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Item 1. Financial Statements

2023-08-04 compared with 2023-04-28 · 133 added, 129 removed, 467 unchanged (36% of the section changed)

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Three Months Ended

March 31, Twelve Months Ended

June 30, Six Months Ended

June 30, Twelve Months Ended

2022 2023 2022 2023 2022 2023

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Stock-based compensation 5,209 7,127 8,459 11,875 15,319 23,037

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

Non-operating expense (income), net 6,104 47 14,793 581 3,201 2,754

Deferred income taxes ( 1,955 ) ( 2,744 ) ( 3,956 ) ( 3,216 ) ( 6,670 ) ( 7,408 )

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Three Months Ended

June 30, Six Months Ended

2022 2023 2022 2023

Net product sales $ 56,575 $ 59,032 $ 113,030 $ 116,013

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Fulfillment 20,342 21,305 40,613 42,210

Technology and content 14,842 20,450

Technology and infrastructure 18,072 21,931 32,914 42,381

Sales and marketing 10,086 10,745 18,406 20,917

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Three Months Ended

June 30, Six Months Ended

2022 2023 2022 2023

Net income (loss) $ ( 2,028 ) $ 6,750 $ ( 5,872 ) $ 9,922

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Foreign currency translation adjustments, net of tax of $ 76 , $( 22 ), $ 60 , and $( 32 )

( 2,186 ) 264 ( 2,519 ) 650

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

Unrealized gains (losses), net of tax of $ 0 , $( 5 ), $ 1 , and $( 34 )

( 238 ) 17 ( 900 ) 112

Reclassification adjustment for losses (gains) included in “Other income (expense), net,” net of tax of $ 0 , $( 5 ), $ 0 , and $( 15 )

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(in millions, except per share data)

December 31, 2022 March 31, 2023

December 31, 2022 June 30, 2023

Current assets:

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These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in Item 8 of Part II, “Financial Statements and Supplementary Data,” of our 2022 Annual Report on Form 10-K.

Common Stock Split

On May 27, 2022, we effected a 20 -for-1 stock split of our common stock and proportionately increased the number of authorized shares of common stock.

All share, restricted stock unit (“RSU”), and per share or per RSU information throughout this Quarterly Report on Form 10-Q has been retroactively adjusted to reflect the stock split.

The shares of common stock retain a par value of $ 0.01 per share.

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

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The consolidated financial statements include the accounts of Amazon.com, Inc.

and its consolidated entities (collectively, the “Company”), consisting of its wholly-owned subsidiaries and those entities in which we have a variable interest and of which we are the primary beneficiary, including certain entities in India and certain entities that support our seller lending financing activities.

Intercompany balances and transactions between consolidated entities are eliminated.

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Actual results could differ materially from these estimates.

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.

For the six months ended June 30, 2023, we recorded approximately $ 510 million of estimated severance costs primarily related to planned role eliminations.

These charges were recorded primarily in “Sales and marketing,” “Technology and infrastructure,” and “General and administrative” on our consolidated statements of operations and included approximately $ 320 million recorded within our AWS segment.

For the six months ended June 30, 2022 and 2023, we recorded approximately $ 260 million and $ 250 million of impairments of property and equipment and operating leases primarily related to physical stores in 2022 and fulfillment network facilities in 2023.

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

For the six months ended June 30, 2022 and 2023, we also recorded expenses of approximately $ 230 million and $ 180 million primarily in “Fulfillment” in 2022 and “Cost of sales” and “Fulfillment” in 2023, on our consolidated statements of operations primarily relating to terminating contracts for certain leases not yet commenced as well as other purchase commitments, which primarily impacted our North America segment.

Supplemental Cash Flow Information

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Three Months Ended

March 31, Twelve Months Ended

June 30, Six Months Ended

June 30, Twelve Months Ended

2022 2023 2022 2023 2022 2023

SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid for interest on debt $ 279 $ 402 $ 1,101 $ 1,684

Cash paid for interest on debt, net of capitalized interest $ 349 $ 954 $ 628 $ 1,356 $ 1,271 $ 2,289

Cash paid for operating leases 2,088 2,528 4,455 4,995 7,960 9,173

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Three Months Ended

June 30, Six Months Ended

2022 2023 2022 2023

Shares used in computation of basic earnings per share 10,175 10,285 10,173 10,268

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Three Months Ended

June 30, Six Months Ended

2022 2023 2022 2023

Marketable equity securities valuation gains (losses) $ ( 4,322 ) $ 299 $ ( 12,567 ) $ ( 181 )

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Total other income (expense), net ( 5,545 ) 61 ( 14,115 ) ( 382 )

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.

Included in other income (expense), net is a marketable equity securities valuation gain (loss) of $( 3.9 ) billion and $ 187 million in Q2 2022 and Q2 2023, and $( 11.5 ) billion and $( 280 ) million for the six months ended June 30, 2022 and 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 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, and had a fair value of $ 2.9 billion and

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

As of June 30, 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.

board of directors.

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):

December 31, 2021 Year Ended

December 31, 2022

Three Months Ended March 31,

Revenues $ 95 $ 661

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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 $ 2.8 billion as of December 31, 2022 and March 31, 2023.

The inventory valuation allowance, representing a write-down of inventory, was $ 2.8 billion and $ 2.7 billion as of December 31, 2022 and June 30, 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, 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.

Included in “Accounts receivable, net and other” on our consolidated balance sheets are receivables primarily related to customers, vendors, and sellers, as well as prepaid expenses and other current assets.

As of December 31, 2022 and June 30, 2023, customer receivables, net, were $ 26.6 billion and $ 25.3 billion, vendor receivables, net, were $ 6.9 billion and $ 5.6 billion, seller receivables, net, were $ 1.3 billion and $ 1.3 billion, and other receivables, net, were $ 3.1 billion and $ 2.7 billion.

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

Prepaid expenses and other current assets were $ 4.5 billion and $ 5.0 billion as of December 31, 2022 and June 30, 2023.

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

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

The allowance for doubtful accounts was $ 1.4 billion and $ 1.5 billion as of December 31, 2022 and June 30, 2023.

Digital Video and Music Content

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 total capitalized costs of video, which is primarily released content, and music as of December 31, 2022 and June 30, 2023 were $ 16.7 billion and $ 17.8 billion.

The weighted average remaining life of our capitalized video content is 3.6 years.

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

Total video and music expense was $ 3.7 billion and $ 4.4 billion in Q2 2022 and Q2 2023, and $ 7.3 billion and $ 8.4 billion for the six months ended June 30, 2022 and 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, 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.

Our total unearned revenue as of December 31, 2022 was $ 16.1 billion, of which $ 8.6 billion was recognized as revenue during the six months ended June 30, 2023.

Included in “Other long-term liabilities” on our consolidated balance sheets was $ 2.9 billion and $ 2.7 billion of unearned revenue as of December 31, 2022 and June 30, 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 $ 122.0 billion as of March 31, 2023.

For contracts with original terms that exceed one year, those commitments not yet recognized were $ 132.1 billion as of June 30, 2023.

The weighted-average remaining life of our long-term contracts is 3.6 years.

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(“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 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.

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Cash, Cash Equivalents, Restricted Cash, and Marketable Securities

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.

As of December 31, 2022 and June 30, 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.

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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, 2022 and March 31, 2023.

We did not hold significant amounts of marketable securities categorized as Level 3 assets as of December 31, 2022 and June 30, 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, 2022 March 31, 2023

December 31, 2022 June 30, 2023

Fair Value Cost or

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Asset-backed securities 2,572 2,103 — ( 101 ) 2,002

Other fixed income securities 237 237 — ( 9 ) 228

Other debt securities 237 201 — ( 8 ) 193

$ 70,391 $ 61,587 $ — $ ( 594 ) $ 64,508

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(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.

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.

(1) The related unrealized gains (losses) recorded in “Other income (expense), net” were $( 4.2 ) billion and $ 284 million in Q2 2022 and Q2 2023, and $( 12.3 ) billion and $( 195 ) million for the six months ended June 30, 2022 and 2023.

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

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

See “Note 4 — Commitments and Contingencies.”

The following table summarizes the remaining contractual maturities of our cash equivalents and marketable fixed income securities as of March 31, 2023 (in millions):

The following table summarizes the remaining contractual maturities of our cash equivalents and marketable debt securities as of June 30, 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, 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, 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.

As of December 31, 2022 and June 30, 2023, these warrants had a fair value of $ 2.1 billion and $ 1.8 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 classified as Level 2 and 3 assets.

As of December 31, 2022 and June 30, 2023, equity investments not accounted for under the equity-method and without readily determinable fair values had a carrying value of $ 715 million and $ 733 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, 2022 March 31, 2023

December 31, 2022 June 30, 2023

Cash and cash equivalents $ 53,888 $ 49,529

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Note 3 — LEASES

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.

Gross assets acquired under finance leases, including those where title transfers at the end of the lease, are recorded in “ Property and equipment, net ” and were $ 68.0 billion and $ 64.6 billion as of December 31, 2022 and June 30, 2023.

Accumulated amortization associated with finance leases was $ 45.2 billion and $ 44.6 billion as of December 31, 2022 and June 30, 2023.

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2023 2022 2023

Operating lease cost $ 2,133 $ 2,608 $ 4,236 $ 5,120

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

December 31, 2022 March 31, 2023

December 31, 2022 June 30, 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

March 31, 2023

June 30, 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 March 31, 2023 (in millions):

Nine 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 June 30, 2023 (in millions):

Six 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 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.

Excluding interest, current financing obligations of $ 266 million and $ 269 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 June 30, 2023.

The weighted-average remaining term of the financing obligations was 17.9 years and 17.5 years and the weighted-average imputed interest rate was 3.1 % as of December 31, 2022 and June 30, 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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(4) Excludes approximately $ 5.0 billion of accrued tax contingencies for which we cannot make a reasonably reliable estimate of the amount and period of payment, if any.

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.

In August 2022, we entered into an agreement to acquire iRobot Corporation, as amended in July 2023, for approximately $ 1.7 billion, including its debt, subject to customary closing conditions.

We expect to fund this acquisition with cash on hand.

Other Contingencies

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.

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

These non-income tax controversies typically 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.

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Legal Proceedings

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.

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 2022 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 March 31, 2023, as supplemented by the following:

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.

In November 2022, the stay was lifted.

In July 2023, Kove alleged in its damages report that in the event of a finding of liability Amazon Web Services could be subject to $ 517 million to $ 1.03 billion 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 (“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.

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

Attorneys General for the District of Columbia and California brought similar suits in May 2021 and September 2022 in the Superior Court of the District of Columbia and the California Superior Court for the County of San Francisco, respectively.

Some of the private 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, injunctive relief, civil penalties, attorneys’ fees, and costs.

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.

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 May 2023, Dialect, LLC filed a complaint against Amazon.com, Inc.

and Amazon Web Services, Inc.

in the United States District Court for the Eastern District for Virginia.

The complaint alleges, among other things, that Amazon’s Alexa-enabled products and services, such as Echo devices, Fire tablets, Fire TV sticks, Fire TVs, Alexa, and Alexa Voice Services, infringe U.S.

7,693,720 and 9,031,845, each entitled “Mobile Systems and Methods for Responding to Natural Language Speech Utterance”;

8,015,006, entitled “Systems and Methods for Processing Natural Language Speech Utterances with Context-Specific Domain Agents”;

8,140,327, entitled “System and Method for Filtering and Eliminating Noise from Natural Language Utterances to Improve Speech Recognition and Parsing”;

8,195,468 and 9,495,957, each entitled “Mobile Systems and Methods of Supporting Natural Language Human-Machine Interactions”;

and 9,263,039, entitled “Systems and Methods for Responding to Natural Language Speech Utterance.” 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.

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Note 5 — DEBT

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.

As of June 30, 2023, we had $ 66.5 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, 2022 March 31, 2023

Maturities (1) Stated Interest Rates Effective Interest Rates December 31, 2022 June 30, 2023

2014 Notes issuance of $ 6.0 billion

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0.88 % - 2.77 %

10,000 10,000

2021 Notes issuance of $ 18.5 billion

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(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.

(1) The weighted-average remaining lives of the 2014, 2017, 2020, 2021, April 2022, and December 2022 Notes were 12.1 , 14.6 , 18.1 , 13.6 , 12.8 , and 5.4 years as of June 30, 2023.

The combined weighted-average remaining life of the Notes was 13.2 years as of June 30, 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 $ 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.

The estimated fair value of the Notes was approximately $ 61.4 billion and $ 59.5 billion as of December 31, 2022 and June 30, 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 %.

As of June 30, 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 5.9 %.

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 $ 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.

There were $ 1.0 billion and $ 972 million of borrowings outstanding under the Credit Facility as of December 31, 2022 and June 30, 2023, which had an interest rate of 5.6 % and 6.3 %, respectively.

As of December 31, 2022 and June 30, 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 June 30, 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.

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.

There were $ 6.8 billion and $ 4.4 billion of borrowings outstanding under the Commercial Paper Programs as of December 31, 2022 and June 30, 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 5.0 %, respectively.

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

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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, 2022 and March 31, 2023.

There were no borrowings outstanding under the Credit Agreement as of December 31, 2022 and June 30, 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.

There were no borrowings outstanding under the Short-Term Credit Agreement as of December 31, 2022 and June 30, 2023.

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

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.

There were $ 1.2 billion and $ 1.1 billion of borrowings outstanding under these facilities as of December 31, 2022 and June 30, 2023, which were included in “Accrued expenses and other” on our consolidated balance sheets.

In addition, we had $ 7.5 billion of unused letters of credit as of June 30, 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 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.

We repurchased 46.2 million shares of our common stock for $ 6.0 billion during the six months ended June 30, 2022 under these programs.

There were no repurchases of our common stock during the six months ended June 30, 2023.

As of June 30, 2023, we have $ 6.1 billion remaining under the repurchase program.

Stock Award Activity

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

Common shares outstanding plus shares underlying outstanding stock awards totaled 10.6 billion and 10.8 billion as of December 31, 2022 and June 30, 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

June 30, Six Months Ended

2022 2023 2022 2023

Cost of sales $ 213 $ 251 $ 359 $ 416

Fulfillment 763 932 1,261 1,535

Technology and content 1,645 2,574

Technology and infrastructure 2,814 4,043 4,459 6,617

Sales and marketing 990 1,303 1,655 2,296

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Total stock-based compensation expense $ 5,209 $ 7,127 $ 8,459 $ 11,875

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

The following table summarizes our restricted stock unit activity for the six months ended June 30, 2023 (in millions):

Number of Units Weighted-Average

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Units forfeited ( 33.1 ) 138

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,

Outstanding as of June 30, 2023 481.5 128

Scheduled vesting for outstanding restricted stock units as of June 30, 2023, is as follows (in millions):

Six Months Ended December 31, Year Ended December 31,

2023 2024 2025 2026 2027 Thereafter Total

Scheduled vesting — restricted stock units 70.7 224.5 128.6 47.0 7.4 3.3 481.5

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

As of June 30, 2023, there was $ 28.0 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 1.0 year.

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

The estimated forfeiture rate as of December 31, 2022 and June 30, 2023 was 26.5 % and 26.3 %.

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

June 30, Six Months Ended

2022 2023 2022 2023

Total beginning stockholders’ equity $ 134,001 $ 154,526 $ 138,245 $ 146,043

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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 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.

Our income tax benefit for the six months ended June 30, 2022 was $ 2.1 billion, which included $ 3.2 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 six months ended June 30, 2023 was $ 1.8 billion, which included $ 306 million of net discrete tax benefits, consisting of $ 805 million resulting from a change in the estimated qualifying expenditures associated with our 2022 U.S.

federal R&D credit and a related increase in our foreign income deduction tax benefit, partially offset by discrete tax expense related to shortfalls from stock-based compensation.

Cash paid for income taxes, net of refunds was $ 3.1 billion and $ 3.7 billion in Q2 2022 and Q2 2023, and $ 3.6 billion and $ 4.4 billion for the six months ended June 30, 2022 and 2023.

As of December 31, 2022 and June 30, 2023, tax contingencies were approximately $ 4.0 billion and $ 5.0 billion.

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

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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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North America, International, and AWS.

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.

The majority of the remaining non-infrastructure technology costs are incurred in the U.S.

and are allocated to our North America segment.

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

The majority of technology costs recorded in “Technology and infrastructure” are incurred in the U.S.

and are included in our North America and AWS segments.

The majority of infrastructure costs recorded in “Technology and infrastructure” are allocated to the AWS segment based on usage.

There are no internal revenue transactions between our reportable segments.

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North America

The North America segment primarily consists of amounts earned from retail sales of consumer products (including from sellers) and subscriptions through North America-focused online and physical stores.

The North America segment primarily consists of amounts earned from retail sales of consumer products (including from sellers) and advertising and subscription services through North America-focused online and physical stores.

This segment includes export sales from these online stores.

International

The International segment primarily consists of amounts earned from retail sales of consumer products (including from sellers) and subscriptions through internationally-focused online stores.

The International segment primarily consists of amounts earned from retail sales of consumer products (including from sellers) and advertising and subscription services through internationally-focused online stores.

This segment includes export sales from these internationally-focused online stores (including export sales from these online stores to customers in the U.S., Mexico, and Canada), but excludes export sales from our North America-focused online stores.

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Three Months Ended

June 30, Six Months Ended

2022 2023 2022 2023

North America

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Three Months Ended

June 30, Six Months Ended

2022 2023 2022 2023

Online stores (1) $ 50,855 $ 52,966 $ 101,984 $ 104,062

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These product sales include digital products sold on a transactional basis.

Digital product subscriptions that provide unlimited viewing or usage rights are included in “Subscription services.”

Digital media content subscriptions that provide unlimited viewing or usage rights are included in “Subscription services.”

(2) Includes product sales where our customers physically select items in a store.

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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, shipping services, and health care 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, health care services, and shipping 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