What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-02 compared with 2024-05-01 · 77 added, 61 removed, 234 unchanged (37% of the section changed)

20 unchanged sentences

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 March 31, 2024, we would have recorded an additional cost of sales of approximately $330 million.

As a measure of sensitivity, for every 1% of additional inventory valuation allowance as of June 30, 2024, we would have recorded an additional cost of sales of approximately $360 million.

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

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Three Months Ended

March 31, Twelve Months Ended

June 30, Six Months Ended

June 30, Twelve Months Ended

2023 2024 2023 2024 2023 2024

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Financing activities (6,539) (4,490) (185) (5,746) 2,917 (21,440)

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 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 $89.1 billion as of December 31, 2023 and June 30, 2024.

Amounts held in foreign currencies were $23.5 billion and $18.4 billion as of December 31, 2023 and June 30, 2024.

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

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

Cash provided by (used in) operating activities was $16.5 billion and $25.3 billion for Q2 2023 and Q2 2024, and $21.3 billion and $44.3 billion for the six months ended June 30, 2023 and 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 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.

The increase in operating cash flow for the trailing twelve months ended June 30, 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 $(15.8) 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.

Cash provided by (used in) investing activities was $(9.7) billion and $(22.1) billion for Q2 2023 and Q2 2024, and $(25.5) billion and $(40.0) billion for the six months ended June 30, 2023 and 2024, with the variability caused primarily by purchases, sales, and maturities of marketable securities and cash capital expenditures.

Cash capital expenditures were $10.4 billion and $16.4 billion during Q2 2023 and Q2 2024, and $23.5 billion and $30.3 billion for the six months ended June 30, 2023 and 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.

We made cash payments, net of acquired cash, related to acquisition and other investment activity of $316 million and $571 million during Q2 2023 and Q2 2024, and $3.8 billion and $3.9 billion for the six months ended June 30, 2023 and 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 Q3 2023, we invested $1.25 billion in a convertible note from Anthropic.

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.

Cash provided by (used in) financing activities was $(6.5) billion and $(4.5) billion for Q2 2023 and Q2 2024, and $(185) million and $(5.7) billion for the six months ended June 30, 2023 and 2024.

Cash inflows from financing activities resulted from proceeds from short-term debt, and other and long-term debt of $4.4 billion and $525 million for Q2 2023 and Q2 2024, and $17.2 billion and $863 million for the six months ended June 30, 2023 and 2024.

Cash outflows from financing activities resulted from payments of short-term debt, and other, long-term debt, finance leases, and financing obligations of $10.9 billion and $5.0 billion in Q2 2023 and Q2 2024, and $17.4 billion and $6.6 billion for the six months ended June 30, 2023 and 2024.

Property and equipment acquired under finance leases was $240 million and $181 million during Q2 2023 and Q2 2024, and $248 million and $223 million for the six months ended June 30, 2023 and 2024.

We had no borrowings outstanding under the two unsecured revolving credit facilities or the commercial paper programs, and we had $183 million of borrowings outstanding under our Credit Facility as of June 30, 2024.

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

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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.

(federal and state) and foreign income taxes (net of refunds) totaled $3.7 billion and $5.7 billion for Q2 2023 and Q2 2024, and $4.4 billion and $6.2 billion for the six months ended June 30, 2023 and 2024.

As of December 31, 2023 and June 30, 2024, restricted cash, cash equivalents, and marketable securities were $503 million and $495 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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Three Months Ended

June 30, Six Months Ended

2023 2024 2023 2024

North America $ 82,546 $ 90,033 $ 159,427 $ 176,374

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International 10 7 5 8

AWS 12 19 14 18

Consolidated 11 10 10 11

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International 10 10 10 10

AWS 12 19 14 18

Consolidated 11 11 11 12

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International 22 21 22 22

AWS 17 18 17 18

Consolidated 100 % 100 % 100 % 100 %

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.

Sales increased 10% in Q2 2024, and 11% for the six months ended June 30, 2024 compared to the comparable prior year periods.

Changes in foreign exchange rates reduced net sales by $1.0 billion for Q2 2024, and by $1.2 billion for the six months ended June 30, 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 12% in Q1 2024 compared to the comparable prior year period.

North America sales increased 9% in Q2 2024, and 11% for the six months ended June 30, 2024 compared to the comparable prior year periods.

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.

International sales increased 7% in Q2 2024, and 8% for the six months ended June 30, 2024 compared to the comparable prior year periods.

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.

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 $974 million for Q2 2024, and by $1.2 billion for the six months ended June 30, 2024 .

AWS sales increased 19% in Q2 2024, and 18% for the six months ended June 30, 2024 compared to the comparable prior year periods.

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

June 30, Six Months Ended

2023 2024 2023 2024

Operating Income (Loss)

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Consolidated $ 7,681 $ 14,672 $ 12,455 $ 29,979

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

Operating income increased from $7.7 billion in Q2 2023 to $14.7 billion in Q2 2024, and increased from $12.5 billion for the six months ended June 30, 2023 to $30.0 billion for the six months ended June 30, 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 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.

The increase in North America operating income in Q2 2024 and for the six months ended June 30, 2024, compared to the comparable prior year periods, is primarily due to increased unit sales and increased advertising sales, partially offset by increased fulfillment and shipping costs.

The International operating income in Q2 2024 and for the six months ended June 30, 2024, as compared to the operating loss in the comparable prior year periods, 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 Q2 2024 or for the six months ended June 30, 2024.

The increase in AWS operating income in Q2 2024 and for the six months ended June 30, 2024, compared to the comparable prior year periods, 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 $115 million for Q2 2024, and by $182 million for the six months ended June 30, 2024.

Operating Expenses

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Three Months Ended

June 30, Six Months Ended

2023 2024 2023 2024

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 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.

The increase in cost of sales in Q2 2024 and for the six months ended June 30, 2024, 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, including lower transportation costs.

Changes in foreign exchange rates reduced cost of sales by $705 million for Q2 2024, and by $895 million for the six months ended June 30, 2024.

Shipping costs were $20.5 billion and $22.0 billion in Q2 2023 and Q2 2024, and $40.4 billion and $43.8 billion for the six months ended June 30, 2023 and 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.

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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 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.

The increase in fulfillment costs in Q2 2024 and for the six months ended June 30, 2024 compared to the comparable prior year periods, is primarily due to increased sales and investments in our fulfillment network, partially offset by fulfillment network efficiencies.

Changes in foreign exchange rates reduced fulfillment costs by $137 million for Q2 2024, and by $123 million for the six months ended June 30, 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 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.

The increase in technology and infrastructure costs in Q2 2024 and for the six months ended June 30, 2024, compared to the comparable prior year periods, is primarily due to an increase in spending on infrastructure, partially offset by 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.

Changes in foreign exchange rates reduced technology and infrastructure costs by $117 million for Q2 2024, and by $154 million for the six months ended June 30, 2024.

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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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 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.

The decrease in sales and marketing costs in Q2 2024 and for the six months ended June 30, 2024, compared to the comparable prior year periods, is primarily due to decreased payroll and related expenses for personnel engaged in marketing and selling activities.

Changes in foreign exchange rates reduced sales and marketing costs by $100 million for Q2 2024, and by $125 million for the six months ended June 30, 2024.

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

The decrease in general and administrative costs in Q2 2024 and for the six months ended June 30, 2024, compared to the comparable prior year periods, is primarily due to a decrease in payroll and related expenses.

Other Operating Expense (Income), Net

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.

Other operating expense (income), net was $146 million and $97 million for Q2 2023 and Q2 2024, and $369 million and $325 million for the six months ended June 30, 2023 and 2024, and was primarily related to asset impairments and the amortization of intangible assets.

Interest Income and Expense

Our interest income was $611 million and $993 million during Q1 2023 and Q1 2024, primarily due to an increase in prevailing rates.

Our interest income was $661 million and $1.2 billion during Q2 2023 and Q2 2024, and $1.3 billion and $2.2 billion for the six months ended June 30, 2023 and 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 $823 million and $644 million during Q1 2023 and Q1 2024, and was primarily related to debt and finance leases.

Interest expense was $840 million and $589 million during Q2 2023 and Q2 2024, and $1.7 billion and $1.2 billion for the six months ended June 30, 2023 and 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 $(443) million and $(2.7) billion during Q1 2023 and Q1 2024.

Other income (expense), net was $61 million and $(18) million during Q2 2023 and Q2 2024, and $(382) million and $(2.7) billion for the six months ended June 30, 2023 and 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 $(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.

Included in other income (expense), net is a marketable equity securities valuation gain (loss) of $187 million and $391 million in Q2 2023 and Q2 2024, and $(280) million and $(1.6) billion for the six months ended June 30, 2023 and 2024, from 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.

Our income tax provision for the six months ended June 30, 2024 was $4.2 billion, which included $1.9 billion of net discrete tax benefits primarily attributable to excess tax benefits from stock-based compensation.

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 March 31, 2023 and 2024 (in millions):

Twelve Months Ended

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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 March 31, 2023 and 2024 (in millions):

Twelve Months Ended

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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 March 31, 2023 and 2024 (in millions):

Twelve Months Ended

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___________________

(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.

(1) For the twelve months ended June 30, 2023 and 2024, this amount relates to equipment included in “Property and equipment acquired under finance leases, net of remeasurements and modifications” of $696 million and $617 million.

(2) For the twelve months ended June 30, 2023 and 2024, this amount relates to property included in “Principal repayments of finance leases” of $5,705 million and $3,092 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 March 31,

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

2023 2024 2023 2024

Reported Exchange

2 unchanged sentences

Effect (1) At Prior

Reported Exchange

Effect (1) At Prior

Rates (2) As Reported Exchange

Effect (1) At Prior

Net sales $ 134,383 $ 285 $ 134,668 $ 147,977 $ 1,041 $ 149,018 $ 261,741 $ 2,721 $ 264,462 $ 291,290 $ 1,205 $ 292,495

4 unchanged sentences

(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 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.

We provided guidance on August 1, 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 August 1, 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.”

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.

Third Quarter 2024 Guidance

• Net sales are expected to be between $154.0 billion and $158.5 billion, or to grow between 8% and 11% compared with third quarter 2023.

This guidance anticipates an unfavorable impact of approximately 90 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.

• Operating income is expected to be between $11.5 billion and $15.0 billion, compared with $11.2 billion in third quarter 2023.

• 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-Q

Item 2. Management’s Discussion and Analysis