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Amazon.Com Announces Third Quarter Financial Results; for the First Time Electronics and Other General Merchandise Sales Surpass $2 Billion over the Past Year; Expects Record Holiday Season

SEATTLE--(BUSINESS WIRE)--Oct. 25, 2005--Amazon.com, Inc. (NASDAQ:AMZN) today announced financial results for its third quarter ended September 30, 2005.

Operating cash flow grew 35% to $661 million for the trailing twelve months, compared with $490 million for the trailing twelve months ended September 30, 2004. Free cash flow grew 13% to $475 million for the trailing twelve months, compared with $420 million for the trailing twelve months ended September 30, 2004. As previously announced in August 2005, the Company settled a patent lawsuit on terms including a previously unanticipated one-time payment of $40 million in third quarter 2005. Excluding this payment, free cash flow would have grown 22% to $515 million for the trailing twelve months.

Common shares outstanding plus shares underlying stock-based awards outstanding totaled 438 million at September 30, 2005, compared with 434 million a year ago.

Net sales increased 27% to $1.86 billion in the third quarter, compared with $1.46 billion in third quarter 2004. Excluding the $7 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 28% compared with third quarter 2004.

Operating income decreased 32% to $55 million in the third quarter, compared with $81 million in third quarter 2004. Excluding the negative impact of the $40 million legal settlement, operating income would have increased 17% to $95 million.

Net income was $30 million in the third quarter, or $0.07 per diluted share, compared with net income of $54 million, or $0.13 per diluted share in third quarter 2004, which includes $21 million in income tax expense, compared with $3 million income tax expense in third quarter 2004. Excluding the negative impact of the $40 million legal settlement -- $20 million after tax -- net income would have been $50 million or $0.12 per diluted share.

"For $79 a year, Amazon Prime members get 'all-you-can-eat' free express shipping," said Jeff Bezos, founder and CEO of Amazon.com. "Customers continue to join Amazon Prime and we anticipate even higher enrollment rates as we get closer to the holidays."

Amazon Prime, Amazon.com's first-ever membership program, was introduced February 2005. For a flat membership fee of $79 per year, Amazon Prime members get unlimited, express two-day shipping for free, with no minimum purchase requirement on over a million eligible items sold by Amazon.com. Members can order as late as 6:30 p.m. ET and still get their order the next day for only $3.99 per item, and can share the benefits of Amazon Prime with up to four family members living in their household. Sign up for Amazon Prime at www.amazon.com/prime.

    Highlights

    --  North America segment sales, representing the Company's U.S.
        and Canadian sites, were $1.04 billion, up 28% from third
        quarter 2004. Segment operating income increased 16% to $66
        million in third quarter 2005 from $57 million in third
        quarter 2004.

    --  North America Other revenue, which includes Amazon Services'
        Merchant.com program, increased to $53 million in third
        quarter 2005.

    --  International segment sales, representing the Company's U.K.,
        German, French, Japanese, and Chinese sites, were $817
        million, up 26% from third quarter 2004. Excluding the
        unfavorable impact from year-over-year changes in foreign
        exchange rates throughout the quarter, net sales growth was
        28%. Segment operating income increased 46% to $55 million in
        third quarter 2005 from $38 million in third quarter 2004.

    --  International segment sales increased to 45% of worldwide net
        sales on a trailing twelve-month basis, up from 43% for the
        twelve months ended September 30, 2004.

    --  Worldwide Electronics & Other General Merchandise sales grew
        43% to $491 million in third quarter 2005, and increased to
        26% of worldwide net sales, compared with 24% for third
        quarter 2004.

    --  The Company sold over 1.6 million copies of Harry Potter and
        the Half-Blood Prince worldwide in third quarter 2005, making
        it Amazon.com's largest new product release.

    --  A9.com, a subsidiary of Amazon.com, launched A9.com Maps, a
        new service that shows users an interactive map and over 35
        million corresponding street-level images in a single
        interface in 24 cities.

    --  Customers shopping at www.amazon.co.uk now qualify for free
        shipping on orders of GBP 15 or more, down from the prior
        threshold of GBP 19.

    --  In the aftermath of Hurricane Katrina, Amazon customers used
        the Company's 1-click(R) technology to contribute more than
        $12 million for American Red Cross relief efforts.

    Financial Guidance

The following forward-looking statements reflect Amazon.com's expectations as of October 25, 2005. Results may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and consumer spending, world events, the rate of growth of the Internet and online commerce, and the various factors detailed below.

    Fourth Quarter 2005 Guidance

    --  Net sales are expected to be between $2.86 billion and $3.16
        billion, or grow between 13% and 24%, compared with fourth
        quarter 2004.

    --  Operating income is expected to be between $135 million and
        $210 million, or between (17%) decline and 29% growth,
        compared with fourth quarter 2004. This guidance includes $30
        million for stock-based compensation and amortization of
        intangible assets, and assumes, among other things, that no
        additional intangible assets are recorded, and that there are
        no further revisions to stock-based compensation or
        restructuring-related estimates.

    Full Year 2005 Guidance

    --  Net sales are expected to be between $8.373 billion and $8.673
        billion, or grow between 21% and 25%, compared with 2004.

    --  Operating income is expected to be between $403 million and
        $478 million, or between (9%) decline and 8% growth, compared
        with 2004. This guidance includes $144 million for stock-based
        compensation, amortization of intangible assets and the $40
        million legal settlement, and assumes, among other things,
        that no additional intangible assets are recorded and that
        there are no changes to stock-based compensation or
        restructuring-related estimates.

A conference call will be webcast live today at 2 p.m. PT/5 p.m. ET, and will be available for at least three months at www.amazon.com/ir. This call will contain forward-looking statements and other material information regarding the Company's financial and operating results.

These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, in addition to the factors discussed above, the amount that Amazon.com invests in new business opportunities and the timing of those investments, the mix of products sold to customers, the mix of net sales derived from products as compared with services, competition, management of growth, potential fluctuations in operating results, international growth and expansion, the outcomes of legal proceedings and claims, fulfillment center optimization, risks of inventory management, seasonality, the degree to which the Company enters into, maintains and develops commercial agreements, acquisitions and strategic transactions, and risks of fulfillment throughput and productivity. Other risks and uncertainties include, among others, risk of future losses, significant indebtedness, system interruptions, consumer trends, limited operating history, government regulation and taxation, fraud, and new business areas. More information about factors that potentially could affect Amazon.com's financial results is included in Amazon.com's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2004, and all subsequent filings.

About Amazon.com

Amazon.com (Nasdaq:AMZN), a Fortune 500 company based in Seattle, opened its virtual doors on the World Wide Web in July 1995 and today offers Earth's Biggest Selection. Amazon.com seeks to be Earth's most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer customers the lowest possible prices. Amazon.com and third-party sellers offer millions of unique new, refurbished, and used items in categories such as health and personal care, jewelry and watches, gourmet food, sports and outdoors, apparel and accessories, books, music, DVDs, electronics and office, toys and baby, and home and garden.

Amazon.com and its affiliates operate seven retail websites: www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca, and www.joyo.com.

    As used herein, "Amazon.com," "we," "our" and similar terms
include Amazon.com, Inc. and its subsidiaries, unless the context
indicates otherwise.




                           AMAZON.COM, INC.
                 Consolidated Statements of Cash Flows
                             (in millions)
                              (unaudited)


                   Three Months      Nine Months       Twelve Months
                       Ended            Ended              Ended
                   September 30,     September 30,      September 30,
                   -------------  -----------------  -----------------
                    2005   2004      2005     2004      2005     2004
                    ------ -----   -------- -------   -------- -------

CASH AND CASH
 EQUIVALENTS,
 BEGINNING OF
 PERIOD            $ 629  $ 701   $ 1,303  $ 1,102   $   746  $   666

OPERATING
 ACTIVITIES:
Net income            30     54       160      242       507      315
Adjustments to
 reconcile net
 income to net
 cash provided
 by operating
 activities:
  Depreciation of
   fixed assets,
   including
   internal-use
   software and
   website
   development,
   and other
   amortization       30     19        85       55       106       73
  Stock-based
   compensation       26      9        71       38        90       53
  Other operating
   expense (income)    -      5         3       (3)       (3)      (3)
  Losses (gains) on
   sales of
   marketable
   securities, net     -      -         -       (1)        -       (1)
  Remeasurements and
   other              (6)     5       (38)     (31)       (6)       5
  Non-cash interest
   expense and other   1      1         4        3         5        4
  Deferred income
   taxes              23     (4)      116      (12)     (128)     (13)
  Cumulative effect
   of change in
   accounting
   principle           -      -       (26)       -       (26)       -
Changes in
 operating assets
 and liabilities:      -      -         -        -         -        -
  Inventories        (76)   (70)       10      (61)      (98)    (104)
  Accounts
   receivable, net
   and other current
   assets            (12)   (18)        6       (9)       14      (25)
  Accounts payable   147     96      (224)    (138)      201      161
  Accrued expenses
   and other current
   liabilities        (5)     9       (30)     (53)        8       19
  Additions to
   unearned revenue   28     34        95       84       120      108
  Amortization of
   previously
   unearned revenue  (32)   (27)      (87)     (76)     (118)    (102)
  Interest payable    (1)     4       (42)     (29)      (11)       -
                    -----  -----   -------  -------   -------  -------
    Net cash
     provided by
     operating
     activities      153    117       103        9       661      490

INVESTING
 ACTIVITIES:
Purchases of fixed
 assets, including
 internal-use
 software and
 website
 development         (76)   (29)     (149)     (52)     (186)     (70)
Acquisitions, net
 of cash acquired     (4)   (71)      (24)     (71)      (24)     (71)
Sales and
 maturities of
 marketable
 securities and
 other investments   163    395       653    1,007     1,072    1,239
  Purchases of
   marketable
   securities       (289)  (380)   (1,027)  (1,136)   (1,475)  (1,257)
                    -----  -----   -------  -------   -------  -------
    Net cash used
     in investing
     activities     (206)   (85)     (547)    (252)     (613)    (159)

FINANCING
 ACTIVITIES:
Proceeds from
 exercises of
 stock options and
 other                23      8        42       43        59       73
Proceeds from
 long-term debt
 and other            13      -        13        -        13        -
Repayments of
 long-term debt
 and capital lease
 obligations          (6)    (1)     (272)    (157)     (272)    (364)
                    -----  -----   -------  -------   -------  -------
    Net cash
     provided
     by (used in)
     financing
     activities       30      7      (217)    (114)     (200)    (291)

Foreign-currency
 effect on cash
 and cash
 equivalents          (6)     6       (42)       1         6       40
                    -----  -----   -------  -------   -------  -------
    Net increase
     (decrease) in
     cash and cash
     equivalents     (29)    45      (703)    (356)     (146)      80
                    -----  -----   -------  -------   -------  -------

CASH AND CASH
 EQUIVALENTS, END
 OF PERIOD         $ 600  $ 746   $   600  $   746   $   600  $   746
                    =====  =====   =======  =======   =======  =======

SUPPLEMENTAL CASH
 FLOW INFORMATION:
Cash paid for
 interest          $  21  $  21   $   105  $   108   $   105  $   111
Cash paid for
 income taxes          6      2        11        3        12        3


                           AMAZON.COM, INC.
                 Consolidated Statements of Operations
                 (in millions, except per share data)
                              (unaudited)


                                           Three Months   Nine Months
                                               Ended         Ended
                                           September 30, September 30,
                                          ----------------------------
                                            2005   2004   2005   2004
                                           ------ ------ ------ ------

Net sales                                 $1,858 $1,463 $5,513 $4,380
Cost of sales                              1,395  1,107  4,141  3,322
                                           ------ ------ ------ ------
Gross profit                                 463    356  1,372  1,058

Operating expenses(1):
 Fulfillment                                 171    138    495    392
 Marketing                                    44     34    131    103
 Technology and content                      121     69    319    199
 General and administrative                   32     29    117     89
 Other operating expense (income)             40      5     43     (3)
                                           ------ ------ ------ ------
       Total operating expenses              408    275  1,105    780
                                           ------ ------ ------ ------

Income from operations                        55     81    267    278

Interest income                               12      7     30     19
Interest expense                             (22)   (26)   (70)   (80)
Other income (expense), net                    -      -      2      -
Remeasurements and other                       6     (5)    38     31
                                           ------ ------ ------ ------
       Total non-operating income
        (expense)                             (4)   (24)     -    (30)
                                           ------ ------ ------ ------

Income before income taxes                    51     57    267    248

Provision for income taxes                    21      3    133      6
                                           ------ ------ ------ ------

Income before cumulative effect of change
 in accounting principle                      30     54    134    242

Cumulative effect of change in accounting
 principle                                     -      -     26      -
                                           ------ ------ ------ ------

Net income                                $   30 $   54 $  160 $  242
                                           ====== ====== ====== ======

Basic earnings per share:
 Prior to cumulative effect of change in
  accounting principle                    $ 0.07 $ 0.13 $ 0.33 $ 0.60
 Cumulative effect of change in
  accounting principle                         -      -   0.06      -
                                           ------ ------ ------ ------
                                          $ 0.07 $ 0.13 $ 0.39 $ 0.60
                                           ====== ====== ====== ======

Diluted earnings per share:
 Prior to cumulative effect of change in
  accounting principle                    $ 0.07 $ 0.13 $ 0.32 $ 0.57
 Cumulative effect of change in
  accounting principle                         -      -   0.06      -
                                           ------ ------ ------ ------
                                          $ 0.07 $ 0.13 $ 0.38 $ 0.57
                                           ====== ====== ====== ======

Weighted average shares used in computation
 of earnings per share:
  Basic                                      413    407    411    405
                                           ====== ====== ====== ======

  Diluted                                    428    425    426    424
                                           ====== ====== ====== ======

(1)Includes stock-based compensation
 as follows:
  Fulfillment                             $    5 $    2 $   13 $    6
  Marketing                                    2      -      5      3
  Technology and content                      13      4     36     21
  General and administrative                   6      3     17      8
                                           ------ ------ ------ ------
                                          $   26 $    9 $   71 $   38
                                           ====== ====== ====== ======



                           AMAZON.COM, INC.
                         Segment Information
                            (in millions)
                             (unaudited)

                                       Three Months    Nine Months
                                          Ended           Ended
                                      September 30,    September 30,
                                      -------------- ----------------
                                        2005    2004     2005    2004
                                       ------  ------   ------  ------
North America
 Net sales                            $1,041  $  816   $3,028  $2,455
 Cost of sales                           749     593    2,179   1,786
                                       ------  ------   ------  ------
 Gross profit                            292     223      849     669
 Direct segment operating expenses (1)   226     166      645     470
                                       ------  ------   ------  ------
 Segment operating income                 66      57      204     199

International
 Net sales                               817     647    2,485   1,925
 Cost of sales                           646     514    1,962   1,536
                                       ------  ------   ------  ------
 Gross profit                            171     133      523     389
 Direct segment operating expenses (1)   116      95      346     275
                                       ------  ------   ------  ------
 Segment operating income                 55      38      177     114

Consolidated
 Net sales                             1,858   1,463    5,513   4,380
 Cost of sales                         1,395   1,107    4,141   3,322
                                       ------  ------   ------  ------
 Gross profit                            463     356    1,372   1,058
 Direct segment operating expenses       342     261      991     745
                                       ------  ------   ------  ------
 Segment operating income                121      95      381     313
 Stock-based compensation                (26)     (9)     (71)    (38)
 Other operating income (expense)        (40)     (5)     (43)      3
                                       ------  ------   ------  ------
 Income from operations                   55      81      267     278
 Total non-operating income (expense),
  net                                     (4)    (24)       -     (30)
 Provision for income taxes              (21)     (3)    (133)     (6)
 Cumulative effect of change in
  accounting principle                     -       -       26       -
                                       ------  ------   ------  ------

 Net income                           $   30  $   54   $  160  $  242
                                       ======  ======   ======  ======

Segment Highlights:
 Y/Y net sales growth:
  North America                           28%     15%      23%     16%
  International                           26      52       29      60
  Consolidated                            27      29       26      32
 Y/Y gross profit growth:
  North America                           31%     11%      27%     16%
  International                           29      56       35      54
  Consolidated                            30      24       30      27
 Y/Y segment operating income growth:
  North America                           16%    (8%)       3%     18%
  International                           46     238       56     188
  Consolidated                            28      29       22      50
 Net sales mix:
  North America                           56%     56%      55%     56%
  International                           44      44       45      44

(1) A significant majority of our costs for "Technology and content"
    are incurred in the United States and most
    of these costs are allocated to our North America segment.


                           AMAZON.COM, INC.
                  Supplemental Net Sales Information
                            (in millions)
                             (unaudited)

                                       Three Months     Nine Months
                                           Ended           Ended
                                       September 30,   September 30,
                                      --------------- ----------------
                                        2005    2004     2005    2004
                                       ------  ------   ------  ------
North America
 Media                                $  684  $  564   $2,015  $1,704
 Electronics and other general
  merchandise                            304     228      863     679
 Other                                    53      24      150      72
                                       ------  ------   ------  ------
                                       1,041     816    3,028   2,455

International
 Media                                   629     530    1,917   1,601
 Electronics and other general
  merchandise                            187     116      565     322
 Other                                     1       1        3       2
                                       ------  ------   ------  ------
                                         817     647    2,485   1,925

Consolidated
 Media                                 1,313   1,094    3,932   3,305
 Electronics and other general
  merchandise                            491     344    1,428   1,001
 Other                                    54      25      153      74
                                       ------  ------   ------  ------
                                      $1,858  $1,463   $5,513  $4,380
                                       ======  ======   ======  ======

Y/Y Net Sales Growth:
North America:
 Media                                    21%     12%      18%     12%
 Electronics and other general
  merchandise                             33      27       27      29
 Other                                   122     (10)     108       -

International:
 Media                                    19%     41%      20%     46%
 Electronics and other general
  merchandise                             62     132       76     210
 Other                                   177      17       85      76

Consolidated:
 Media                                    20%     25%      19%     26%
 Electronics and other general
  merchandise                             43      50       43      59
 Other                                   123     (10)     107       1

Consolidated Net Sales Mix:
 Media                                    71%     75%      71%     75%
 Electronics and other general
  merchandise                             26      24       26      23
 Other                                     3       2        3       2


                           AMAZON.COM, INC.
                      Consolidated Balance Sheets
                 (in millions, except per share data)

                                       September   December September
                                           30,        31,       30,
                                          2005       2004     2004
                                       ----------  -------  ----------
ASSETS                                (unaudited)         (unaudited)
Current assets:
 Cash and cash equivalents            $      600  $ 1,303  $      746
 Marketable securities                       819      476         439
                                       ----------  -------  ----------
    Cash, cash equivalents, and
     marketable securities                 1,419    1,779       1,185
 Inventories                                 456      480         357
 Deferred tax assets, current portion         58       81           1
 Accounts receivable, net and other
  current assets                             188      199         150
                                       ----------  -------  ----------
            Total current assets           2,121    2,539       1,693

Fixed
 assets, net                                 322      246         227
Deferred tax assets, long-term
 portion                                     190      282          11
Goodwill                                     159      139         138
Other assets                                  40       42          40
                                       ----------  -------  ----------
            Total assets              $    2,832  $ 3,248  $    2,109
                                       ==========  =======  ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
 (DEFICIT)
Current liabilities:
 Accounts
  payable                             $      876  $ 1,142  $      689
 Accrued expenses and other current
  liabilities                                340      361         269
 Unearned revenue                             48       41          46
 Interest payable                             32       74          44
 Current portion of long-term debt
  and other                                   17        2           3
                                       ----------  -------  ----------
            Total current liabilities      1,313    1,620       1,051

Long-term debt and other                   1,513    1,855       1,780

Commitments and contingencies

Stockholders' Equity (Deficit):
 Preferred stock, $0.01 par value:
  Authorized shares -- 500
  Issued and outstanding shares --
   none                                        -        -           -
 Common stock, $0.01 par value:
  Authorized shares -- 5,000
  Issued and outstanding shares  --
   414, 410 and 407 shares                     4        4           4
 Additional paid-in capital                2,215    2,123       1,979
 Accumulated other comprehensive
  income                                      13       32          28
 Accumulated deficit                      (2,226)  (2,386)     (2,733)
                                       ----------  -------  ----------
            Total stockholders'
             equity (deficit)                  6     (227)       (722)
                                       ----------  -------  ----------
            Total liabilities and
             stockholders' equity
             (deficit)                $    2,832  $ 3,248  $    2,109
                                       ==========  =======  ==========

                           AMAZON.COM, INC.
        Supplemental Financial Information and Business Metrics
                 (in millions, except per share data)
                              (unaudited)
----------------------------------------------------------------------
                                                                 Y/Y %
                     Q3 2004 Q4 2004 Q1 2005  Q2 2005  Q3 2005  Change
                     -------------------------------------------------
Cash Flows and Shares

Operating cash flow
 -- trailing twelve
 months (TTM) (1)     $  490  $  567  $  523  $   624  $   661    35%

Purchase of fixed
 assets (incl.
 internal-use
 software & website
 development) -- TTM  $   70  $   89  $  106  $   138  $   186   166%

Free cash flow
 (operating cash flow
 less purchases of
 fixed assets) --
 TTM (1)              $  420  $  477  $  417  $   486  $   475    13%

Common shares and
 stock-based awards
 outstanding             434     434     434      438      438     1%
Common shares
 outstanding             407     410     411      412      414     2%
Stock-based awards
 outstanding              27      25      24       26       24   (10%)
Stock-based awards
 outstanding -- % of
 common shares
 outstanding             6.5%    6.0%    5.7%     6.3%     5.8%   N/A

Results of Operations

Worldwide (WW) net
 sales                $1,463  $2,541  $1,902  $ 1,753  $ 1,858    27%
WW net sales -- Y/Y
 growth, excluding
 the effect of
 foreign exchange
 rates                  23.9%   26.2%   22.3%    24.6%    27.6%   N/A
WW net sales --  TTM  $6,326  $6,921  $7,292  $ 7,658  $ 8,054    27%

Gross profit          $  356  $  544  $  458  $   450  $   463    30%
Gross margin -- % of
 WW net sales           24.3%   21.4%   24.1%    25.7%    24.9%   N/A
Gross profit -- TTM   $1,484  $1,602  $1,700  $ 1,809  $ 1,917    29%
Gross margin -- TTM %
 of WW net sales        23.5%   23.1%   23.3%    23.6%    23.8%   N/A

Fulfillment costs,
 excluding stock-
 based compensation
 -- % of WW net sales    9.3%    8.0%    8.6%     8.7%     8.9%   N/A
Fulfillment costs,
 excluding stock-
 based compensation
 -- TTM % of WW net
 sales                   8.6%    8.5%    8.6%     8.6%     8.5%   N/A

Operating income (1)  $   81  $  162  $  108  $   104  $    55   (32%)
Operating margin -- %
 of WW net sales (1)     5.6%    6.4%    5.7%     6.0%     3.0%   N/A
Operating income --
 TTM (1)              $  416  $  440  $  438  $   456  $   430      3%
Operating margin --
 TTM % of WW net
 sales (1)               6.6%    6.4%    6.0%     6.0%     5.3%   N/A

Net income (1) (2)    $   54  $  347  $   78  $    52  $    30   (45%)
Net income per
 diluted
 share (1) (2)        $ 0.13  $ 0.82  $ 0.18  $  0.12  $  0.07   (45%)
Net income --
 TTM (1) (2)          $  315  $  588  $  555  $   531  $   507    61%
Net income per
 diluted share -- TTM
 (1) (2)              $ 0.74  $ 1.39  $ 1.31  $  1.25  $  1.19    61%

Segments

North America Segment:
  Net sales           $  816  $1,392  $1,027  $   960  $ 1,041    28%
  Net sales -- Y/Y
   growth, excluding
   the effect of
   foreign exchange
   rates                15.0%   21.8%   21.1%    21.0%    27.4%   N/A
  Net sales -- TTM    $3,597  $3,847  $4,027  $ 4,195  $ 4,420    23%
  Gross profit        $  223  $  355  $  279  $   278  $   292    31%
  Gross margin -- %
   of North America
   net sales            27.4%   25.5%   27.2%    29.0%    28.1%   N/A
  Gross profit -- TTM $  958  $1,024  $1,077  $ 1,135  $ 1,204    26%
  Gross margin -- TTM
   % of North America
   net sales            26.6%   26.6%   26.7%    27.1%    27.2%   N/A
  Operating income    $   57  $  122  $   66  $    72  $    66    16%
  Operating margin --
   % of North America
   net sales             7.0%    8.8%    6.4%     7.5%     6.4%   N/A
  Operating income --
   TTM                $  313  $  321  $  311  $   317  $   326     4%
  Operating margin --
   TTM % of North
   America net sales     8.7%    8.3%    7.7%     7.6%     7.4%   N/A

International Segment:
  Net sales           $  647  $1,149  $  875  $   793  $   817    26%
  Net sales -- Y/Y
   growth, excluding
   the effect of
   foreign exchange
   rates                38.9%   32.5%   23.8%    29.3%    27.8%   N/A
  Net sales -- TTM    $2,729  $3,074  $3,265  $ 3,463  $ 3,634    33%
  Net sales -- TTM %
   of WW net sales      43.1%   44.4%   44.8%    45.2%    45.1%   N/A
  Gross profit        $  133  $  190  $  180  $   172  $   171    29%
  Gross margin -- %
   of International
   net sales            20.5%   16.5%   20.5%    21.7%    20.9%   N/A
  Gross profit -- TTM $  527  $  578  $  623  $   674  $   713    35%
  Gross margin -- TTM
   % of International
   net sales            19.3%   18.8%   19.1%    19.5%    19.6%   N/A
  Operating income    $   38  $   55  $   63  $    60  $    55    46%
  Operating margin --
   % of International
   net sales             5.8%    4.8%    7.2%     7.6%     6.7%   N/A
  Operating income --
   TTM                $  153  $  169  $  190  $   216  $   233    52%
  Operating margin --
   TTM % of
   International net
   sales                 5.6%    5.5%    5.8%     6.2%     6.4%   N/A
----------------------------------------------------------------------


                           AMAZON.COM, INC.
        Supplemental Financial Information and Business Metrics
  (in millions, except inventory turnover, accounts payable days, and
                            employee data)
                              (unaudited)

----------------------------------------------------------------------
                                                                 Y/Y %
                     Q3 2004 Q4 2004 Q1 2005  Q2 2005  Q3 2005  Change
                     -------------------------------------------------

Segments (continued)

Consolidated Segments:
  Operating expenses  $  261  $  367  $  330  $   318  $   342    31%
  Operating expenses
   -- TTM             $1,019  $1,112  $1,198  $ 1,276  $ 1,358    33%
  Operating income    $   95  $  177  $  129  $   132  $   121    28%
  Operating margin --
   % of consolidated
   sales                 6.5%    7.0%    6.8%     7.5%     6.5%   N/A
  Operating income --
   TTM                $  466  $  490  $  502  $   533  $   559    20%
  Operating margin --
   TTM % of
   consolidated net
   sales                 7.4%    7.1%    6.9%     7.0%     6.9%   N/A

Supplemental North
 America Segment Net
 Sales:
  Media               $  564  $  885  $  699  $   632  $   684    21%
  Media -- TTM        $2,455  $2,589  $2,690  $ 2,780  $ 2,901    18%
  Electronics and
   other general
   merchandise        $  228  $  449  $  281  $   278  $   304    33%
  Electronics and
   other general
   merchandise -- TTM $1,031  $1,128  $1,185  $ 1,236  $ 1,311    27%
  Electronics and
   other general
   merchandise -- TTM
   % of North America
   net sales              29%     29%     29%      29%      30%   N/A
  Other               $   24  $   58  $   46  $    50  $    53   122%
  Other -- TTM        $  111  $  130  $  153  $   178  $   208    88%

Supplemental
 International
 Segment Net Sales:
  Media               $  530  $  911  $  675  $   614  $   629    19%
  Media -- TTM        $2,285  $2,513  $2,612  $ 2,730  $ 2,828    24%
  Electronics and
   other general
   merchandise        $  116  $  237  $  199  $   178  $   187    62%
  Electronics and
   other general
   merchandise -- TTM $  442  $  558  $  651  $   730  $   801    81%
  Electronics and
   other general
   merchandise -- TTM
   % of International
   net sales              16%     18%     20%      21%      22%   N/A
  Other               $    1  $    1  $    1  $     1  $     1   177%
  Other -- TTM        $    2  $    2  $    3  $     3  $     4    97%

Supplemental
 Worldwide Net Sales:
  Media               $1,094  $1,796  $1,374  $ 1,246  $ 1,313    20%
  Media -- TTM        $4,740  $5,102  $5,302  $ 5,510  $ 5,730    21%
  Electronics and
   other general
   merchandise        $  344  $  686  $  480  $   456  $   491    43%
  Electronics and
   other general
   merchandise -- TTM $1,474  $1,686  $1,835  $ 1,966  $ 2,113    43%
  Electronics and
   other general
   merchandise -- TTM
   % of WW net sales      23%     24%     25%      26%      26%   N/A
  Other               $   25  $   59  $   47  $    51  $    54   123%
  Other -- TTM        $  113  $  133  $  156  $   181  $   211    88%

Balance Sheet

Cash and marketable
 securities           $1,185  $1,779  $1,151  $ 1,325  $ 1,419    20%

Inventory, net --
 ending               $  357  $  480  $  403  $   383  $   456    28%
Inventory -- average
 inventory % of TTM
 net sales               4.6%    4.9%    5.0%     5.0%     5.2%   N/A
Inventory turnover,
 average -- TTM         16.6    15.7    15.5     15.3     14.8   (11%)

Fixed assets, net     $  227  $  246  $  245  $   267  $   322    42%

Accounts payable days
 -- ending                57      53      44       51       58     1%

Other

Employees (full-time
 and part-time;
 excludes contractors
 & temporary
 personnel)            8,800   9,000   9,400   10,200   11,100    27%

----------------------------------------------------------------------
Note:  The attached "Financial and Operational Summary" is an integral
part of this Supplemental Financial Information and Business Metrics.

(1) As previously announced in August 2005, the Company settled a
patent lawsuit on terms including a previously unanticipated one-time
payment of $40 million in Q3 2005, which negatively impacted Q3 2005
operating cash flow, free cash flow and operating income by $40
million and net income by $20 million after tax.

(2) Q4 2004 net income includes a $244 million benefit from
realizing a deferred tax asset related primarily to net operating loss
carryforwards attributable to continuing operations; 2005 net income
includes a $56 million tax expense for Q1 2005, a $56 million tax
expense for Q2 2005, and a $21 million tax expense for Q3 2005,
primarily due to taxable income resulting from the transfer of certain
operating assets from U.S. to international locations.
                           Amazon.com, Inc.
                   Financial and Operational Summary
                              (unaudited)

Quarterly Results of Operations (comparisons are with the equivalent period of the prior year, unless otherwise stated)

    Net Sales

--  Shipping revenue was $112 million, up 30% from $87 million.

--  Amounts paid in advance for subscription services, including
    amounts received from online DVD rentals, Amazon Prime, and other
    membership programs, are deferred and classified in "Unearned
    revenue" on our balance sheets and recognized as revenue over the
    subscription term.

--  Amounts earned from third-party sales on our websites are recorded
    as net amounts.

    Cost of Sales

--  Cost of sales consists of the purchase price of products sold by
    us, inbound and outbound shipping charges, packaging supplies, and
    service costs such as those incurred in operating and staffing our
    fulfillment and customer service centers on behalf of third-party
    sellers, and amortization of our DVD rental library.

--  Outbound shipping-related costs totaled $159 million, up 25% from
    $128 million. Net shipping loss was $47 million, up 15% from a net
    shipping loss of $41 million, resulting primarily from our free
    shipping offers and Amazon Prime.

    Operating Expenses

--  Fixed assets include assets such as furniture and fixtures, heavy
    equipment, technology infrastructure, internal-use software and
    website development, and our DVD rental library. Depreciation
    expense is generally classified within the corresponding operating
    expense categories on the consolidated statements of operations,
    and certain assets, such as our DVD rental library, are amortized
    to "Cost of sales." Depreciation expense for fixed assets,
    including amortization of internal-use software and website
    development, was $29 million, up from $19 million, and is
    classified within the corresponding operating expense categories.

--  Stock-based compensation increased $17 million to $26 million. We
    chose to early-adopt SFAS 123(R), the new accounting rules on
    stock-based compensation, effective January 1, 2005. Stock-based
    compensation would have been $30 million, under our prior
    accounting method, up $21 million versus Q3 2004.

--  In accordance with SAB 107, issued March 2005, we present
    stock-based compensation within the same operating expense line
    items as cash compensation.

--  Operating expenses with and without stock-based compensation are
    as follows:
                         Q3 2005                    Q3 2004
                -------------------------- --------------------------
                  As     Stock-Based         As     Stock-Based
                Reported Compensation Net  Reported Compensation Net
                -------- ----------------- -------- -----------------
Operating
 Expenses:
  Fulfillment     $171       $  (5)  $166    $138          $(2) $136
  Marketing         44          (2)    42      34            -    34
  Technology and
   content         121         (13)   108      69           (4)   65
  General and
   administrative   32          (6)    26      29           (3)   26
  Other operating
   expense (income) 40           -     40       5            -     5
                   ----       -----   ----    ----          ---  ----
    Total operating
     expenses     $408       $ (26)  $382    $275          $(9) $266
                   ====       =====   ====    ====          ===  ====

Year-over-year Percentage
 Growth:
  Fulfillment       24 %               23 %    23 %               27 %
  Marketing         28                 23      13                 19
  Technology and
   content          74                 66       5                 21
  General and
   administrative   12                  1      13                 16

Percent of Net
 Sales:
  Fulfillment      9.2 %              8.9 %   9.4 %              9.3 %
  Marketing        2.4                2.3     2.4                2.3
  Technology and
   content         6.5                5.8     4.7                4.4
  General and
   administrative  1.7                1.4     2.0                1.8
    Fulfillment

--  Fulfillment costs include those costs incurred in operating and
    staffing our fulfillment and customer service centers, including
    costs attributable to buying, receiving, inspecting, and
    warehousing inventories; picking, packaging and preparing customer
    orders for shipment; credit card fees and bad debt costs,
    including costs associated with our guarantee of certain
    third-party seller transactions. Fulfillment costs also include
    amounts paid to third parties, who assist us in fulfillment and
    customer service operations.

--  Credit card fees associated with third-party seller transactions
    are assessed on the gross purchase price of underlying
    transactions, and therefore represent a larger percentage of our
    recorded net revenue on these transactions than credit card fees
    for our retail sales transactions. Bad debt costs, including costs
    associated with our guarantee program, are also higher as a
    percentage of recorded net revenue versus our retail sales.
    Accordingly, as third-party sales increase, credit card fees and
    bad debt costs on these sales will negatively affect fulfillment
    costs as a percentage of net sales.

--  Fulfillment costs increased in absolute dollars from the prior
    year primarily due to variable costs corresponding with sales and
    inventory volumes, our mix of product sales, costs associated with
    credit card fees, bad debt costs, including costs of our guarantee
    of certain third-party seller transactions. We expanded our
    fulfillment capacity in 2005 through gains in efficiencies as well
    as increases in leased warehouse space. We plan to continue
    expanding our worldwide fulfillment capacity in order to
    accommodate greater selection and meet anticipated shipment
    volumes from sales of our own products as well as sales by third
    parties where we provide the fulfillment. We expect absolute
    amounts spent in fulfillment and fulfillment-related cost of sales
    to increase over time.

    Marketing

--  Marketing efforts include targeted online marketing channels, such
    as our Associates and Syndicated Stores programs, sponsored
    search, portal advertising, e-mail campaigns, and other
    initiatives. Our marketing expenses are largely variable, based on
    growth in sales and changes in rates. To the extent there is
    increased or decreased competition for these traffic sources, or
    to the extent our mix of these channels shifts, we would expect to
    see a corresponding change in our marketing expense. While costs
    associated with free shipping are not included in marketing
    expense, we view our free shipping offers as an effective
    worldwide marketing tool and intend to continue offering them
    indefinitely. We expect absolute amounts spent in marketing to
    increase over time.

    Technology and Content

--  Technology and content expenses consist principally of payroll and
    related expenses for employees involved in development of our
    websites, including application development, editorial content,
    merchandising selection and systems, and telecommunications
    support; and costs associated with the systems and
    telecommunications infrastructure.

--  Our spending in technology and content has primarily increased as
    we are adding computer scientists and software engineers to
    continue to enhance the customer experience on our websites and
    those websites powered by us, and to improve our process
    efficiency. Additionally, we continue to invest in several areas
    of technology, including seller platforms, search, web services,
    and digital initiatives. As we have done throughout the year, we
    intend to continue investing in areas of technology and content,
    and expect absolute dollars spent in technology and content to
    increase over time as we continue to add computer scientists and
    software engineers to our staff.

--  A significant majority of our technology costs are incurred in the
    U.S. and most of them are allocated to our North America segment.

--  We expense costs related to the development of internal-use
    software and website development other than those incurred during
    the application development stage. Costs incurred during the
    application development stage are capitalized and amortized over
    the two-year estimated useful life of the software. We capitalized
    $25 million of internal-use software and website development
    costs, including $3 million associated with stock-based
    compensation, which is excluded from purchases of fixed assets on
    our consolidated statements of cash flows since it is stock based
    rather than cash, compared with $12 million a year ago. These
    amounts were partially offset by amortization of previously
    capitalized amounts of $14 million and $8 million.

    General and Administrative

--  General and administrative costs increased primarily due to
    payroll and related expenses, professional fees, and legal costs,
    offset by a $12 million benefit for actual and expected
    reimbursement by an insurer of certain legal costs previously
    incurred by us. We expect absolute dollars spent in general and
    administrative to increase over time.

    Stock-Based Compensation

--  Prior to January 1, 2005, we accounted for stock-based awards
    under the intrinsic value method, which resulted in compensation
    expense for restricted stock and restricted stock units at grant
    date fair value based on the number of shares granted and the
    quoted price of our common stock, and for stock options to the
    extent option exercise prices were set below market prices on the
    date of grant. Also, stock-based awards subject to an exchange
    offer, other modifications, or performance criteria, were subject
    to variable accounting treatment.

--  As of January 1, 2005, we adopted SFAS 123(R), which requires
    measurement of compensation cost for stock-based awards at grant
    date fair value. The fair value of restricted stock and restricted
    stock units is determined based on the number of shares granted
    and the quoted price of our common stock, while the fair value of
    stock options is determined using a Black-Scholes valuation model.
    The fair value is recognized as an expense over the service
    period, net of estimated forfeitures, using the accelerated method
    under SFAS 123(R). Because we implemented SFAS 123(R), we no
    longer have stock awards subject to variable accounting treatment.

--  Prior to our adoption of SFAS 123(R), cash retained as a result of
    excess tax deductions relating to stock-based compensation was
    presented in operating cash flows, along with other tax cash
    flows. SFAS 123(R) requires benefits relating to excess
    stock-based compensation deductions to be presented as financing
    cash inflows. Tax benefits resulting from stock-based compensation
    deductions in excess of amounts reported for financial reporting
    purposes were $2 million.

--  Stock-based awards generally vest over service periods of between
    two and five years.

--  Payroll tax expense resulting from exercises of stock-based awards
    is a cash expense and is not categorized as stock-based
    compensation.

--  We granted stock awards, substantially all of which have been
    restricted stock units since October 2002, of 1 million shares at
    a per-share weighted-average fair value of $40. Our annual stock
    awards are granted in the second quarter.

--  At September 30, 2005, there were 438 million common shares and
    stock-based awards outstanding, up 1% from 434 million at
    September 30, 2004. This total includes all stock-based awards
    outstanding, without regard for estimated forfeitures, consisting
    of vested and unvested awards, and in-the-money and
    out-of-the-money stock options.

--  At September 30, 2005, there were 24 million stock awards
    outstanding, consisting of 14 million stock options with a $14
    weighted-average exercise price and 10 million restricted stock
    units. At September 30, 2004 there were 27 million stock awards
    outstanding.

    Other Operating Expense (Income)

--  We settled a patent lawsuit on terms including a previously
    unanticipated one-time payment of $40 million in Q3 2005 that was
    recorded to "Other operating expense (income)" on the consolidated
    statements of operations. Operating cash flow, free cash flow,
    operating income, and net income were negatively impacted by this
    legal settlement, as follows:
                                          Q3 2005
                     -------------------------------------------------
                      Operating Cash      Free Cash   Operating   Net
                        Flow (TTM)        Flow (TTM)   Income   Income
                     -------------------------------------------------

  As reported               $   661          $   475     $ 55     $30
  Legal settlement               40               40       40      20
                             -------          -------     ----     ---
  Adjusted                  $   701          $   515     $ 95     $50
                             =======          =======     ====     ===
--  Included in "Other operating expense (income)" are amortization of
    intangibles and restructuring-related expenses or credits.

--  We acquired certain companies during the three quarters ended
    September 30, 2005, for an aggregate cash purchase price of $29
    million. The excess of purchase price over the fair value of the
    net assets acquired was $19 million and is classified as
    "Goodwill" on our consolidated balance sheets. Acquired other
    intangibles totaled $10 million and have estimated useful lives of
    between one and three years. The results of operations of each of
    the acquired businesses have been included in our consolidated
    results as of the closing date of acquisition. The effect of these
    acquisitions on consolidated net sales and operating income was
    not significant for Q3 2005.

    Remeasurements and Other

--  We realized a $4 million gain primarily associated with the sale
    of certain equity investments.

--  Remeasurement of the principal amount of our 6.875% PEACS from
    euros to U.S. dollars resulted in a foreign-currency gain of $4
    million, compared with a loss of $16 million.

--  Remeasurement of foreign-currency intercompany balances that are
    to be repaid among subsidiaries represented a $2 million loss,
    compared with a gain of $7 million.

--  The remeasurement of our 6.875% PEACS and intercompany balances
    can result in significant gains and charges associated with the
    effect of movements in currency exchange rates.

    Income Taxes and Deferred Tax Assets

--  Our tax provision for interim periods is determined using an
    estimate of the annual effective tax rate, with the cumulative
    effect of a change to the estimated annual rate being recorded in
    the interim period such a change is made. The Q3 2005 tax
    provision includes a cumulative adjustment benefit of $4 million
    to reflect our current estimate of our annual effective tax rate
    of 50%.

--  Our effective tax rate for Q3 2005 and for the three quarters
    ended September 30, 2005, remains higher than the 35% statutory
    rate associated with taxable income resulting from the Q1 2005
    transfer of certain operating assets from the U.S. to
    international locations. We expect these asset transfers to result
    in tax expense for financial reporting purposes above the
    statutory rate throughout 2005. Since we have Net Operating Losses
    ("NOLs") these asset transfers will not have a significant effect
    on cash taxes paid in 2005, which we expect to be approximately
    $25 million compared with $4 million in 2004. Cash paid for income
    taxes was $6 million and $2 million in Q3 2005 and Q3 2004, and
    for the three quarters ended September 30, 2005 and 2004 was $11
    million and $3 million.

--  SFAS 109 requires that deferred tax assets be evaluated for future
    realization and reduced by a valuation allowance to the extent we
    believe a portion will not be realized. We consider many factors
    when assessing the likelihood of future realization of our
    deferred tax assets, including our recent cumulative earnings
    experience by taxing jurisdiction, expectations of future taxable
    income, the carry-forward periods available to us for tax
    reporting purposes, and other relevant factors. Significant
    judgment is required in making this assessment, and it is very
    difficult to predict when, if ever, our assessment may conclude
    that the remaining portion of our deferred tax assets is
    realizable.

--  At September 30, 2005, approximately $720 million of our gross
    deferred tax assets were related to approximately $2.3 billion of
    NOLs, the majority of which expire after 2016. Our NOL deferred
    tax assets are reduced by a valuation allowance of approximately
    $510 million due to uncertainty about their future realization.
    The remainder of our deferred tax assets relate to temporary
    timing differences between tax and financial reporting.

--  Substantially all of the unrealized $510 million NOL deferred tax
    assets, if realized, would be credited to "Stockholders' equity"
    rather than results of operations for financial reporting purposes
    since they primarily relate to tax-deductible stock-based
    compensation in excess of amounts recognized for financial
    reporting purposes.

--  Classification of deferred tax assets between current and
    long-term asset categories is based on the expected timing of
    realization, and the valuation allowance is allocated ratably.

    Foreign Exchange

--  Our financial reporting currency is the U.S. dollar and changes in
    exchange rates significantly affect our reported results and
    consolidated trends. For example, during Q3 2005 our consolidated
    revenue and operating income were negatively affected by the
    strengthening of the U.S. Dollar in comparison to the currencies
    of internationally focused websites, but our consolidated revenue
    and operating income from Q2 2002 through Q2 2005 have benefited
    from weakness in the U.S. dollar in comparison to the same
    currencies.

--  The effect on our consolidated statements of operations from
    year-over-year changes in exchange rates versus the U.S. dollar
    throughout the period is as follows:
                            Q3 2005                  Q3 2004
                   ------------------------- ------------------------
                     At                        At
                    Prior  Exchange           Prior  Exchange
                    Year     Rate             Year     Rate
                    Rates   Effect     As     Rates   Effect     As
                     (1)      (2)   Reported   (1)      (2)   Reported
                   ------- -------- -------- ------- -------- --------
                         (in millions, except per share amounts)
Net sales          $1,865    $  (7)  $1,858  $1,406    $  57   $1,463
Gross profit          464       (1)     463     344       12      356
Operating expenses    408        -      408     282       (7)     275
Income from
 operations            56       (1)      55      77        4       81
Net interest
 expense and other    (10)       -      (10)    (18)      (1)     (19)
Remeasurements and
 other (3)              4        2        6       1       (6)      (5)
Net income             29        1       30      57       (3)      54
Diluted earnings
 per share         $ 0.07    $   -   $ 0.07  $ 0.13    $   -   $ 0.13

(1) Represents the outcome that would have resulted had currency
    exchange rates in the current period been the same as those in
    effect in the comparable prior year period for operating results,
    and if we did not incur the variability associated with
    remeasurements for our 6.875% PEACS and intercompany balances.

(2) Represents the increase (decrease) in reported amounts resulting
    from changes in exchange rates from those in effect in the
    comparable prior year period for operating results, and if we did
    not incur the variability associated with remeasurements for our
    6.875% PEACS and intercompany balances.

(3) Includes foreign-currency gains (losses) on remeasurement of
    6.875% PEACS and intercompany balances compared to prior quarter,
    and realized currency-related gains associated with sales of
    euro-denominated investments held by a U.S. subsidiary.

    Cash Flows and Balance Sheet

--  Operating cash flows and free cash flows can be volatile and are
    sensitive to many factors, including changes in working capital
    and timing of capital expenditures. Working capital at any
    specific point in time is subject to many variables, including
    seasonality, the timing of expense payments, discounts offered by
    vendors, vendor payment terms, and fluctuations in foreign
    exchange rates.

--  Our cash, cash equivalents, and marketable securities of $1.4
    billion, at fair value, primarily consist of cash, investment
    grade securities, and AAA-rated money market mutual funds.
    Included are amounts held in foreign currencies of $687 million,
    primarily in euros, British pounds, and yen.

--  We have pledged $79 million of our cash and marketable securities
    as collateral primarily for standby letters of credit and real
    estate leases, compared with $76 million as of September 30, 2004.

--  "Accounts receivable, net and other current assets" includes
    accounts receivable from merchant partners, vendors and credit
    card companies, interest receivables, and $20 million of prepaid
    expenses.

--  "Other assets" includes, among other things, $13 million of
    deferred issuance costs on long-term debt, $9 million of certain
    equity investments, and $13 million of other intangibles, net.

--  "Unearned revenue" is recorded when payments are received from
    third parties or customers in advance of our providing the
    associated service.

--  Amounts related to restructuring-related leases and other
    commitments due within twelve months are $4 million and are
    included in "Accrued expenses and other current liabilities," and
    the remaining $5 million is included in "Long-term debt and other"
    on our balance sheet. These amounts are net of anticipated
    sublease income of $6 million.

--  "Accrued expenses and other current liabilities" includes, among
    other things, liabilities for gift certificates, professional
    fees, marketing activities, and workforce costs, including accrued
    payroll, vacation, and other benefits.

--  "Long-term debt and other" primarily includes the following (in
    millions):
                                  Principal   Interest    Principal
                                 at Maturity     Rate     Due Date
                                --------------------------------------

 Convertible Subordinated Notes.  $  900 (1)   4.750%   February 2009
 Premium Adjustable Convertible
  Securities ("PEACS")..........     589 (2)   6.875%   February 2010
                                   -----------
                                  $ 1,489 (3)
                                   ===========

(1) Convertible at the holders' option into our common stock at
    $78.0275 per share. We have the right to redeem the Convertible
    Subordinated Notes, in whole or in part, at a redemption price of
    101.9% of the principal, which decreases every February 1 by 47.5
    basis points until maturity, plus any accrued and unpaid interest.

(2) EUR 490 million principal amount, convertible at the holders'
    option into our common stock at EUR 84.883 per share ($102 per
    share based on the euro/U.S. dollar exchange rate as of September
    30, 2005). We have the right to redeem the PEACS, in whole or in
    part, by paying the principal amount, plus any accrued and unpaid
    interest. We do not hedge any portion of the PEACS. The U.S.
    dollar equivalent principal, interest, and conversion price
    fluctuates based on the euro/U.S. dollar exchange ratio. Due to
    fluctuations in this exchange ratio, our principal debt obligation
    since issuance in February 2000 has increased by $106 million as
    of September 30, 2005.

(3) The "if converted" number of shares associated with our
    convertible debt instruments (approximately 17 million total
    shares) is excluded from diluted shares as their effect is
    antidilutive.

    Certain Definitions and Other

--  We present segment information along two lines: North America and
    International. We measure operating results of our segments using
    an internal performance measure of direct segment operating
    expenses that excludes stock-based compensation and other
    operating expenses (income), each of which is not allocated to
    segment results. Other centrally incurred operating costs are
    fully allocated to segment results. Our operating results,
    particularly for the International segment, are affected by
    movements in foreign exchange rates.

--  The North America segment consists of amounts earned from retail
    sales of consumer products (including from third-party sellers)
    and subscriptions through North America-focused websites such as
    www.amazon.com and www.amazon.ca; from North America-focused
    Syndicated Stores, such as www.cdnow.com; from our mail-order tool
    catalog phone orders; from our Amazon Prime membership program;
    and from non-retail activities such as North America-focused
    Amazon Services' Merchant.com, marketing, and promotional
    agreements. This segment includes export sales from www.amazon.com
    and www.amazon.ca.

--  The International segment consists of amounts earned from retail
    sales of consumer products (including from third-party sellers)
    and subscriptions through internationally focused websites such as
    www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr,
    and since September 2004, www.joyo.com; from internationally
    focused Syndicated Stores; from our DVD rental service and from
    non-retail activities such as internationally focused marketing
    and promotional agreements. This segment includes export sales
    from these internationally based sites (including export sales
    from these sites to customers in the U.S. and Canada), but
    excludes export sales from www.amazon.com and www.amazon.ca.

--  We provide supplemental sales information within each segment for
    three categories: "Media," "Electronics and other general
    merchandise," and "Other." Media consists of amounts earned from
    DVD rental and retail sales from all sellers of books, music,
    DVD/video, magazine subscriptions, software, video games, and
    video-game consoles. Electronics and other general merchandise
    consists of amounts earned from retail sales from all sellers of
    items not included in Media, such as electronics and office,
    camera and photo, toys and baby, tools, home and garden, apparel,
    sports and outdoors, kitchen and housewares, gourmet food,
    jewelry, health and personal care, beauty, and musical
    instruments. The Other category consists of non retail activities,
    such as the Merchant.com program and miscellaneous marketing and
    promotional activities, such as our co-branded credit card
    program.

--  Operating cash flow is net cash provided by (used in) operating
    activities, including cash outflows for interest and excluding
    proceeds from the exercise of stock-based employee awards. Free
    cash flow is operating cash flow less cash outflows for purchases
    of fixed assets, including internal-use software and website
    development.

--  Operating cycle is number of days of sales in inventory plus
    number of days of sales in accounts receivable minus accounts
    payable days. Accounts payable days are calculated as the quotient
    of accounts payable to cost of sales, multiplied by the number of
    days in the period. Inventory turns are calculated as the quotient
    of cost of sales to average inventory over five quarter ends.

--  References to customers mean customer accounts, which are unique
    e-mail addresses, established either when a customer's initial
    order is shipped or when a customer orders from certain
    third-party sellers on our websites. Customer accounts include
    customers of Amazon Marketplace, Auctions and zShops, and our
    Merchants@, Syndicated Stores programs, but exclude DVD rental
    customers, customers associated with certain of our acquisitions
    (including Joyo.com customers), Amazon Services' Merchant.com
    program customers, Amazon.com Payments customers, our catalog
    customers, and the customers of select companies with whom we have
    a technology alliance or marketing and promotional relationship. A
    customer is considered active when they have placed an order
    during the preceding twelve-month period.

--  References to sellers or merchants mean active seller accounts,
    which are established when a seller receives an order from a
    customer account. Seller accounts include sellers in Amazon
    Marketplace, Auctions, zShops, and Merchants@ platforms, but
    exclude Amazon Services' Merchant.com sellers. A seller is
    considered active when they have received an order during the
    preceding twelve-month period.

--  References to units mean units sold (net of returns and
    cancellations) by us and third-party sellers at Amazon.com domains
    worldwide -- such as www.amazon.com, www.amazon.co.uk,
    www.amazon.de, www.amazon.co.jp, www.amazon.fr, and
    www.amazon.ca -- and at Syndicated Stores domains, as well as
    Amazon.com-owned items sold through catalogs and at non-Amazon.com
    domains, such as books, music, and DVD/video items ordered from
    Amazon.com's store at www.target.com. Units sold do not include
    units associated with certain of our acquisitions (including
    Joyo.com units), Amazon.com gift certificates or DVD rentals.

CONTACT: Amazon.com Investor Relations
Tim Stone, 206-266-2171
ir@amazon.com
www.amazon.com/ir
or
Amazon.com Public Relations
Patty Smith, 206-266-7180

SOURCE: Amazon.com, Inc.


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