What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-01 compared with 2023-10-27 · 73 added, 103 removed, 222 unchanged (44% of the section changed)

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These assumptions about future disposition of inventory are inherently uncertain and changes in our estimates and assumptions may cause us to realize material write-downs in the future.

As a measure of sensitivity, for every 1% of additional inventory valuation allowance as of September 30, 2023, we would have recorded an additional cost of sales of approximately $375 million.

As a measure of sensitivity, for every 1% of additional inventory valuation allowance as of March 31, 2024, we would have recorded an additional cost of sales of approximately $330 million.

In addition, we enter into supplier commitments for certain electronic device components and certain products.

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Three Months Ended

September 30, Nine Months Ended

September 30, Twelve Months Ended

September 30,

March 31, Twelve Months Ended

2023 2024 2023 2024

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Financing activities 6,354 (1,256) 14,082 (23,489)

Our principal sources of liquidity are cash flows generated from operations and our cash, cash equivalents, and marketable securities balances, which, at fair value, were $70.0 billion and $64.2 billion as of December 31, 2022 and September 30, 2023.

Amounts held in foreign currencies were $18.3 billion and $13.7 billion as of December 31, 2022 and September 30, 2023.

Our principal sources of liquidity are cash flows generated from operations and our cash, cash equivalents, and marketable securities balances, which, at fair value, were $86.8 billion and $85.1 billion as of December 31, 2023 and March 31, 2024.

Amounts held in foreign currencies were $23.5 billion and $16.7 billion as of December 31, 2023 and March 31, 2024.

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

Cash provided by (used in) operating activities was $11.4 billion and $21.2 billion for Q3 2022 and Q3 2023, and $17.6 billion and $42.5 billion for the nine months ended September 30, 2022 and 2023.

Cash provided by (used in) operating activities was $4.8 billion and $19.0 billion for Q1 2023 and Q1 2024.

Our operating cash flows result primarily from cash received from our consumer, seller, developer, enterprise, and content creator customers, and advertisers, offset by cash payments we make for products and services, employee compensation, payment processing and related transaction costs, operating leases, and interest payments.

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

The increase in operating cash flow for the trailing twelve months ended September 30, 2023, compared to the comparable prior year period, was due to an increase in net income (loss), excluding non-cash expenses, and changes in working capital.

The increase in operating cash flow for the trailing twelve months ended March 31, 2024, compared to the comparable prior year period, was due to an increase in net income, 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 $(15.6) billion and $(11.8) billion for Q3 2022 and Q3 2023, and $(26.8) billion and $(37.2) billion for the nine months ended September 30, 2022 and 2023, with the variability caused primarily by purchases, sales, and maturities of marketable securities and cash capital expenditures.

Cash capital expenditures were $15.0 billion and $11.3 billion during Q3 2022 and Q3 2023, and $42.9 billion and $34.8 billion for the nine months ended September 30, 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.

We expect cash capital expenditures to decrease in 2023, primarily due to lower spending on our fulfillment network.

We made cash payments, net of acquired cash, related to acquisition and other investment activity of $885 million and $1.6 billion during Q3 2022 and Q3 2023, and $7.5 billion and $5.5 billion for the nine months ended September 30, 2022 and 2023.

We funded the acquisitions of

MGM Holdings Inc.

in 2022 and One Medical in 2023 with cash on hand.

We expect to fund the acquisition of iRobot Corporation with cash on hand.

In Q3 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 $3.0 billion and $(8.9) billion for Q3 2022 and Q3 2023, and $9.6 billion and $(9.1) billion for the nine months ended September 30, 2022 and 2023.

Cash inflows from financing activities resulted from proceeds from short-term debt, and other and long-term debt of $12.4 billion and $216 million for Q3 2022 and Q3 2023, and $43.9 billion and $17.4 billion for the nine months ended September 30, 2022 and 2023.

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 $9.4 billion and $9.2 billion in Q3 2022 and Q3 2023, and $34.2 billion and $26.5 billion for the nine months ended September 30, 2022 and 2023.

Property and equipment acquired under finance leases was $131 million and $183 million during Q3 2022 and Q3 2023, and $358 million and $431 million for the nine months ended September 30, 2022 and 2023.

We had no borrowings outstanding under the two unsecured revolving credit facilities, $567 million of borrowings outstanding under the commercial paper programs, $972 million of borrowings outstanding under our Credit Facility, and $5.0 billion of borrowings outstanding under the Term Loan as of September 30, 2023.

Cash provided by (used in) investing activities was $(15.8) billion and $(17.9) billion for Q1 2023 and Q1 2024, with the variability caused primarily by purchases, sales, and maturities of marketable securities and cash capital expenditures.

Cash capital expenditures were $13.1 billion and $13.9 billion during Q1 2023 and Q1 2024, 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 cash capital expenditures to meaningfully increase in 2024, primarily driven by investments in technology infrastructure.

We made cash payments, net of acquired cash, related to acquisition and other investment activity of $3.5 billion and $3.4 billion during Q1 2023 and Q1 2024.

We funded the acquisition of 1Life Healthcare, Inc.

(One Medical) in 2023 with cash on hand.

In Q3 2023, we invested $1.25 billion in a note from Anthropic, which is convertible to equity.

In Q1 2024, we invested $2.75 billion in a second convertible note.

Cash provided by (used in) financing activities was $6.4 billion and $(1.3) billion for Q1 2023 and Q1 2024.

Cash inflows from financing activities resulted from proceeds from short-term debt, and other and long-term debt of $12.8 billion and $338 million for Q1 2023 and Q1 2024.

Cash outflows from financing activities resulted from payments of short-term debt, and other, long-term debt, finance leases, and financing obligations of $6.4 billion and $1.6 billion in Q1 2023 and Q1 2024.

Property and equipment acquired under finance leases was $8 million and $42 million during Q1 2023 and Q1 2024.

We had no borrowings outstanding under the two unsecured revolving credit facilities or the commercial paper programs, and we had $352 million of borrowings outstanding under our Credit Facility as of March 31, 2024.

See Item 1 of Part I, “Financial Statements — Note 5 — Debt” for additional information.

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tax purposes, which delays the deductibility of these expenses.

As a result, we expect the cash taxes we pay in 2023 to increase significantly.

Cash taxes paid (net of refunds) were $742 million and $2.6 billion for Q3 2022 and Q3 2023, and $4.3 billion and $7.0 billion for the nine months ended September 30, 2022 and 2023.

As of December 31, 2022 and September 30, 2023, restricted cash, cash equivalents, and marketable securities were $365 million and $476 million.

Cash paid for U.S.

(federal and state) and foreign income taxes (net of refunds) totaled $619 million and $458 million for Q1 2023 and Q1 2024.

As of December 31, 2023 and March 31, 2024, restricted cash, cash equivalents, and marketable securities were $503 million and $480 million.

See Item 1 of Part I, “Financial Statements — Note 4 — Commitments and Contingencies” and “Financial Statements — Note 5 — Debt” for additional discussion of our principal contractual commitments, as well as our pledged assets.

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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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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, rising interest rates, and recessionary fears may impact customer demand and our ability to forecast consumer spending patterns.

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

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 expect some or all of these factors to continue to impact our operations into Q2 2024.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2023 2022 2023

North America $ 76,881 $ 86,341

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Consolidated $ 127,358 $ 143,313

Year-over-year Percentage Growth (Decline):

Year-over-year Percentage Growth:

North America 11 % 12 %

International 1 10

AWS 27 12 32 13

Consolidated 9 13

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International 9 11

AWS 28 12 32 13

Consolidated 11 13

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International 23 22

AWS 16 16 16 16

Consolidated 100 % 100 %

Sales increased 13% in Q3 2023, and 11% for the nine months ended September 30, 2023 compared to the comparable prior year periods.

Changes in foreign exchange rates increased net sales by $1.4 billion for Q3 2023, and reduced net sales by $1.3 billion for the nine months ended September 30, 2023.

Sales increased 13% in Q1 2024 compared to the comparable prior year period.

Changes in foreign exchange rates reduced net sales by $164 million for Q1 2024.

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

North America sales increased 11% in Q3 2023, and 11% for the nine months ended September 30, 2023 compared to the comparable prior year periods.

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 increased 16% in Q3 2023, and 9% for the nine months ended September 30, 2023 compared to the comparable prior year periods, primarily due to 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 exchange rates increased International net sales by $1.4 billion for Q3 2023, and reduced International net sales by $1.1 billion for the nine months ended September 30, 2023.

AWS sales increased 12% in Q3 2023, and 13% for the nine months ended September 30, 2023 compared to the comparable prior year periods.

North America sales increased 12% in Q1 2024 compared to the comparable prior year period.

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

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

International sales increased 10% in Q1 2024 compared to the comparable prior year period.

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

Increased unit sales

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

Changes in foreign exchange rates reduced International net sales by $248 million for Q1 2024.

AWS sales increased 17% in Q1 2024 compared to the comparable prior year period.

The sales growth primarily reflects increased customer usage, partially offset by pricing changes primarily driven by long-term customer contracts.

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Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2023 2022 2023

Operating Income (Loss)

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Consolidated $ 4,774 $ 15,307

Operating income increased from $2.5 billion in Q3 2022 to $11.2 billion in Q3 2023, and increased from $9.5 billion for the nine months ended September 30, 2022 to $23.6 billion for the nine months ended September 30, 2023.

Operating income increased from $4.8 billion in Q1 2023 to $15.3 billion in Q1 2024.

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 income in Q3 2023, as compared to the operating loss in the comparable prior year period, is primarily due to increased unit sales and increased advertising sales, partially offset by increased shipping and fulfillment costs.

The North America operating income for the nine months ended September 30, 2023, as compared to the operating loss in the comparable prior year period, is primarily due to increased unit sales and increased advertising sales, partially offset by increased shipping and fulfillment costs, increased technology and infrastructure costs, and growth in certain operating expenses.

Changes in foreign exchange rates negatively impacted operating income by $27 million for Q3 2023, and positively impacted operating income by $7 million for the nine months ended September 30, 2023.

The decrease in International operating loss in absolute dollars in Q3 2023, compared to the comparable prior year period, is primarily due to increased unit sales and increased advertising sales.

The decrease in International operating loss in absolute dollars for the nine months ended September 30, 2023, compared to the comparable prior year period, is primarily due to increased unit sales and increased advertising sales, partially offset by increased fulfillment and shipping costs, increased technology and infrastructure costs, and growth in certain operating expenses.

Changes in foreign exchange rates positively impacted operating loss by $228 million for Q3 2023, and by $86 million for the nine months ended September 30, 2023.

The increase in AWS operating income in absolute dollars in Q3 2023, compared to the comparable prior year period, is primarily due to increased sales and cost structure productivity, partially offset by spending on technology infrastructure, which was primarily driven by additional investments to support AWS business growth.

The decrease in AWS operating income in absolute dollars for the nine months ended September 30, 2023, compared to the comparable prior year period, is primarily due to increased payroll and related expenses and spending on technology infrastructure, both of which were primarily driven by additional investments to support AWS business growth, partially offset by increased sales.

Changes in foreign exchange rates negatively impacted operating income by $69 million for Q3 2023, and positively impacted operating income by $282 million for the nine months ended September 30, 2023.

The increase in North America operating income in Q1 2024, compared to the comparable prior year period, 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 International operating income in Q1 2024, as compared to the operating loss in the comparable prior year period, is primarily due to increased unit sales and increased advertising sales, partially offset by increased shipping and fulfillment costs.

Changes in foreign exchange rates did not significantly impact operating income for Q1 2024.

The increase in AWS operating income in Q1 2024, compared to the comparable prior year period, is primarily due to increased sales, decreased payroll and related expenses, and a reduction in depreciation and amortization expense from our change in the estimated useful lives of our servers, partially offset by spending on technology infrastructure that was primarily driven by additional investments to support AWS business growth.

Changes in foreign exchange rates positively impacted operating income by $67 million for Q1 2024.

Operating Expenses

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Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2023 2022 2023

Operating Expenses:

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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 Q3 2023 and for the nine months ended September 30, 2023, compared to the comparable prior year periods, 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 increased cost of sales by $818 million for Q3 2023, and reduced cost of sales by $1.0 billion for the nine months ended September 30, 2023.

The increase in cost of sales in Q1 2024, compared to the comparable prior year period, is primarily due to increased product and shipping costs resulting from increased sales, partially offset by fulfillment network efficiencies, including lower transportation costs.

Changes in foreign exchange rates reduced cost of sales by $190 million for Q1 2024.

Shipping costs were $19.9 billion and $21.8 billion in Q1 2023 and Q1 2024.

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 $19.9 billion and $21.8 billion in Q3 2022 and Q3 2023, and $58.8 billion and $62.2 billion for the nine months ended September 30, 2022 and 2023.

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, and we offer additional services.

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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 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.

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 Q3 2023 and for the nine months ended September 30, 2023, compared to the comparable prior year periods, is primarily due to increased sales, partially offset by fulfillment network efficiencies.

Changes in foreign exchange rates increased fulfillment costs by $249 million for Q3 2023, and reduced fulfillment costs by $182 million for the nine months ended September 30, 2023.

The increase in fulfillment costs in Q1 2024, compared to the comparable prior year period, 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 $14 million for Q1 2024.

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.

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These costs are allocated to segments based on usage.

The increase in technology and infrastructure costs in absolute dollars in Q3 2023, compared to the comparable prior year period, is primarily due to an increase in spending on infrastructure.

The increase in technology and infrastructure costs in absolute dollars for the nine months ended September 30, 2023, compared to the comparable prior year period, 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 infrastructure.

Changes in foreign exchange rates increased technology and infrastructure costs by $87 million for Q3 2023, and reduced technology and infrastructure costs by $312 million for the nine months ended September 30, 2023.

The decrease in technology and infrastructure costs in Q1 2024, compared to the comparable prior year period, is primarily due to a reduction in depreciation and amortization expense from our change in the estimated useful life of our servers and decreased 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, partially offset by an increase in spending on infrastructure.

See Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” of our 2023 Annual Report on Form 10-K for a discussion of how management views advances in technology and the importance of innovation.

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Sales and marketing costs include advertising and payroll and related expenses for personnel engaged in marketing and selling activities, including sales commissions related to AWS.

We direct customers to our stores primarily through a number of marketing channels, such as our sponsored search, social and online advertising, third-party customer referrals, television advertising, and other initiatives.

We direct customers to our stores primarily through a number of marketing channels, such as our sponsored search, third-party customer referrals, social and online advertising, television advertising, and other initiatives.

Our marketing costs are largely variable, based on growth in sales and changes in rates.

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

The decrease in sales and marketing costs in absolute dollars in Q3 2023, compared to the comparable prior year period, is primarily due to lower marketing spend.

The increase in sales and marketing costs in absolute dollars for the nine months ended September 30, 2023, compared to the comparable prior year period, is primarily due to increased payroll and related expenses for personnel engaged in marketing and selling activities.

The decrease in sales and marketing costs in Q1 2024, compared to the comparable prior year period, is primarily due to decreased payroll and related expenses for personnel engaged in marketing and selling activities, and decreased advertising expenses.

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 decrease in general and administrative costs in absolute dollars in Q3 2023, compared to the comparable prior year period, is primarily due to a decrease in payroll and related expenses.

The increase in general and administrative costs in absolute dollars for the nine months ended September 30, 2023, compared to the comparable prior year period, is primarily due to an increase in payroll and related expenses.

The decrease in general and administrative costs in Q1 2024, compared to the comparable prior year period, is primarily due to a decrease in payroll and related expenses.

Other Operating Expense (Income), Net

Other operating expense (income), net was $165 million and $244 million for Q3 2022 and Q3 2023, and $504 million and $613 million for the nine months ended September 30, 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.

Other operating expense (income), net was $223 million and $228 million for Q1 2023 and Q1 2024, and was primarily related to asset impairments and the amortization of intangible assets.

Interest Income and Expense

Our interest income was $277 million and $776 million during Q3 2022 and Q3 2023, and $544 million and $2.0 billion for the nine months ended September 30, 2022 and 2023, primarily due to an increase in prevailing rates.

Our interest income was $611 million and $993 million during Q1 2023 and Q1 2024, 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.

Interest expense was $617 million and $806 million during Q3 2022 and Q3 2023, and $1.7 billion and $2.5 billion for the nine months ended September 30, 2022 and 2023, and was primarily related to debt and finance leases.

Interest expense was $823 million and $644 million during Q1 2023 and Q1 2024, and was primarily related to debt and finance leases.

See Item 1 of Part I, “Financial Statements — Note 3 — Leases and Note 5 — Debt” for additional information.

Other Income (Expense), Net

Other income (expense), net was $759 million and $1.0 billion during Q3 2022 and Q3 2023, and $(13.4) billion and $649 million for the nine months ended September 30, 2022 and 2023.

Other income (expense), net was $(443) million and $(2.7) billion during Q1 2023 and Q1 2024.

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 is a marketable equity securities valuation gain (loss) of $1.1 billion and $1.2 billion in Q3 2022 and Q3 2023, and $(10.4) billion and $926 million for the nine months ended September 30, 2022 and 2023, from our equity investment in Rivian.

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.

Our income tax provision for the nine months ended September 30, 2023 was $4.1 billion, which included $175 million of net discrete tax expense.

Included in other income (expense), net is a marketable equity securities valuation gain (loss) of $(467) million and $(2.0) billion in Q1 2023 and Q1 2024, from 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.

Our income tax provision for the three months ended March 31, 2024 was $2.5 billion, which included $558 million of net discrete tax benefits.

See Item 1 of Part I, “Financial Statements — Note 7 — Income Taxes” for additional information.

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Free Cash Flow

Free cash flow is cash flow from operations reduced by “Purchases of property and equipment, net of proceeds from sales and incentives.” The following is a reconciliation of free cash flow to the most comparable GAAP cash flow measure, “Net cash provided by (used in) operating activities,” for the trailing twelve months ended September 30, 2022 and 2023 (in millions):

Twelve Months Ended

September 30,

Net cash provided by (used in) operating activities $ 54,330 $ 99,147

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Free cash flow less principal repayments of finance leases and financing obligations is free cash flow reduced by “Principal repayments of finance leases” and “Principal repayments of financing obligations.” Principal repayments of finance leases and financing obligations approximates the actual payments of cash for our finance leases and financing obligations.

The following is a reconciliation of free cash flow less principal repayments of finance leases and financing obligations to the most comparable GAAP cash flow measure, “Net cash provided by (used in) operating activities,” for the trailing twelve months ended September 30, 2022 and 2023 (in millions):

Twelve Months Ended

September 30,

Net cash provided by (used in) operating activities $ 54,330 $ 99,147

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In this measure, equipment acquired under finance leases is reflected as if these assets had been purchased with cash, which is not the case as these assets have been leased.

The following is a reconciliation of free cash flow less equipment finance leases and principal repayments of all other finance leases and financing obligations to the most comparable GAAP cash flow measure, “Net cash provided by (used in) operating activities,” for the trailing twelve months ended September 30, 2022 and 2023 (in millions):

Twelve Months Ended

September 30,

Net cash provided by (used in) operating activities $ 54,330 $ 99,147

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___________________

(1) For the twelve months ended September 30, 2022 and 2023, this amount relates to equipment included in “Property and equipment acquired under finance leases, net of remeasurements and modifications” of $1,966 million and $748 million.

(2) For the twelve months ended September 30, 2022 and 2023, this amount relates to property included in “Principal repayments of finance leases” of $8,561 million and $5,245 million.

(1) For the twelve months ended March 31, 2023 and 2024, this amount relates to equipment included in “Property and equipment acquired under finance leases, net of remeasurements and modifications” of $517 million and $676 million.

(2) For the twelve months ended March 31, 2023 and 2024, this amount relates to property included in “Principal repayments of finance leases” of $6,544 million and $3,774 million.

All of these free cash flows measures have limitations as they omit certain components of the overall cash flow statement and do not represent the residual cash flow available for discretionary expenditures.

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Dollar is as follows (in millions):

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

2022 2023 2022 2023

Reported Exchange

Effect (1) At Prior

Rates (2) As Reported Exchange

Effect (1) At Prior

Three Months Ended March 31,

Reported Exchange

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(2) Represents the outcome that would have resulted had foreign exchange rates in the reported period been the same as those in effect in the comparable prior year period for operating results.

We provided guidance on October 26, 2023, in our earnings release furnished on Form 8-K as set forth below.

These forward-looking statements reflect Amazon.com’s expectations as of October 26, 2023, and are subject to substantial uncertainty.

We provided guidance on April 30, 2024, in our earnings release furnished on Form 8-K as set forth below.

These forward-looking statements reflect Amazon.com’s expectations as of April 30, 2024, and are subject to substantial uncertainty.

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 II, “Risk Factors.”

Fourth Quarter 2023 Guidance

• Net sales are expected to be between $160.0 billion and $167.0 billion, or to grow between 7% and 12% compared with fourth quarter 2022.

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

• Operating income is expected to be between $7.0 billion and $11.0 billion, compared with $2.7 billion in fourth quarter 2022.

Second Quarter 2024 Guidance

• Net sales are expected to be between $144.0 billion and $149.0 billion, or to grow between 7% and 11% compared with second quarter 2023.

This guidance anticipates an unfavorable impact of approximately 60 basis points from foreign exchange rates.

In first quarter 2024 the impact from Leap Year added approximately 120 basis points to the year-over-year net sales growth rate.

• Operating income is expected to be between $10.0 billion and $14.0 billion, compared with $7.7 billion in second quarter 2023.

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

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What changed 10-Q

Item 2. Management’s Discussion and Analysis