

(6) Includes sales related to various other offerings, such as certain licensing and distribution of video content, shipping services, and health care services, and our co-branded credit card agreements.

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