Amazon(AMZN) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents Amazon's unaudited consolidated financial statements and notes on key accounting areas for the periods ended June 30, 2024 Consolidated Statements of Cash Flows This section details the company's cash inflows and outflows from operating, investing, and financing activities for the reported periods Consolidated Statements of Cash Flows (Million USD) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :------------------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $16,476 | $25,281 | $21,264 | $44,270 | | Net cash provided by (used in) investing activities | $(9,673) | $(22,138) | $(25,479) | $(40,000) | | Net cash provided by (used in) financing activities | $(6,539) | $(4,490) | $(185) | $(5,746) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $333 | $(1,659) | $(4,186) | $(2,217) | | Cash, cash equivalents, and restricted cash, end of period | $50,067 | $71,673 | $50,067 | $71,673 | - Net cash provided by operating activities significantly increased, rising from $16,476 million in Q2 2023 to $25,281 million in Q2 2024, and from $21,264 million to $44,270 million for the six months ended June 30, 2024[16] - Net cash used in investing activities increased from $(9,673) million in Q2 2023 to $(22,138) million in Q2 2024, primarily due to increased purchases of property and equipment and marketable securities[16] Consolidated Statements of Operations This section presents the company's revenues, expenses, operating income, and net income for the reported periods Consolidated Statements of Operations (Million USD) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total net sales | $134,383 | $147,977 | $261,741 | $291,290 | | Total operating expenses | $126,702 | $133,305 | $249,286 | $261,311 | | Operating income | $7,681 | $14,672 | $12,455 | $29,979 | | Net income | $6,750 | $13,485 | $9,922 | $23,916 | | Basic earnings per share | $0.66 | $1.29 | $0.97 | $2.30 | | Diluted earnings per share | $0.65 | $1.26 | $0.95 | $2.24 | - Net sales increased by 10% YoY for Q2 2024 to $147,977 million, and by 11% for the six months ended June 30, 2024, reaching $291,290 million[17] - Operating income nearly doubled in Q2 2024 to $14,672 million from $7,681 million in Q2 2023, and more than doubled for the six-month period to $29,979 million[17] Consolidated Statements of Comprehensive Income This section reports net income and other comprehensive income components, such as foreign currency translation adjustments, for the reported periods Consolidated Statements of Comprehensive Income (Million USD) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $6,750 | $13,485 | $9,922 | $23,916 | | Total other comprehensive income (loss) | $293 | $(395) | $807 | $(953) | | Comprehensive income | $7,043 | $13,090 | $10,729 | $22,963 | - Comprehensive income increased significantly to $13,090 million in Q2 2024 from $7,043 million in Q2 2023, despite a shift from positive to negative 'Total other comprehensive income (loss)' due to foreign currency translation adjustments[18] Consolidated Balance Sheets This section provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific points in time Consolidated Balance Sheets (Million USD) | Metric | December 31, 2023 | June 30, 2024 | | :-------------------------------------- | :---------------- | :------------ | | Total current assets | $172,351 | $173,307 | | Total assets | $527,854 | $554,818 | | Total current liabilities | $164,917 | $158,172 | | Total long-term lease liabilities | $77,297 | $78,084 | | Total long-term debt | $58,314 | $54,889 | | Total stockholders' equity | $201,875 | $236,447 | - Total assets grew to $554,818 million as of June 30, 2024, from $527,854 million at December 31, 2023, driven by increases in property and equipment, operating leases, and other assets[253] - Total stockholders' equity increased by approximately $34.5 billion to $236,447 million as of June 30, 2024, primarily due to higher retained earnings[253] Notes to Consolidated Financial Statements This section provides detailed explanations and additional information supporting the consolidated financial statements Note 1 — ACCOUNTING POLICIES AND SUPPLEMENTAL DISCLOSURES This note outlines significant accounting policies, interim financial statement preparation, consolidation principles, estimates, and supplemental cash flow information - Effective January 1, 2024, the estimated useful lives for servers were changed from five to six years, resulting in a reduction of depreciation and amortization expense by $786 million in Q2 2024 and $1.7 billion for the six months ended June 30, 2024, benefiting net income by $601 million and $1.3 billion, respectively[256] Supplemental Cash Flow Information (Million USD) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :-------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cash paid for interest on debt, net | $954 | $680 | $1,356 | $949 | | Cash paid for operating leases | $2,528 | $2,844 | $4,995 | $6,176 | | Cash paid for income taxes, net of refunds | $3,735 | $5,700 | $4,354 | $6,158 | - The inventory valuation allowance decreased from $3.0 billion as of December 31, 2023, to $2.6 billion as of June 30, 2024[262] Note 2 — FINANCIAL INSTRUMENTS This note details the company's financial instruments, including cash, cash equivalents, restricted cash, marketable securities, and non-marketable investments Cash, Cash Equivalents, and Marketable Securities (Million USD) | Metric | December 31, 2023 | June 30, 2024 | | :----------------------------------------- | :---------------- | :------------ | | Total Estimated Fair Value | $87,283 | $89,587 | | Less: Restricted cash, cash equivalents, and marketable securities | $(503) | $(495) | | Total cash, cash equivalents, and marketable securities | $86,780 | $89,092 | - The company's non-marketable investments include equity warrants with a fair value of $2.1 billion as of June 30, 2024, and equity investments in private companies with a carrying value of $815 million[61] - The company invested an additional $2.75 billion in a second convertible note from Anthropic, PBC in Q1 2024, following a $1.25 billion investment in Q3 2023, with these notes classified as available for sale and reported at fair value[61] Note 3 — LEASES This note provides details on the company's operating and finance leases, summarizing lease costs, terms, discount rates, and liabilities Total Lease Cost (Million USD) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :----------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $2,608 | $2,921 | $5,120 | $5,750 | | Finance lease cost | $1,615 | $1,020 | $3,241 | $2,034 | | Variable lease cost | $494 | $592 | $1,012 | $1,227 | | Total lease cost | $4,717 | $4,533 | $9,373 | $9,011 | Lease Liabilities (Million USD) | Metric | December 31, 2023 | June 30, 2024 | | :----------------------------------- | :---------------- | :------------ | | Present value of operating lease liabilities | $75,639 | $77,432 | | Present value of finance lease liabilities | $12,109 | $10,827 | | Total long-term lease liabilities | $77,297 | $78,084 | - The weighted-average remaining lease term for operating leases was 10.9 years as of June 30, 2024, with a weighted-average discount rate of 3.4%[30] Note 4 — COMMITMENTS AND CONTINGENCIES This note outlines the company's various commitments, including debt, lease liabilities, purchase obligations, and details ongoing legal proceedings Total Commitments as of June 30, 2024 (Million USD) | Commitment Type | Six Months Ended 2024 | Year Ended 2025 | Year Ended 2026 | Year Ended 2027 | Year Ended 2028 | Thereafter | Total | | :------------------------------------ | :-------------------- | :-------------- | :-------------- | :-------------- | :-------------- | :--------- | :---- | | Long-term debt principal and interest | $5,530 | $6,929 | $4,582 | $10,403 | $3,644 | $60,176 | $91,264 | | Operating lease liabilities | $6,247 | $10,766 | $10,021 | $9,160 | $8,353 | $48,719 | $93,266 | | Unconditional purchase obligations | $4,739 | $5,969 | $4,180 | $3,226 | $2,584 | $11,710 | $32,408 | | Total commitments | $20,794 | $30,422 | $24,773 | $28,254 | $19,944 | $171,125 | $295,312 | - The company is involved in multiple antitrust lawsuits in the U.S. and Canada, alleging price fixing, monopolization, and consumer protection violations, with complaints seeking billions in damages and injunctive relief[36] - A new patent infringement complaint was filed against Amazon Web Services EMEA SARL in Germany in March 2024, alleging infringement related to Intel processors in AWS EC2 instances[36] Note 5 — DEBT This note details the company's debt structure, including unsecured senior notes, revolving credit facilities, and commercial paper programs Long-Term Debt Obligations (Million USD) | Metric | December 31, 2023 | June 30, 2024 | | :--------------------------------------- | :---------------- | :------------ | | Total face value of long-term debt | $67,182 | $62,683 | | Less: current portion of long-term debt | $(8,494) | $(7,429) | | Long-term debt | $58,314 | $54,889 | - As of June 30, 2024, the company had $62.5 billion in unsecured senior notes outstanding, with a combined weighted-average remaining life of 12.9 years[38] - Borrowings under the secured revolving credit facility decreased from $682 million at December 31, 2023, to $183 million at June 30, 2024, and the facility was terminated in July 2024[38] Note 6 — STOCKHOLDERS' EQUITY This note covers changes in stockholders' equity, including stock repurchase activity, stock award plans, and stock-based compensation expense - The Board of Directors authorized a $10.0 billion stock repurchase program in March 2022, with $6.1 billion remaining as of June 30, 2024, and no repurchases occurred in the six months ended June 30, 2023 or 2024[162] Stock-Based Compensation Expense (Million USD) | Expense Category | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of sales | $251 | $266 | $416 | $440 | | Fulfillment | $932 | $944 | $1,535 | $1,580 | | Technology and infrastructure | $4,043 | $3,670 | $6,617 | $6,442 | | Sales and marketing | $1,303 | $1,224 | $2,296 | $2,156 | | General and administrative | $598 | $618 | $1,011 | $1,065 | | Total stock-based compensation expense | $7,127 | $6,722 | $11,875 | $11,683 | - As of June 30, 2024, there was $22.1 billion of net unrecognized compensation cost related to unvested stock-based compensation, with a weighted-average recognition period of 1.0 year[166] Note 7 — INCOME TAXES This note details the company's income tax provision, effective tax rate, and tax contingencies, including discrete tax benefits and ongoing disputes - The income tax provision for the six months ended June 30, 2024, was $4.2 billion, including $1.9 billion of net discrete tax benefits primarily from excess tax benefits from stock-based compensation[46] - Cash paid for income taxes, net of refunds, increased to $5.7 billion in Q2 2024 from $3.7 billion in Q2 2023, and to $6.2 billion for the six months ended June 30, 2024, from $4.4 billion in the prior year period[46] - Income tax contingencies were approximately $5.6 billion as of June 30, 2024, up from $5.2 billion at December 31, 2023, with ongoing disputes in jurisdictions like Luxembourg and India[46] Note 8 — SEGMENT INFORMATION This note describes the company's three reportable segments: North America, International, and AWS, detailing their net sales and operating income Segment Net Sales (Million USD) | Segment | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North America | $82,546 | $90,033 | $159,427 | $176,374 | | International | $29,697 | $31,663 | $58,820 | $63,598 | | AWS | $22,140 | $26,281 | $43,494 | $51,318 | | Consolidated | $134,383 | $147,977 | $261,741 | $291,290 | Segment Operating Income (Loss) (Million USD) | Segment | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North America | $3,211 | $5,065 | $4,109 | $10,048 | | International | $(895) | $273 | $(2,142) | $1,176 | | AWS | $5,365 | $9,334 | $10,488 | $18,755 | | Consolidated | $7,681 | $14,672 | $12,455 | $29,979 | - AWS net sales grew 19% in Q2 2024 and 18% for the six months ended June 30, 2024, contributing significantly to consolidated net sales and operating income[65] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, liquidity, capital resources, critical accounting estimates, and segment results Forward-Looking Statements This section highlights that the report contains forward-looking statements subject to various risks that could cause actual results to differ materially - The report contains forward-looking statements subject to various risks, including foreign exchange rate fluctuations, global economic conditions, inflation, interest rates, and competition, which could cause actual results to differ materially from expectations[68] Critical Accounting Estimates This section discusses key accounting estimates that require significant judgment and can materially impact the financial statements Inventories This section addresses inventory valuation, which relies on judgments about disposition methods and recoverable values - Inventory valuation relies on judgments about disposition methods and recoverable values; a 1% additional inventory valuation allowance as of June 30, 2024, would have increased cost of sales by approximately $360 million[70] Income Taxes This section discusses the complexities and judgments involved in income tax provisions and accruals due to evolving tax laws - Income tax provisions and accruals require significant judgment due to complex and evolving tax laws, with many transactions having uncertain ultimate tax determinations[71] - Effective tax rates are influenced by factors such as business operations, acquisitions, intercompany transactions, foreign earnings, and changes in tax laws, leading to potential volatility[95] Liquidity and Capital Resources This section analyzes the company's ability to generate and manage cash, including operating cash flows and capital expenditures - Principal liquidity sources are cash flows from operations and cash, cash equivalents, and marketable securities, which totaled $89.1 billion at fair value as of June 30, 2024[74] - Operating cash flows increased to $25.3 billion in Q2 2024 (from $16.5 billion in Q2 2023) and to $44.3 billion for the six months ended June 30, 2024 (from $21.3 billion in Q2 2023), driven by increased net income and working capital changes[74] - Cash capital expenditures are expected to meaningfully increase in 2024, primarily due to investments in technology infrastructure supporting AWS growth and fulfillment network capacity[74] Results of Operations This section provides a detailed analysis of the company's financial performance, including net sales, operating income, and expenses Overview This section provides a general summary of the company's operating results and the macroeconomic factors impacting them - Macroeconomic factors like inflation, increased interest rates, and supply chain volatility continue to impact operations, with expected effects into Q3 2024[128] Net Sales This section details the company's net sales performance by category and the impact of foreign exchange rates Net Sales by Category (Million USD) | Category | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Online stores | $52,966 | $55,392 | $104,062 | $110,062 | | Physical stores | $5,024 | $5,206 | $9,919 | $10,408 | | Third-party seller services | $32,332 | $36,201 | $62,152 | $70,797 | | Advertising services | $10,683 | $12,771 | $20,192 | $24,595 | | Subscription services | $9,894 | $10,866 | $19,551 | $21,588 | | AWS | $22,140 | $26,281 | $43,494 | $51,318 | | Other | $1,344 | $1,260 | $2,371 | $2,522 | | Consolidated | $134,383 | $147,977 | $261,741 | $291,290 | - Consolidated net sales increased 10% in Q2 2024 and 11% for the six months ended June 30, 2024, with foreign exchange rates unfavorably impacting net sales by $1.0 billion and $1.2 billion, respectively[129] - AWS sales increased 19% in Q2 2024 and 18% for the six months ended June 30, 2024, primarily due to increased customer usage[130] Operating Income (Loss) This section analyzes the company's operating income and loss by segment, highlighting key performance drivers Operating Income (Loss) by Segment (Million USD) | Segment | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | | :------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North America | $3,211 | $5,065 | $4,109 | $10,048 | | International | $(895) | $273 | $(2,142) | $1,176 | | AWS | $5,365 | $9,334 | $10,488 | $18,755 | | Consolidated | $7,681 | $14,672 | $12,455 | $29,979 | - Consolidated operating income increased from $7.7 billion in Q2 2023 to $14.7 billion in Q2 2024, and from $12.5 billion to $30.0 billion for the six months ended June 30, 2024[102] - International segment shifted from an operating loss of $(895) million in Q2 2023 to an operating income of $273 million in Q2 2024, primarily due to increased unit and advertising sales[102] Operating Expenses This section details the various components of the company's operating expenses and their changes over the periods Cost of Sales This section discusses changes in the cost of products sold and shipping expenses, influenced by sales volume and network efficiencies - Cost of sales increased in Q2 2024 and for the six months ended June 30, 2024, primarily due to increased product and shipping costs from higher sales, partially offset by fulfillment network efficiencies[82] - Shipping costs were $22.0 billion in Q2 2024, up from $20.5 billion in Q2 2023, and $43.8 billion for the six months ended June 30, 2024, up from $40.4 billion in the prior year period[82] Fulfillment This section analyzes changes in fulfillment costs, driven by sales growth, network investments, and operational efficiencies - Fulfillment costs increased in Q2 2024 and for the six months ended June 30, 2024, due to increased sales and investments in the fulfillment network, partially offset by efficiencies[106] - Fulfillment costs were $23,566 million in Q2 2024, an 11% increase from Q2 2023, and $45,883 million for the six months ended June 30, 2024, a 9% increase from the prior year period[132] Technology and Infrastructure This section examines technology and infrastructure costs, influenced by spending, depreciation changes, and payroll adjustments - Technology and infrastructure costs increased in Q2 2024 and for the six months ended June 30, 2024, primarily due to increased infrastructure spending, offset by reduced depreciation from server useful life changes and decreased payroll[107] - These costs were $22,304 million in Q2 2024, a 2% increase from Q2 2023, and $42,728 million for the six months ended June 30, 2024, a 1% increase from the prior year period[132] Sales and Marketing This section discusses changes in sales and marketing expenses, primarily due to adjustments in payroll and related personnel costs - Sales and marketing costs decreased in Q2 2024 and for the six months ended June 30, 2024, primarily due to decreased payroll and related expenses for marketing and selling personnel[108] - These costs were $10,512 million in Q2 2024, a 2% decline from Q2 2023, and $20,174 million for the six months ended June 30, 2024, a 4% decline from the prior year period[132] General and Administrative This section analyzes general and administrative costs, primarily influenced by changes in payroll and related expenses - General and administrative costs decreased in Q2 2024 and for the six months ended June 30, 2024, primarily due to a decrease in payroll and related expenses[109] - These costs were $3,041 million in Q2 2024, a 5% decline from Q2 2023, and $5,783 million for the six months ended June 30, 2024, a 7% decline from the prior year period[132] Other Operating Expense (Income), Net This section covers other operating expenses and income, primarily related to asset impairments and intangible asset amortization - Other operating expense (income), net, was $97 million in Q2 2024, down from $146 million in Q2 2023, primarily related to asset impairments and amortization of intangible assets[109] Interest Income and Expense This section details changes in interest income and expense, primarily driven by prevailing interest rates and debt obligations - Interest income increased to $1.2 billion in Q2 2024 from $661 million in Q2 2023, and to $2.2 billion for the six months ended June 30, 2024, from $1.3 billion in the prior year period, primarily due to higher prevailing interest rates[110] - Interest expense decreased to $589 million in Q2 2024 from $840 million in Q2 2023, and to $1.2 billion for the six months ended June 30, 2024, from $1.7 billion in the prior year period, primarily related to debt and finance leases[110] Other Income (Expense), Net This section discusses other non-operating income and expenses, primarily influenced by marketable equity securities valuation gains or losses - Other income (expense), net, was $(18) million in Q2 2024, compared to $61 million in Q2 2023, and $(2.7) billion for the six months ended June 30, 2024, compared to $(382) million in the prior year period[111] - This change was primarily driven by marketable equity securities valuation gains (losses), including a $391 million gain in Q2 2024 from the equity investment in Rivian, but a $(1.6) billion loss for the six months ended June 30, 2024[111] Income Taxes This section details the income tax provision, including discrete tax benefits from stock-based compensation - The income tax provision for the six months ended June 30, 2024, was $4.2 billion, including $1.9 billion of net discrete tax benefits, primarily from excess tax benefits from stock-based compensation[112] Non-GAAP Financial Measures This section presents and reconciles non-GAAP financial measures, such as free cash flow, to their most directly comparable GAAP measures Free Cash Flow This section defines and presents the company's free cash flow, a key non-GAAP liquidity measure Free Cash Flow (Million USD) | Metric | Twelve Months Ended June 30, 2023 | Twelve Months Ended June 30, 2024 | | :------------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by (used in) operating activities | $61,841 | $107,952 | | Purchases of property and equipment, net of proceeds from sales and incentives | $(53,963) | $(54,979) | | Free cash flow | $7,878 | $52,973 | - Free cash flow significantly increased to $52,973 million for the trailing twelve months ended June 30, 2024, from $7,878 million in the comparable prior year period[139] Free Cash Flow Less Principal Repayments of Finance Leases and Financing Obligations This section presents an adjusted free cash flow measure, accounting for principal repayments of finance leases and financing obligations Free Cash Flow Less Principal Repayments of Finance Leases and Financing Obligations (Million USD) | Metric | Twelve Months Ended June 30, 2023 | Twelve Months Ended June 30, 2024 | | :------------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Free cash flow | $7,878 | $52,973 | | Principal repayments of finance leases | $(5,705) | $(3,092) | | Principal repayments of financing obligations | $(244) | $(306) | | Free cash flow less principal repayments of finance leases and financing obligations | $1,929 | $49,575 | - This adjusted free cash flow measure increased substantially to $49,575 million for the trailing twelve months ended June 30, 2024, from $1,929 million in the prior year period[141] Free Cash Flow Less Equipment Finance Leases and Principal Repayments of All Other Finance Leases and Financing Obligations This section provides a further adjusted free cash flow measure, excluding equipment finance leases and other principal repayments Free Cash Flow Less Equipment Finance Leases and Principal Repayments of All Other Finance Leases and Financing Obligations (Million USD) | Metric | Twelve Months Ended June 30, 2023 | Twelve Months Ended June 30, 2024 | | :------------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Free cash flow | $7,878 | $52,973 | | Equipment acquired under finance leases | $(269) | $(425) | | Principal repayments of all other finance leases | $(631) | $(794) | | Principal repayments of financing obligations | $(244) | $(306) | | Free cash flow less equipment finance leases and principal repayments of all other finance leases financing obligations | $6,734 | $51,448 | - This further adjusted free cash flow measure also saw a significant increase, reaching $51,448 million for the trailing twelve months ended June 30, 2024, compared to $6,734 million in the prior year period[142] Effect of Foreign Exchange Rates This section analyzes the impact of foreign exchange rate fluctuations on the company's net sales and operating income Effect of Foreign Exchange Rates on Operating Results (Million USD) | Metric | Three Months Ended June 30, 2023 (Effect) | Three Months Ended June 30, 2024 (Effect) | Six Months Ended June 30, 2023 (Effect) | Six Months Ended June 30, 2024 (Effect) | | :--------------- | :---------------------------------------- | :---------------------------------------- | :-------------------------------------- | :-------------------------------------- | | Net sales | $285 | $1,041 | $2,721 | $1,205 | | Operating expenses | $389 | $1,070 | $2,964 | $1,306 | | Operating income | $(104) | $(29) | $(243) | $(101) | - Foreign exchange rate fluctuations unfavorably impacted net sales by $1,041 million in Q2 2024 and $1,205 million for the six months ended June 30, 2024, compared to prior year rates[120] - The effect of foreign exchange rates on operating income was a negative impact of $(29) million in Q2 2024 and $(101) million for the six months ended June 30, 2024[120] Guidance This section provides the company's forward-looking expectations for net sales and operating income for the upcoming quarter - For Q3 2024, net sales are expected to be between $154.0 billion and $158.5 billion, representing 8% to 11% growth compared to Q3 2023, anticipating an unfavorable impact of approximately 90 basis points from foreign exchange rates[122] - Operating income for Q3 2024 is expected to be between $11.5 billion and $15.0 billion, compared with $11.2 billion in Q3 2023[122] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to market risks, including interest rate, foreign exchange, and equity investment risks Interest Rate Risk This section describes the company's exposure to interest rate fluctuations, primarily affecting its investment portfolio and debt - The company's exposure to interest rate risk primarily relates to its investment portfolio and debt, with the fair value of long-term debt fluctuating with interest rate movements[123] - Investments in fixed-interest marketable debt securities are subject to fair value declines if interest rates rise, potentially leading to principal losses if sold[123] Foreign Exchange Risk This section details the company's exposure to foreign exchange rate fluctuations, particularly impacting international net sales - International segment net sales accounted for 21% of consolidated revenues in Q2 2024, exposing the company to significant foreign exchange rate fluctuations[149] - A 5% adverse change in foreign exchange rates on $18.4 billion of foreign funds as of June 30, 2024, would result in a $920 million decline[149] - Foreign exchange rate fluctuations reduced International segment net sales by $974 million in Q2 2024 compared to Q2 2023[149] Equity Investment Risk This section discusses risks associated with the company's equity, equity warrant, and convertible debt investments in public and private companies - As of June 30, 2024, the company held $11.6 billion in equity, equity warrant, and convertible debt investments in public and private companies[170] - Equity and equity warrant investments in publicly traded companies, including Rivian, totaled $3.8 billion and are subject to market price volatility[170] - Valuations of private companies are inherently complex and subject to additional uncertainty due to global economic conditions and lack of readily available market data[170] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes to internal control over financial reporting - The principal executive and financial officers concluded that disclosure controls and procedures were effective as of June 30, 2024, providing reasonable assurance for timely and accurate financial reporting[151] - No material changes to internal control over financial reporting occurred during the most recent fiscal quarter[151] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section refers to detailed discussions of the company's involvement in various claims, proceedings, and litigation, including antitrust and intellectual property matters - The company is regularly involved in claims, proceedings, and litigation, including those related to patent and other intellectual property, taxes, labor, competition, and consumer protection[36][152] Item 1A. Risk Factors This section outlines significant factors, events, and uncertainties that could materially affect the company's business, financial condition, operating results, and stock price Business and Industry Risks This section identifies risks inherent to the company's business model and the industries in which it operates, including competition and expansion We Face Intense Competition This section highlights the intense and evolving competitive landscape across various industries and geographies, impacting the company's operations - The company operates in rapidly evolving and intensely competitive markets across various industries and geographies, facing competitors with greater resources, longer histories, and stronger brand recognition[172] - Competition is intensifying due to new business models, new entrants, and technological advancements like AI and machine learning, potentially leading to increased spending or lower prices[172] Our Expansion into New Products, Services, Technologies, and Geographic Regions Subjects Us to Additional Risks This section discusses risks associated with expanding into new markets, products, and technologies, including potential for unmet expectations or reputational harm - Expansion into new market segments, products, and services, especially those with new technology challenges, may not meet expectations or recoup significant investments, potentially leading to write-downs or reputational harm[173] Our International Operations Expose Us to a Number of Risks This section outlines risks related to international operations, including local economic/political conditions, government regulation, and foreign ownership restrictions - International operations are subject to risks including local economic/political conditions, government regulation, foreign ownership restrictions, limitations on fund repatriation, and intense competition from local companies[157] - Operations in China and India face unique regulatory and licensing requirements, with substantial uncertainties regarding interpretation of laws, potentially leading to fines, license revocations, or operational restructuring[157] - Negative impacts on China-based sellers and suppliers due to regulatory, trade, economic, or geopolitical factors could adversely affect the company's operating results[177] The Variability in Our Retail Business Places Increased Strain on Our Operations This section addresses operational strains caused by demand fluctuations in the retail business due to seasonality, promotions, and unforeseen events - Demand for products and services fluctuates significantly due to seasonality, promotions, product launches, and unforeseeable events like global economic conditions or disasters, increasing operational strain[178] - Failure to meet customer demand due to understocking or overstocking can lead to significant inventory markdowns, write-offs, or system interruptions during peak periods[178] We Are Impacted by Fraudulent or Unlawful Activities of Sellers This section discusses risks from fraudulent or unlawful activities by third-party sellers, potentially harming reputation and incurring liability - The company faces risks from fraudulent or unlawful activities by third-party sellers, including selling counterfeit or unlawful goods, which can harm its business, reputation, and lead to civil or criminal liability[179] - The A-to-z Guarantee program, which reimburses customers for certain claims, will incur increasing costs as third-party seller sales grow, potentially affecting operating results[179] We Face Risks Related to Adequately Protecting Our Intellectual Property Rights and Being Accused of Infringing Intellectual Property Rights of Third Parties This section addresses challenges in protecting intellectual property and the risk of infringement claims, including those related to AI technology - Protecting intellectual property is critical but challenging, as effective protection is not available in all countries, and third parties may infringe or misappropriate proprietary rights[160] - The company is subject to claims of intellectual property infringement by third parties, which can result in significant financial and managerial resource expenditure, injunctions, or substantial damage payments[160] - The use of artificial intelligence by the company and its customers may increase claims of infringement or unauthorized use of third-party technology or content[182] Operating Risks This section identifies risks related to the company's day-to-day operations, including fluctuations in results, expansion strains, and network optimization We Experience Significant Fluctuations in Our Operating Results and Growth Rate This section highlights the variability in operating results and growth rates due to customer demand, competition, and system expansions, making forecasting difficult - Operating results and growth rates fluctuate due to factors like customer demand, competition, system expansions, and the mix of products/services sold, making accurate forecasting difficult[185] - Fixed expenses and investments, coupled with potential sales shortfalls, can prevent quick spending adjustments, impacting profitability[185] Our Expansion Places a Significant Strain on our Management, Operational, Financial, and Other Resources This section discusses the significant strain rapid global expansion places on management, operations, systems, and financial resources - Rapid global expansion and increasing product/service offerings place significant strain on management, operations, systems, and financial resources, with ineffective growth management potentially damaging reputation and operating results[184] We Face Risks Related to Successfully Optimizing and Operating Our Fulfillment Network and Data Centers This section addresses risks in optimizing fulfillment and data center operations, including capacity management, service interruptions, and labor constraints - Failure to accurately predict customer demand or optimize fulfillment and data center operations can lead to excess/insufficient capacity, service interruptions, increased costs, and impairment charges[187] - Labor market constraints increase payroll costs and make it difficult to staff the fulfillment network efficiently, impacting productivity[187] We Could Be Harmed by Data Loss or Other Security Breaches This section highlights the risks of data loss, theft, or security breaches, which could adversely affect operations, lead to litigation, and harm reputation - Failure to prevent data loss, theft, or security breaches could expose the company and customers to risks, adversely affect operating results, lead to litigation, and harm reputation[216] - Despite systems designed to protect data, measures cannot provide absolute security and may fail, as past security breaches have occurred[216] We Face Risks Related to System Interruption and Lack of Redundancy This section discusses risks from system interruptions, delays, and lack of redundancy, potentially impacting service availability and data integrity - Occasional system interruptions and delays can make websites and services unavailable, reducing net sales and attractiveness of offerings[217] - Computer and communications systems are vulnerable to damage or interruption from disasters, viruses, and operational failures, and are not fully redundant, potentially leading to data loss and reputational harm[217] The Loss of Key Senior Management Personnel or the Failure to Hire and Retain Highly Skilled and Other Personnel Could Negatively Affect Our Business This section highlights the dependence on key personnel and the risks associated with losing or failing to retain highly skilled employees - The company depends on senior management and highly skilled personnel, with intense competition for qualified individuals, especially in technology[191] - Failure to hire, train, retain, and manage sufficient personnel can strain operations, increase costs, and harm business and reputation[191] Our Supplier Relationships Subject Us to a Number of Risks This section discusses risks associated with reliance on significant, sometimes single-source, suppliers for merchandise, content, and components - Reliance on significant, sometimes limited or single-source, suppliers for merchandise, content, and components poses risks if they limit or stop selling, or delay delivery[221] - Constraints on semiconductor products, including GPUs for AI infrastructure, could adversely affect the development and operation of AI technologies[221] Our Commercial Agreements, Strategic Alliances, and Other Business Relationships Expose Us to Risks This section outlines risks related to complex commercial agreements and strategic alliances, which may not be successfully implemented or renewed - Complex commercial agreements and strategic alliances require substantial resources and may not be successfully implemented or renewed on favorable terms, impacting operating results[222] Our Business Suffers When We Are Unsuccessful in Making, Integrating, and Maintaining Acquisitions and Investments This section discusses risks associated with acquisitions and investments, including business disruption, integration challenges, and potential financial impacts - Acquisitions and investments involve risks such as business disruption, difficulty retaining key personnel, additional operating losses, and challenges in integrating operations and systems[223] - Future acquisitions may require issuing additional equity, spending cash, or incurring debt, potentially reducing profitability or diluting existing shareholders[195] We Face Significant Inventory Risk This section addresses inventory risks due to seasonality, new product launches, and fluctuating customer demand, potentially leading to overstocking or understocking - The company faces significant inventory risks due to seasonality, new product launches, rapid product cycle changes, and fluctuating customer demand, potentially leading to overstocking or understocking[196] - Inability to sell products in sufficient quantities or meet demand during peak seasons can adversely affect operating results[196] We Are Subject to Payments-Related Risks This section outlines risks associated with accepting various payment methods, including regulations, compliance, fraud, and reliance on third-party processors - Accepting various payment methods exposes the company to regulations, compliance requirements, and fraud, with potential increases in interchange fees and operating costs[197] - Reliance on third parties for payment processing and co-branded credit card programs could disrupt business if services are unavailable or terms become unfavorable[197] - Providing regulated services like account balances and money transfers subjects the company to licensing, capital maintenance, and data handling requirements, with potential civil/criminal penalties for violations[228] Legal and Regulatory Risks This section identifies risks arising from the evolving legal and regulatory environment, including government regulation, litigation, and tax liabilities We Have a Rapidly Evolving Business Model and Our Stock Price Is Highly Volatile This section discusses the company's rapidly evolving business model and the resulting high volatility in its stock price - The company's rapidly evolving business model contributes to significant stock price volatility, influenced by interest rates, industry trends, operating results, and analyst estimates[229] - Stock price volatility could adversely affect business and financing opportunities, potentially forcing increased cash compensation or larger stock awards, impacting operating results or shareholder ownership[229] Government Regulation Is Evolving and Unfavorable Changes Could Harm Our Business This section addresses risks from evolving and expanding government regulations across various industries and geographies, potentially leading to substantial costs - The company is subject to a wide range of evolving and expanding government regulations across various industries and geographies, including taxation, privacy, consumer protection, and competition[230] - Ongoing investigations and new regulatory approaches, particularly concerning competition and consumer protection, could lead to substantial costs, civil/criminal liability, and changes to business practices[232] Claims, Litigation, Government Investigations, and Other Proceedings May Adversely Affect Our Business and Results of Operations This section discusses the risks associated with claims, litigation, and government investigations, which can result in significant costs and operational disruption - The company is regularly subject to claims, litigation, and investigations across a wide range of issues, which have increased in number and scale with business expansion[202] - Outcomes are unpredictable and can result in significant legal costs, operational disruption, negative publicity, substantial payments, or changes to business practices materially adverse to operations[202] We Are Subject to Product Liability Claims When People or Property Are Harmed by the Products We Sell or Manufacture This section addresses exposure to product liability or food safety claims from products sold or manufactured by the company or third parties - The company is exposed to product liability or food safety claims from products it sells or manufactures, as well as those sold by third parties using its services[203] - The A-to-z Guarantee may require reimbursement for certain product liability claims, increasing costs as third-party seller sales grow[203] We Face Additional Tax Liabilities and Collection Obligations This section discusses potential for additional tax expense and liabilities due to changes in tax laws, regulations, and ongoing controversies - The company is subject to various taxes and collection obligations, with potential for additional tax expense and liabilities due to changes in laws, regulations, and interpretations, including new revenue-based taxes targeting online commerce[204][205] - Ongoing tax controversies in various jurisdictions, such as the Indian tax authority's assertion on cloud services fees, could result in significant additional tax assessments[205] We Are Subject to Risks Related to Government Contracts and Related Procurement Regulations This section outlines risks associated with government contracts, including procurement regulations, audits, and potential penalties for violations - Government contracts are subject to procurement regulations, audits, and investigations, with potential violations leading to civil/criminal penalties, contract termination, or debarment from future government business[237] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds were reported for the period[238] Item 3. Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities to report for the period - No defaults upon senior securities were applicable for the reporting period[248] Item 4. Mine Safety Disclosures This section states that there are no mine safety disclosures to report for the period - No mine safety disclosures were reported for the period[207] Item 5. Other Information This section discloses that certain Board members and senior management adopted Rule 10b5-1(c) trading plans to sell common stock - Jonathan Rubinstein, a Board member, adopted a Rule 10b5-1(c) trading plan on May 15, 2024, to sell up to 18,670 shares of common stock by May 15, 2026[208] - Brian Olsavsky, SVP and CFO, adopted a Rule 10b5-1(c) trading plan on May 17, 2024, to sell up to 29,200 shares of common stock by November 29, 2024[208] - Shelley Reynolds, VP, Worldwide Controller, adopted a Rule 10b5-1(c) trading plan on May 22, 2024, to sell up to 2,182 shares of common stock by November 29, 2024[208] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents and executive certifications - Exhibits include Amended and Restated Certificate of Incorporation and Bylaws, certifications from the President and CEO and SVP and CFO, and financial statements in Inline XBRL format[209] Signatures This section contains the required signatures, certifying the due authorization and filing of the report on behalf of Amazon.com, Inc - The report is duly signed on behalf of Amazon.com, Inc. by Shelley L. Reynolds, Vice President, Worldwide Controller (Principal Accounting Officer), dated August 1, 2024[243][251]