What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-06 compared with 2025-02-07 · 74 added, 97 removed, 252 unchanged (40% 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 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.

Actual results and outcomes could differ materially for a variety of reasons, including, among others, fluctuations in foreign exchange rates and energy prices, changes in global economic conditions, tariff and trade policies, resource and supply volatility, including for memory chips, 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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We also offer other services such as compute, storage, and database offerings, fulfillment, advertising, publishing, and digital content subscriptions.

Our financial focus is on long-term, sustainable growth in free cash flows.

Free cash flows are driven primarily by increasing operating income and efficiently managing accounts receivable, inventory, accounts payable, and cash capital expenditures, including our decision to purchase or lease property and equipment.

Our financial focus is on long-term, sustainable growth in free cash flow.

Free cash flow is driven primarily by increasing operating income and efficiently managing accounts receivable, inventory, accounts payable, and cash capital expenditures, including our decision to purchase or lease property and equipment.

Increases in operating income primarily result from increases in sales of products and services and efficiently managing our operating costs, partially offset by investments we make in longer-term strategic initiatives, including capital expenditures focused on improving the customer experience.

To increase sales of products and services, we focus on improving all aspects of the customer experience, including lowering prices, improving availability, offering faster delivery and performance times, increasing selection, producing original content, increasing product categories and service offerings, expanding product information, improving ease of use, improving reliability, and earning customer trust.

See “Results of Operations — Non-GAAP Financial Measures” below for additional information on our non-GAAP free cash flows financial measures.

See “Results of Operations — Non-GAAP Financial Measures” below for additional information on our non-GAAP free cash flow measure.

We seek to reduce our variable costs per unit and work to leverage our fixed costs.

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We expect variability in inventory turnover over time since it is affected by numerous factors, including our product mix, the mix of sales by us and by third-party sellers, our continuing focus on in-stock inventory availability and selection of product offerings, supply chain disruptions and resulting vendor lead times, our investment in new geographies and product lines, and the extent to which we choose to utilize third-party fulfillment providers.

We also expect some variability in accounts payable days over time since they are affected by several factors, including the mix of product sales, the mix of sales by third-party sellers, the mix

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 infrastructure will increase over time as we add computer scientists, designers, software and hardware engineers, and merchandising employees.

We also expect some variability in accounts payable days over

time since they are affected by several factors, including the mix of product sales, the mix of sales by third-party sellers, the mix 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 infrastructure will increase over time, which can negatively impact short-term free cash flow, as we add infrastructure and employees, including to support our artificial intelligence and machine learning initiatives, to support long-term growth.

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.

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Inventories, consisting of products available for sale, are primarily accounted for using the first-in first-out method, and are valued at the lower of cost and net realizable value.

This valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, returns to product

vendors, or liquidations, and expected recoverable values of each disposition category.

This valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable values of each disposition category.

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.

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The increase in operating cash flow in 2025, 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.

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

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 $(94.3) billion and $(142.5) billion in 2024 and 2025, with the variability caused primarily by purchases, sales, and maturities of marketable securities and cash capital expenditures.

Cash capital expenditures were $48.1 billion, and $77.7 billion in 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 increase in 2025, primarily driven by investments in technology infrastructure.

We made cash payments, net of acquired cash, related to acquisition and other investment activity of $5.8 billion and $7.1 billion in 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 convertible note from Anthropic, PBC.

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

In Q4 2024, we entered into an agreement and invested $1.3 billion in a third convertible note, and will invest an additional $2.7 billion by Q4 2025.

Cash capital expenditures were $77.7 billion, and $128.3 billion in 2024 and 2025, 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, both of which we expect to increase in 2026.

We made cash payments, net of acquired cash, related to acquisition and other investment activity of $7.1 billion and $3.8 billion in 2024 and 2025, which primarily reflect investments in convertible notes from Anthropic, PBC (“Anthropic”), including $2.7 billion we invested in 2025.

Cash provided by (used in) financing activities was $(11.8) billion and $9.7 billion in 2024 and 2025.

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Cash outflows from financing activities resulted from payments of short-term debt, and other, long-term debt, finance leases, and financing obligations of $17.0 billion and $15.3 billion in 2024 and 2025.

Property and equipment acquired under finance leases was $642 million and $854 million in 2023 and 2024.

Property and equipment acquired under finance leases was $854 million and $2.9 billion in 2024 and 2025.

We had no borrowings outstanding under the two unsecured revolving credit facilities or the commercial paper programs as of December 31, 2025.

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in those jurisdictions in which we would incur significant, additional costs upon repatriation of such amounts.

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 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 accelerated depreciation deductions for 2022, 2023, and 2024.

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.

taxable income is reduced by accelerated depreciation deductions and the resulting U.S.

tax liability is reduced by tax credits, primarily related to the U.S.

federal research and development credit.

The One Big Beautiful Bill Act of 2025 (the “2025 Tax Act”) made changes to the U.S.

corporate income tax, including reinstating the option to claim 100% accelerated depreciation deductions on qualified property, with retroactive application beginning January 20, 2025 and immediate expensing of domestic research and development costs, with retroactive application beginning January 1, 2025.

The 2025 Tax Act significantly decreased our cash taxes in 2025.

Cash paid for U.S.

(federal and state) and foreign income taxes (net of refunds) totaled $12.3 billion and $8.3 billion for 2024 and 2025.

As of December 31, 2023 and 2024, restricted cash, cash equivalents, and marketable securities were $503 million and $3.5 billion.

We expect the 2025 Tax Act to have a similar effect on our cash taxes in 2026.

See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 9 — Income Taxes” for additional cash taxes paid information.

As of December 31, 2024 and 2025, restricted cash, cash equivalents, and marketable securities were $3.5 billion and $3.3 billion.

See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 6 — Debt” and “Financial Statements and Supplementary Data — Note 7 — Commitments and Contingencies” for additional discussion of our principal contractual commitments, as well as our pledged assets.

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However, any projections of future cash needs and cash flows are subject to substantial uncertainty.

See Item 1A of Part I, “Risk Factors.” We continually evaluate opportunities to sell additional equity or debt securities, obtain credit facilities, obtain finance and operating lease arrangements, enter into financing obligations, repurchase common stock, pay dividends, or repurchase, refinance, or otherwise restructure our debt for strategic reasons or to further strengthen our financial position.

See Item 1A of Part I, “Risk Factors.” We continually evaluate opportunities to sell additional equity or debt securities, obtain credit facilities, obtain finance and operating lease arrangements, enter into financing obligations, repurchase common stock, pay dividends, repurchase, refinance, or otherwise restructure our debt, or access capital through other financing arrangements for strategic reasons or to further strengthen our financial position.

The sale of additional equity or convertible debt securities would be dilutive to our shareholders.

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

Macroeconomic factors, including changes in inflation and interest rates, global economic and geopolitical developments, and the development and adoption of technologies and services, including artificial intelligence, have direct and indirect impacts on our results of operations that are difficult to isolate and quantify.

These could affect customer demand for our products and services, our ability to predict growth needs, expenses, and the benefits we gain from new technologies.

We expect some or all of them to continue to impact our operations into Q1 2025.

Macroeconomic factors, including changes in inflation and interest rates, resource and supply volatility, global economic and geopolitical developments, including unpredictable shifts in global tariff and trade policies, and the development and adoption of technologies and services, including artificial intelligence, have direct and indirect impacts on our results of operations that are difficult to predict, isolate, and quantify.

These could affect customer demand for our products and services, our ability to forecast growth needs, expenses, and benefits from new technologies.

Further, we expect to continue making additional investments in our artificial intelligence initiatives.

We expect some or all of these factors to continue to impact our results of operations into Q1 2026.

Net sales include product and service sales.

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Sales increased 12% in 2025, compared to the prior year.

Changes in foreign exchange rates reduced net sales by $2.3 billion in 2024.

Changes in foreign exchange rates increased net sales by $4.4 billion in 2025.

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

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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 $1.8 billion in 2024.

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 increased International net sales by $4.9 billion in 2025.

AWS sales increased 20% in 2025, compared to the prior year.

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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 2024, compared to the prior year, 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 $1.7 billion in 2024.

The increase in cost of sales in 2025, compared to the prior year, is primarily due to increased product and shipping costs resulting from increased sales, partially offset by operational efficiencies.

Changes in foreign exchange rates increased cost of sales by $2.8 billion in 2025.

Shipping costs were $95.8 billion and $102.7 billion in 2024 and 2025.

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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 2024, 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 reduced fulfillment costs by $223 million in 2024.

The increase in fulfillment costs in 2025, compared to the prior year, is primarily due to increased sales and investments in our fulfillment network, partially offset by operational efficiencies.

Changes in foreign exchange rates increased fulfillment costs by $609 million in 2025.

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

We expect spending in technology and infrastructure to increase over time as we continue to add infrastructure and employees, including to support our artificial intelligence and machine learning initiatives.

These costs are allocated to segments based on usage.

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

Changes in foreign exchange rates reduced technology and infrastructure costs by $244 million in 2024.

The increase in technology and infrastructure costs in 2025, compared to the prior year, is primarily due to an increase in spending on infrastructure, including depreciation and amortization.

Changes in foreign exchange rates increased technology and infrastructure costs by $312 million in 2025.

We currently expense the majority of the costs associated with the development of our satellite network for global broadband service (including production, launch, and payroll costs, and launch services deposits upon launch).

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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 2024, compared to the prior year, is primarily due to decreased payroll and related expenses for personnel engaged in marketing and selling activities, partially offset by increased advertising expenses.

Changes in foreign exchange rates reduced sales and marketing costs by $263 million in 2024.

The increase in sales and marketing costs in 2025, compared to the prior year, is primarily due to increased third-party advertising expenses.

Changes in foreign exchange rates increased sales and marketing costs by $283 million in 2025.

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

General and administrative costs in 2025 did not significantly change compared to the prior year.

Other Operating Expense (Income), Net

Other operating expense (income), net was $767 million and $763 million during 2023 and 2024, and was primarily related to asset impairments and the amortization of intangible assets.

Operating Income (Loss)

Operating income (loss) by segment is as follows (in millions):

Other operating expense (income), net was $763 million and $4.6 billion during 2024 and 2025.

The increase in 2025 was primarily related to the settlement of a lawsuit with the Federal Trade Commission (the “FTC”) in Q3 2025, and also included the resolution of tax disputes associated with our stores business in Italy, and physical stores and other asset impairments.

Operating Income

Operating income by segment is as follows (in millions):

Year Ended December 31,

Operating Income (Loss)

Operating Income

North America $ 24,967 $ 29,619

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Operating income was $68.6 billion and $80.0 billion for 2024 and 2025.

Operating income for 2025 includes charges of $2.5 billion we recorded in Q3 2025 related to the settlement of a lawsuit with the FTC and $2.7 billion, of which $1.8 billion was recorded in Q3 2025, of estimated severance costs primarily related to planned role eliminations.

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.

For more information on the operating expenses that impact segment operating income, see “Operating Expenses” and the descriptions of operating expense line item changes on pages 25 to 27, and “Note 10 — Segment Information” on page 67.

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

The International operating income in 2024, 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.

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

The increase in AWS operating income in 2024, compared to the prior year, 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.

The increase in North America operating income in 2025, compared to the prior year, is primarily due to increased unit sales and increased advertising sales, partially offset by increased fulfillment, technology and infrastructure, shipping, and other operating costs.

Changes in foreign exchange rates negatively impacted operating income by $204 million in 2025.

The increase in International operating income in 2025, compared to the prior year, is primarily due to increased unit sales and increased advertising sales, partially offset by increased fulfillment and shipping costs.

Changes in foreign exchange rates positively impacted operating income by $903 million in 2025.

The increase in AWS operating income in 2025, compared to the prior year, is primarily due to increased sales, partially offset by spending on technology infrastructure that was primarily driven by additional investments to support AWS business growth.

Changes in foreign exchange rates negatively impacted operating income by $341 million in 2025.

Interest Income and Expense

Our interest income was $2.9 billion and $4.7 billion during 2023 and 2024, primarily due to a higher average balance of invested funds at prevailing rates.

Our interest income was $4.7 billion and $4.4 billion during 2024 and 2025, primarily due to a decrease in prevailing rates, offset by a higher average balance of invested funds.

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

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Other Income (Expense), Net

Other income (expense), net was $938 million and $(2.3) billion during 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 in 2023 and 2024 is a marketable equity securities valuation gain (loss) of $797 million and $(1.6) billion from our equity investment in Rivian.

Other income (expense), net was $(2.3) billion and $15.2 billion during 2024 and 2025.

The primary components of other income (expense), net are related to equity securities valuations and adjustments, equity warrant valuations, foreign currency, and reclassification adjustments for gains (losses) on available-for-sale debt securities.

The net loss of $(2.3) billion in 2024 is primarily from the marketable securities loss from our equity investment in Rivian Automotive, Inc.

The net gain of $15.2 billion in 2025 is primarily from an upward adjustment for observable changes in price relating to our nonvoting

preferred stock in Anthropic, and the reclassification adjustments for the gains on available-for-sale debt securities from the portions of our convertible notes investments in Anthropic that were converted to nonvoting preferred stock during 2025.

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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In addition, we record valuation allowances against deferred tax assets when there is uncertainty about our ability to generate future income in relevant jurisdictions.

We recorded a provision (benefit) for income taxes of $7.1 billion and $9.3 billion in 2023 and 2024.

We recorded a provision for income taxes of $9.3 billion and $19.1 billion in 2024 and 2025.

See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 9 — Income Taxes” for additional information.

Equity-Method Investment Activity, Net of Tax

Equity-method investment activity, net of tax was $( 101 ) million and $( 554 ) million during 2024 and 2025.

The primary components of equity-method investment activity, net of tax are related to our share of the earnings or losses as reported by equity-method investees, amortization of basis differences, related gains or losses, and impairments.

The net loss of $( 554 ) million in 2025 is primarily from impairments.

Non-GAAP Financial Measures

Regulation G, Conditions for Use of Non-GAAP Financial Measures, and other SEC regulations define and prescribe the conditions for use of certain non-GAAP financial information.

Our measures of free cash flows and the effect of foreign exchange rates on our consolidated statements of operations meet the definition of non-GAAP financial measures.

We provide multiple measures of free cash flows because we believe these measures provide additional perspective on the impact of acquiring property and equipment with cash and through finance leases and financing obligations.

Free cash flow and the effect of foreign exchange rates on our consolidated statements of operations meet the definition of non-GAAP financial measures.

Free Cash Flow

Our financial focus is on long-term, sustainable growth in free cash flow.

We provide a free cash flow measure because we believe it provides additional perspective on the impact of acquiring property and equipment with cash.

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 2024 and 2025 (in millions):

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Net cash provided by (used in) financing activities $ (11,812) $ 9,661

Free Cash Flow Less Principal Repayments of Finance Leases and Financing Obligations

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 2023 and 2024 (in millions):

Year Ended December 31,

Net cash provided by (used in) operating activities $ 84,946 $ 115,877

Purchases of property and equipment, net of proceeds from sales and incentives (48,133) (77,658)

Free cash flow 36,813 38,219

Principal repayments of finance leases (4,384) (2,043)

Principal repayments of financing obligations (271) (669)

Free cash flow less principal repayments of finance leases and financing obligations $ 32,158 $ 35,507

Net cash provided by (used in) investing activities $ (49,833) $ (94,342)

Net cash provided by (used in) financing activities $ (15,879) $ (11,812)

Free Cash Flow Less Equipment Finance Leases and Principal Repayments of All Other Finance Leases and Financing Obligations

Free cash flow less equipment finance leases and principal repayments of all other finance leases and financing obligations is free cash flow reduced by equipment acquired under finance leases, which is included in “Property and equipment acquired under finance leases, net of remeasurements and modifications,” principal repayments of all other finance lease liabilities, which is included in “Principal repayments of finance leases,” and “Principal repayments of financing obligations.” All other finance lease liabilities and financing obligations consists of property.

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 2023 and 2024 (in millions):

Year Ended December 31,

Net cash provided by (used in) operating activities $ 84,946 $ 115,877

Purchases of property and equipment, net of proceeds from sales and incentives (48,133) (77,658)

Free cash flow 36,813 38,219

Equipment acquired under finance leases (1) (310) (572)

Principal repayments of all other finance leases (2) (683) (767)

Principal repayments of financing obligations (271) (669)

Free cash flow less equipment finance leases and principal repayments of all other finance leases and financing obligations $ 35,549 $ 36,211

Net cash provided by (used in) investing activities $ (49,833) $ (94,342)

Net cash provided by (used in) financing activities $ (15,879) $ (11,812)

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(1) For the year ended December 31, 2023 and 2024, this amount relates to equipment included in “Property and equipment acquired under finance leases, net of remeasurements and modifications” of $642 million and $854 million.

(2) For the year ended December 31, 2023 and 2024, this amount relates to property included in “Principal repayments of finance leases” of $4,384 million and $2,043 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.

For example, these measures of free cash flows do not incorporate the portion of payments representing principal reductions of debt or cash payments for business acquisitions.

Free cash flow has limitations as it omits certain components of the overall cash flow statement and does not represent the residual cash flow available for discretionary expenditures.

For example, free cash flow does not incorporate the portion of payments representing principal reductions of debt or cash payments for business acquisitions.

Additionally, our mix of property and equipment acquisitions with cash or other financing options may change over time.

Therefore, we believe it is important to view free cash flows measures only as a complement to our entire consolidated statements of cash flows.

Therefore, we believe it is important to view free cash flow only as a complement to our entire consolidated statements of cash flows.

Effect of Foreign Exchange Rates

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These forward-looking statements reflect Amazon.com’s expectations as of February 5, 2026, 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 I, “Risk Factors.”

Our results are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates and energy prices, changes in global economic and geopolitical conditions, tariff and trade policies, resource and supply volatility, including for memory chips, 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 2026 Guidance

• Net sales are expected to be between $173.5 billion and $178.5 billion, or to grow between 11% and 15% compared with first quarter 2025.

This guidance anticipates an unusually large, unfavorable impact of approximately $2.1 billion, or 150 basis points, from foreign exchange rates.

Also, as a reminder, in first quarter 2024 the impact from Leap Year added approximately $1.5 billion in net sales.

This guidance anticipates a favorable impact of approximately 180 basis points from foreign exchange rates.

• Operating income is expected to be between $16.5 billion and $21.5 billion, compared with $18.4 billion in first quarter 2025.

This guidance includes approximately $1 billion of higher year-over-year Amazon Leo costs as we scale in 2026, as well as investment in quick commerce and even sharper prices in our international stores business.

• 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