What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-02 compared with 2023-02-03 · 69 added, 67 removed, 274 unchanged (33% of the section changed)

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Forward-looking statements reflect management’s current expectations and are inherently uncertain.

Actual results and outcomes could differ materially for a variety of reasons, including, among others, fluctuations in foreign exchange rates, changes in global economic conditions and customer demand and spending, inflation, interest rates, regional labor market and global supply chain constraints, world events, the rate of growth of the Internet, online commerce, and cloud services, the amount that Amazon.com invests in new business opportunities and the timing of those investments, the mix of products and services sold to customers, the mix of net sales derived from products as compared with services, the extent to which we owe income or other taxes, competition, management of growth, potential fluctuations in operating results, international growth and expansion, the outcomes of claims, litigation, government investigations, and other proceedings, fulfillment, sortation, delivery, and data center optimization, risks of inventory management, variability in demand, the degree to which we enter into, maintain, and develop commercial agreements, proposed and completed acquisitions and strategic transactions, payments risks, and risks of fulfillment throughput and productivity.

Actual results and outcomes could differ materially for a variety of reasons, including, among others, fluctuations in foreign exchange rates, changes in global economic conditions and customer demand and spending, inflation, interest rates, regional labor market constraints, world events, the rate of growth of the internet, online commerce, cloud services, and new and emerging technologies, the amount that Amazon.com invests in new business opportunities and the timing of those investments, the mix of products and services sold to customers, the mix of net sales derived from products as compared with services, the extent to which we owe income or other taxes, competition, management of growth, potential fluctuations in operating results, international growth and expansion, the outcomes of claims, litigation, government investigations, and other proceedings, fulfillment, sortation, delivery, and data center optimization, risks of inventory management, variability in demand, the degree to which we enter into, maintain, and develop commercial agreements, proposed and completed acquisitions and strategic transactions, payments risks, and risks of fulfillment throughput and productivity.

In addition, global economic and geopolitical conditions and additional or unforeseen circumstances, developments, or events may give rise to or amplify many of these risks.

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of suppliers, seasonality, and changes in payment and other terms over time, including the effect of balancing pricing and timing of payment terms with suppliers.

We expect spending in technology and content will increase over time as we add computer scientists, designers, software and hardware engineers, and merchandising employees.

Our technology and content investment and capital spending projects often support a variety of product and service offerings due to geographic expansion and the cross-functionality of our systems and operations.

We seek to invest efficiently in several areas of technology and content, including AWS, and expansion of new and existing product categories and service offerings, as well as in technology infrastructure to enhance the customer experience and improve our process efficiencies.

We expect spending in technology and infrastructure will increase over time as we add computer scientists, designers, software and hardware engineers, and merchandising employees.

Our technology and infrastructure investment and capital spending projects often support a variety of product and service offerings due to geographic expansion and the cross-functionality of our systems and operations.

We seek to invest efficiently in several areas of technology and infrastructure, including AWS, and expansion of new and existing product categories and service offerings, as well as in infrastructure to enhance the customer experience and improve our process efficiencies.

We believe that advances in technology, specifically the speed and reduced cost of processing power, data storage and analytics, improved wireless connectivity, and the practical applications of artificial intelligence and machine learning, will continue to improve users’ experience on the internet and increase its ubiquity in people’s lives.

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We also believe it is useful to evaluate our operating results and growth rates before and after the effect of currency changes.

In addition, the remeasurement of our intercompany balances can result in significant gains and losses associated with the effect of movements in foreign currency exchange rates.

In addition, the remeasurement of our intercompany balances can result in significant gains and losses associated with the effect of movements in foreign exchange rates.

Currency volatilities may continue, which may significantly impact (either positively or negatively) our reported results and consolidated trends and comparisons.

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In addition, our actual and forecasted earnings are subject to change due to economic, political, and other conditions and significant judgment is required in determining our ability to use our deferred tax assets.

Our effective tax rates could be affected by numerous factors, such as changes in our business operations, acquisitions, investments, entry into new businesses and geographies, intercompany transactions, the relative amount of our foreign earnings, including earnings being lower than anticipated in jurisdictions where we have lower statutory rates and higher than anticipated in jurisdictions where we have higher statutory rates, losses incurred in jurisdictions for which we are not able to realize related tax benefits, the applicability of special tax regimes, changes in foreign currency exchange rates, changes in our stock price, changes to our forecasts of income and loss and the mix of jurisdictions to which they relate, changes in our deferred tax assets and liabilities and their valuation, changes in the laws, regulations, administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions.

Our effective tax rates could be affected by numerous factors, such as changes in our business operations, acquisitions, investments, entry into new businesses and geographies, intercompany transactions, the relative amount of our foreign earnings, including earnings being lower than anticipated in jurisdictions where we have lower statutory rates and higher than anticipated in jurisdictions where we have higher statutory rates, losses incurred in jurisdictions for which we are not able to realize related tax benefits, the applicability of special tax regimes, changes in foreign exchange rates, changes in our stock price, changes to our forecasts of income and loss and the mix of jurisdictions to which they relate, changes in our deferred tax assets and liabilities and their valuation, changes in the laws, regulations, administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions.

In addition, a number of countries have enacted or are actively pursuing changes to their tax laws applicable to corporate multinationals.

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Amounts held in foreign currencies were $18.3 billion and $23.5 billion as of December 31, 2022 and 2023.

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

Our foreign currency balances include British Pounds, Canadian Dollars, Euros, Indian Rupees, and Japanese Yen.

Cash provided by (used in) operating activities was $46.8 billion and $84.9 billion in 2022 and 2023.

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Cash received from our customers and other activities generally corresponds to our net sales.

The increase in operating cash flow in 2022, compared to the prior year, was primarily due to the increase in net income, excluding non-cash expenses, partially offset by changes in working capital.

The increase in operating cash flow in 2023, compared to the prior year, was due to an increase in net income (loss), excluding non-cash expenses, and changes in working capital.

Working capital at any specific point in time is subject to many variables, including variability in demand, inventory management and category expansion, the timing of cash receipts and payments, customer and vendor payment terms, and fluctuations in foreign exchange rates.

Cash provided by (used in) investing activities corresponds with cash capital expenditures, including leasehold improvements, incentives received from property and equipment vendors, proceeds from asset sales, cash outlays for acquisitions, investments in other companies and intellectual property rights, and purchases, sales, and maturities of marketable securities.

Cash provided by (used in) investing activities was $(58.2) billion and $(37.6) billion in 2021 and 2022, with the variability caused primarily by purchases, sales, and maturities of marketable securities.

Cash capital expenditures were $55.4 billion, and $58.3 billion in 2021 and 2022, which primarily reflect investments in technology infrastructure (the majority of which is to support AWS business growth) and in additional capacity to support our fulfillment network.

We expect to continue these investments over time, with increased spending on technology infrastructure.

acquisitions, investments in other companies and intellectual property rights, and purchases, sales, and maturities of marketable securities.

Cash provided by (used in) investing activities was $(37.6) billion and $(49.8) billion in 2022 and 2023, with the variability caused primarily by purchases, sales, and maturities of marketable securities and cash capital expenditures.

Cash capital expenditures were $58.3 billion, and $48.1 billion in 2022 and 2023, which primarily reflect investments in technology infrastructure (the majority of which is to support AWS business growth) and in additional capacity to support our fulfillment network, which investments we expect to increase in 2024.

We made cash payments, net of acquired cash, related to acquisition and other investment activity of $8.3 billion and $5.8 billion in 2022 and 2023.

We funded the acquisition of MGM Holdings Inc.

with cash on hand.

We expect to fund the acquisitions of 1Life Healthcare, Inc.

(One Medical) and iRobot Corporation with cash on hand.

We funded the acquisitions of MGM Holdings Inc.

in 2022 and 1Life Healthcare, Inc.

(One Medical) in 2023 with cash on hand.

In 2023, we invested $1.25 billion in a note from Anthropic, PBC, which is convertible into equity.

We have an agreement that expires in Q1 2024 to invest up to an additional $2.75 billion in a second convertible note.

Cash provided by (used in) financing activities was $9.7 billion and $(15.9) billion in 2022 and 2023.

Cash inflows from financing activities resulted from proceeds from short-term debt, and other and long-term-debt of $62.7 billion and $18.1 billion in 2022 and 2023.

Cash outflows from financing activities resulted from repurchases of common stock, payments of short-term debt, and other, long-term debt, finance leases, and financing obligations of $20.7 billion and $53.0 billion in 2021 and 2022.

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

We had no borrowings outstanding under the two unsecured revolving credit facilities, $6.8 billion of borrowings outstanding under the commercial paper programs, and $1.0 billion of borrowings outstanding under the secured revolving credit facility as of December 31, 2022.

Cash outflows from financing activities resulted from repurchases of common stock in 2022, payments of short-term debt, and other, long-term debt, finance leases, and financing obligations of $53.0 billion and $34.0 billion in 2022 and 2023.

Property and equipment acquired under finance leases was $675 million and $642 million in 2022 and 2023.

We had no borrowings outstanding under the two unsecured revolving credit facilities or the commercial paper programs, we had $682 million of borrowings outstanding under the secured revolving credit facility, and the entire amount of the term loan has been repaid as of December 31, 2023.

See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 6 — Debt” for additional information.

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taxable income is reduced by accelerated depreciation deductions and increased by the impact of capitalized research and development expenses.

tax rules provide for enhanced accelerated depreciation deductions by allowing the election of full expensing of qualified property, primarily equipment, through 2022.

Our federal tax provision included a partial election for 2020 and 2021, and a full election for 2022.

Effective January 1, 2022, research and development expenses are required to be capitalized and amortized for U.S.

tax rules provide for enhanced accelerated depreciation deductions by allowing us to expense a portion of qualified property, primarily equipment.

These enhanced deductions are scheduled to phase out annually from 2023 through 2026.

Our federal tax provision included a partial accelerated depreciation deduction election for 2021, and a full election for 2022 and 2023.

Additionally, effective January 1, 2022, research and development expenses are required to be capitalized and amortized for U.S.

tax purposes, which delays the deductibility of these expenses.

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

Cash paid for U.S.

(federal and state) and foreign income taxes (net of refunds) totaled $6.0 billion and $11.2 billion for 2022 and 2023.

As of December 31, 2022 and 2023, restricted cash, cash equivalents, and marketable securities were $365 million and $503 million.

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There can be no assurance that additional credit lines or financing instruments will be available in amounts or on terms acceptable to us, if at all.

In addition, economic conditions and actions by policymaking bodies are contributing to rising interest rates and significant capital market volatility, which, along with increases in our borrowing levels, could increase our future borrowing costs.

In addition, economic conditions and actions by policymaking bodies are contributing to changing interest rates and significant capital market volatility, which, along with any increases in our borrowing levels, could increase our future borrowing costs.

Results of Operations

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See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 10 — Segment Information.”

Macroeconomic factors, including inflation, increased interest rates, significant capital market volatility, the prolonged COVID-19 pandemic, global supply chain constraints, and global economic and geopolitical developments, have direct and indirect impacts on our results of operations that are difficult to isolate and quantify.

These factors contributed to increases in our operating costs during 2022, particularly across our North America and International segments, primarily due to a return to more normal, seasonal demand volumes in relation to our fulfillment network fixed costs, increased transportation and utility costs, and increased wage rates.

In addition, rising fuel, utility, and food costs, rising interest rates, and recessionary fears may impact customer demand and our ability to forecast consumer spending patterns.

Macroeconomic factors, including inflation, increased interest rates, significant capital market and supply chain volatility, and global economic and geopolitical developments, have direct and indirect impacts on our results of operations that are difficult to isolate and quantify.

In addition, changes in fuel, utility, and food costs, interest rates, and economic outlook may impact customer demand and our ability to forecast consumer spending patterns.

We also expect the current macroeconomic environment and enterprise customer cost optimization efforts to impact our AWS revenue growth rates.

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Product sales represent revenue from the sale of products and related shipping fees and digital media content where we record revenue gross.

Service sales primarily represent third-party seller fees, which includes commissions and any related fulfillment and shipping fees, AWS sales, advertising services, Amazon Prime membership fees, and certain digital content subscriptions.

Net sales information is as follows (in millions):

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Sales increased 12% in 2023, compared to the prior year.

Changes in foreign currency exchange rates reduced net sales by $15.5 billion in 2022.

Changes in foreign exchange rates reduced net sales by $71 million in 2023.

For a discussion of the effect of foreign exchange rates on sales growth, see “Effect of Foreign Exchange Rates” below.

North America sales increased 12% in 2023, compared to the prior year.

The sales growth primarily reflects increased unit sales, including sales by third-party sellers, advertising sales, and subscription services.

The sales growth primarily reflects increased unit sales, primarily by third-party sellers, advertising sales, and subscription services.

Increased unit sales were driven largely by our continued focus on price, selection, and convenience for our customers, including from our shipping offers.

International sales decreased 8% in 2022, compared to the prior year, primarily due to the impact of changes in foreign currency exchange rates, partially offset by increased unit sales, including sales by third-party sellers, advertising sales, and subscription services.

International sales increased 11% in 2023, compared to the prior year.

The sales growth primarily reflects increased unit sales, primarily by third-party sellers, advertising sales, and subscription services.

Increased unit sales were driven largely by our continued focus on price, selection, and convenience for our customers, including from our shipping offers.

Changes in foreign currency exchange rates reduced International net sales by $15.0 billion in 2022.

Changes in foreign exchange rates increased International net sales by $88 million in 2023.

AWS sales increased 13% in 2023, compared to the prior year.

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We believe that operating income is a more meaningful measure than gross profit and gross margin due to the diversity of our product categories and services.

The North America operating loss in 2022, as compared to the operating income in the prior year, is primarily due to increased fulfillment and shipping costs, due in part to increases in investments in our fulfillment network, transportation costs, and wage rates and incentives, increased technology and content costs, and growth in certain operating expenses, partially offset by increased unit sales, including sales by third-party sellers, and advertising sales.

Changes in foreign currency exchange rates positively impacted operating loss by $274 million in 2022.

The increase in International operating loss in absolute dollars in 2022, compared to the prior year, is primarily due to increased fulfillment and shipping costs, due in part to increases in investments in our fulfillment network, transportation costs, and wage rates and incentives, increased technology and content costs, and growth in certain operating expenses, partially offset by increased advertising sales and increased unit sales, including sales by third-party sellers.

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

The increase in AWS operating income in absolute dollars in 2022, compared to the prior year, is primarily due to increased sales and cost structure productivity, including a reduction in depreciation and amortization expense from our change in the estimated useful lives of our servers and networking equipment, partially offset by increased payroll and related expenses and spending on technology infrastructure, all of which were primarily driven by additional investments to support AWS business growth.

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

The North America operating income in 2023, as compared to the operating loss in the prior year, is primarily due to increased unit sales and increased advertising sales, partially offset by increased shipping and fulfillment costs and increased technology and infrastructure costs.

The decrease in International operating loss in absolute dollars in 2023, compared to the prior year, is primarily due to increased unit sales and increased advertising sales, partially offset by increased fulfillment and shipping costs and increased technology and infrastructure costs.

Changes in foreign exchange rates positively impacted operating loss by $246 million in 2023.

The increase in AWS operating income in absolute dollars in 2023, compared to the prior year, is primarily due to increased sales, partially offset by increased payroll and related expenses and spending on technology infrastructure, both of which were primarily driven by additional investments to support AWS business growth.

Changes in foreign exchange rates positively impacted operating income by $220 million in 2023.

Operating Expenses

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Fulfillment 84,299 90,619

Technology and content 56,052 73,213

Technology and infrastructure 73,213 85,622

Sales and marketing 42,238 44,370

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Fulfillment 12 7

Technology and content 31 31

Technology and infrastructure 31 17

Sales and marketing 30 5

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Fulfillment 16.4 15.8

Technology and content 11.9 14.2

Technology and infrastructure 14.2 14.9

Sales and marketing 8.2 7.7

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Cost of sales primarily consists of the purchase price of consumer products, inbound and outbound shipping costs, including costs related to sortation and delivery centers and where we are the transportation service provider, and digital media content costs where we record revenue gross, including video and music.

The increase in cost of sales in absolute dollars in 2022, compared to the prior year, is primarily due to increased shipping and product costs resulting from increased sales and increases in investments in our fulfillment network, transportation costs, and wage rates and incentives.

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

The increase in cost of sales in absolute dollars in 2023, compared to the prior year, is primarily due to increased product and shipping costs resulting from increased sales, partially offset by fulfillment network efficiencies and lower transportation rates.

Changes in foreign exchange rates reduced cost of sales by $254 million in 2023.

Shipping costs were $83.5 billion and $89.5 billion in 2022 and 2023.

Shipping costs to receive products from our suppliers are included in our inventory and recognized as cost of sales upon sale of products to our customers.

Shipping costs, which include sortation and delivery centers and transportation costs, were $76.7 billion and $83.5 billion in 2021 and 2022.

We expect our cost of shipping to continue to increase to the extent our customers accept and use our shipping offers at an increasing rate, we use more expensive shipping methods, including faster delivery, and we offer additional services.

We seek to mitigate costs of shipping over time in part through achieving higher sales volumes, optimizing our fulfillment network, negotiating better terms with our suppliers, and achieving better operating efficiencies.

We believe that offering low prices to our customers is fundamental to our future success, and one way we offer lower prices is through shipping offers.

Costs to operate our AWS segment are primarily classified as “Technology and content” as we leverage a shared infrastructure that supports both our internal technology requirements and external sales to AWS customers.

Costs to operate our AWS segment are primarily classified as “Technology and infrastructure” as we leverage a shared infrastructure that supports both our internal technology requirements and external sales to AWS customers.

Fulfillment costs primarily consist of those costs incurred in operating and staffing our North America and International fulfillment centers, physical stores, and customer service centers and payment processing costs.

While AWS payment processing and related transaction costs are included in “Fulfillment,” AWS costs are primarily classified as “Technology and content.” Fulfillment costs as a percentage of net sales may vary due to several factors, such as payment processing and related

transaction costs, our level of productivity and accuracy, changes in volume, size, and weight of units received and fulfilled, the extent to which third-party sellers utilize Fulfillment by Amazon services, timing of fulfillment network and physical store expansion, the extent we utilize fulfillment services provided by third parties, mix of products and services sold, and our ability to affect customer service contacts per unit by implementing improvements in our operations and enhancements to our customer self-service features.

While AWS payment processing and related transaction costs are included in “Fulfillment,” AWS costs are primarily classified as “Technology and infrastructure.” Fulfillment costs as a percentage of net sales may vary due to several factors, such as payment processing and related transaction costs, our level of productivity and accuracy, changes in volume, size, and weight of units received and

fulfilled, the extent to which third-party sellers utilize Fulfillment by Amazon services, timing of fulfillment network and physical store expansion, the extent we utilize fulfillment services provided by third parties, mix of products and services sold, and our ability to affect customer service contacts per unit by implementing improvements in our operations and enhancements to our customer self-service features.

Additionally, sales by our sellers have higher payment processing and related transaction costs as a percentage of net sales compared to our retail sales because payment processing costs are based on the gross purchase price of underlying transactions.

The increase in fulfillment costs in absolute dollars in 2022, compared to the prior year, is primarily due to increased investments in our fulfillment network and variable costs corresponding with increased product and service sales volume and inventory levels, and increased wage rates and incentives.

Changes in foreign exchange rates reduced fulfillment costs by $2.5 billion in 2022.

The increase in fulfillment costs in absolute dollars in 2023, compared to the prior year, is primarily due to increased sales and investments in our fulfillment network, partially offset by fulfillment network efficiencies.

Changes in foreign exchange rates increased fulfillment costs by $52 million in 2023.

We seek to expand our fulfillment network to accommodate a greater selection and in-stock inventory levels and to meet anticipated shipment volumes from sales of our own products as well as sales by third parties for which we provide the fulfillment services.

We regularly evaluate our facility requirements.

Technology and Content

Technology and content costs include payroll and related expenses for employees involved in the research and development of new and existing products and services, development, design, and maintenance of our stores, curation and display of products and services made available in our online stores, and infrastructure costs.

Technology and Infrastructure

Technology and infrastructure costs include payroll and related expenses for employees involved in the research and development of new and existing products and services, development, design, and maintenance of our stores, curation and display of products and services made available in our online stores, and infrastructure costs.

Infrastructure costs include servers, networking equipment, and data center related depreciation and amortization, rent, utilities, and other expenses necessary to support AWS and other Amazon businesses.

Collectively, these costs reflect the investments we make in order to offer a wide variety of products and services to our customers, including expenditures related to initiatives to build and deploy innovative and efficient software and electronic devices and the development of a satellite network for global broadband service and autonomous vehicles for ride-hailing services.

We seek to invest efficiently in numerous areas of technology and content so we may continue to enhance the customer experience and improve our process efficiency through rapid technology developments, while operating at an ever increasing scale.

We expect spending in technology and content to increase over time as we continue to add employees and technology infrastructure.

We seek to invest efficiently in numerous areas of technology and infrastructure so we may continue to enhance the customer experience and improve our process efficiency through rapid technology developments, while operating at an ever increasing scale.

We expect spending in technology and infrastructure to increase over time as we continue to add employees and infrastructure.

These costs are allocated to segments based on usage.

The increase in technology and content costs in absolute dollars in 2022, compared to the prior year, is primarily due to increased payroll and related costs associated with technical teams responsible for expanding our existing products and services and initiatives to introduce new products and service offerings, and an increase in spending on technology infrastructure, partially offset by a reduction in depreciation and amortization expense from our change in the estimated useful lives of our servers and networking equipment.

See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 1 — Description of Business, Accounting Policies, and Supplemental Disclosures — Use of Estimates” for additional information on the change in estimated useful lives of our servers and networking equipment.

The increase in technology and infrastructure costs in absolute dollars in 2023, compared to the prior year, is primarily due to an increase in spending on infrastructure and increased payroll and related costs associated with technical teams responsible for expanding our existing products and services and initiatives to introduce new products and service offerings.

Sales and Marketing

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To the extent there is increased or decreased competition for these traffic sources, or to the extent our mix of these channels shifts, we would expect to see a corresponding change in our marketing costs.

The increase in sales and marketing costs in absolute dollars in 2022, compared to the prior year, is primarily due to increased payroll and related expenses for personnel engaged in marketing and selling activities and higher marketing spend.

The increase in sales and marketing costs in absolute dollars in 2023, compared to the prior year, is primarily due to increased payroll and related expenses for personnel engaged in marketing and selling activities.

While costs associated with Amazon Prime membership benefits and other shipping offers are not included in sales and marketing expense, we view these offers as effective worldwide marketing tools, and intend to continue offering them indefinitely.

General and Administrative

The increase in general and administrative costs in absolute dollars in 2022, compared to the prior year, is primarily due to increases in payroll and related expenses and professional fees.

General and administrative costs were $11.9 billion and $11.8 billion during 2022 and 2023, and were primarily related to payroll and related expenses and professional fees.

Other Operating Expense (Income), Net

Other operating expense (income), net was $62 million and $1.3 billion during 2021 and 2022, and was primarily related to the amortization of intangible assets and, for 2022, $1.1 billion of impairments of property and equipment and operating leases.

Other operating expense (income), net was $1.3 billion and $767 million during 2022 and 2023, and was primarily related to asset impairments for physical store closures in 2022 and for fulfillment network facilities and physical store closures in 2023, and the amortization of intangible assets.

Interest Income and Expense

Our interest income was $448 million and $989 million during 2021 and 2022, primarily due to an increase in prevailing rates.

We generally invest our excess cash in AAA-rated money market funds and investment grade short- to intermediate-term fixed income securities.

Our interest income was $989 million and $2.9 billion during 2022 and 2023, primarily due to an increase in prevailing rates.

We generally invest our excess cash in AAA-rated money market funds and investment grade short- to intermediate-term marketable debt securities.

Our interest income corresponds with the average balance of invested funds based on the prevailing rates, which vary depending on the geographies and currencies in which they are invested.

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Other Income (Expense), Net

Other income (expense), net was $14.6 billion and $(16.8) billion during 2021 and 2022.

Other income (expense), net was $(16.8) billion and $938 million during 2022 and 2023.

The primary components of other income (expense), net are related to equity securities valuations and adjustments, equity warrant valuations, and foreign currency.

Included in other income (expense), net in 2021 and 2022 is a marketable equity securities valuation gain (loss) of $11.8 billion and $(12.7) billion from our equity investment in Rivian.

Included in other income (expense), net in 2022 and 2023 is a marketable equity securities valuation gain (loss) of $(12.7) billion and $797 million from our equity investment in Rivian.

Our effective tax rate is subject to significant variation due to several factors, including variability in our pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, intercompany transactions, the applicability of special tax regimes, changes in how we do business, acquisitions, investments, developments in tax controversies, changes in our stock price, changes in our deferred tax assets and liabilities and their valuation, foreign currency gains (losses), changes in statutes, regulations, case law, and administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions, and relative changes of expenses or losses for which tax benefits are not recognized.

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These forward-looking statements reflect Amazon.com’s expectations as of February 1, 2024, and are subject to substantial uncertainty.

Our results are inherently unpredictable and may be materially affected by many factors, such as uncertainty regarding the impacts of the COVID-19 pandemic, fluctuations in foreign exchange rates, changes in global economic and geopolitical conditions and customer demand and spending (including the impact of recessionary fears), inflation, interest rates, regional labor market and global supply chain constraints, world events, the rate of growth of the Internet, online commerce, and cloud services, as well as those outlined in Item 1A of Part I, “Risk Factors.”

Our results are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic and geopolitical conditions and customer demand and spending (including the impact of recessionary fears), inflation, interest rates, regional labor market constraints, world events, the rate of growth of the internet, online commerce, cloud services, and new and emerging technologies, as well as those outlined in Item 1A of Part I, “Risk Factors.”

First Quarter 2024 Guidance

• Net sales are expected to be between $138.0 billion and $143.5 billion, or to grow between 8% and 13% compared with first quarter 2023.

This guidance anticipates an unfavorable impact of approximately 210 basis points from foreign exchange rates.

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

This guidance anticipates a favorable impact of approximately 40 basis points from foreign exchange rates.

• Operating income is expected to be between $8.0 billion and $12.0 billion, compared with $4.8 billion in first quarter 2023.

This guidance includes approximately $0.9 billion lower depreciation expense due to an increase in the estimated useful life of our servers beginning on January 1, 2024.

• This guidance assumes, among other things, that no additional business acquisitions, restructurings, or legal settlements are concluded.

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-K

Item 7. Management’s Discussion and Analysis