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Amazon.com Announces Third Quarter Financial Results -- Net Sales up 24% Year over Year -- Expects Record Holiday Season

SEATTLE--(BUSINESS WIRE)--Oct. 24, 2006--Amazon.com, Inc. (NASDAQ:AMZN) today announced financial results for its third quarter ended September 30, 2006.

Operating cash flow declined 11% to $587 million for the trailing twelve months, compared with $661 million for the trailing twelve months ended September 30, 2005. Free cash flow decreased 23% to $366 million for the trailing twelve months, compared with $475 million for the trailing twelve months ended September 30, 2005, driven primarily by our increased expenditure in technology and content.

Common shares outstanding plus shares underlying stock-based awards outstanding totaled 435 million at September 30, 2006, compared with 438 million a year ago. During the quarter, the Company repurchased 8 million shares, or $252 million under its previously announced authorization to repurchase up to $500 million of the Company's common stock.

Net sales increased 24% to $2.31 billion in the third quarter, compared with $1.86 billion in third quarter 2005. Excluding the $20 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 23% compared with third quarter 2005.

Operating income decreased 28% to $40 million in the third quarter, compared with $55 million in third quarter 2005. The decline in operating income was mainly due to technology and content investments. Third quarter 2005 operating income included a negative impact of $40 million relating to a patent litigation settlement.

Net income was $19 million in the third quarter, or $0.05 per diluted share, compared with net income of $30 million, or $0.07 per diluted share in third quarter 2005.

"We're pleased with the strong revenue growth and rapid adoption of Amazon Prime," said Jeff Bezos, founder and CEO of Amazon.com. "We look forward to seeing significant sequential improvement in operating leverage this Q4, even as we continue to invest in many initiatives including new retail categories, seller platforms, web services, and digital."

Amazon Prime continues to demonstrate strong quarter-to-quarter sequential growth for new memberships. Amazon Prime, Amazon.com's first-ever membership program, was introduced in 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 they 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 $1.26 billion, up 21% from third
        quarter 2005.

    --  International segment sales, representing the Company's U.K.,
        German, Japanese, French and Chinese sites, were $1.05
        billion, up 29% from third quarter 2005. Excluding the
        favorable impact from year-over-year changes in foreign
        exchange rates throughout the quarter, International net sales
        growth was 26%.

    --  Worldwide Electronics & Other General Merchandise grew 43% to
        $699 million in third quarter 2006, and increased to 30% of
        worldwide net sales compared with 26% in third quarter 2005.

    --  The Company launched Amazon Unbox, a digital video download
        service offering customers thousands of television shows,
        movies and other video content from more than 30 studio and
        network partners from Hollywood and around the world. Amazon
        Unbox continues to add selection with the addition of
        Showtime(R) premium programming in October.

    --  Amazon Business Solutions launched in beta WebStore by Amazon
        and Fulfillment by Amazon, giving small and medium-sized
        businesses access to Amazon's order fulfillment, customer
        service, customer shipping offers and underlying website
        technology.

    --  Amazon Web Services launched Amazon Elastic Compute Cloud
        (Amazon EC2) in limited public beta. Amazon EC2 is a web
        service that provides resizable compute capacity, making
        web-scale computing easier for developers. Just as Amazon
        Simple Storage Service (Amazon S3) enables "storage" in the
        cloud, Amazon EC2 enables "compute" in the cloud. Developers
        continue to adopt Amazon's web services -- over 200,000 have
        registered to date, up greater than 60% year-over-year.

    --  Amazon's Japan website -- Amazon.co.jp -- launched its Health
        & Beauty store, offering customers a selection of over 35,000
        items in 12 categories including supplements, drinking water
        and soft drinks, condiments, processed foods and health foods,
        as well as cosmetics and products for bath care, nursing care
        and aroma relaxation.

    --  The Company announced its Automotive Parts & Accessories store
        on www.amazon.com, featuring over one million automotive
        products offered by Amazon and leading mass market and
        specialty retailers. Amazon's innovative Part Finder allows
        owners of approximately 10,000 different car and truck models
        to find the correct replacement parts, performance parts or
        accessories for their vehicles.

    Financial Guidance

The following forward-looking statements reflect Amazon.com's expectations as of October 24, 2006. 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 2006 Guidance

    --  Net sales are expected to be between $3.625 billion and $3.950
        billion, or to grow between 22% and 33% compared with fourth
        quarter 2005.

    --  Operating income is expected to be between $145 million and
        $235 million, or between (12%) decline and 43% growth,
        compared with fourth quarter 2005. This guidance includes $35
        million for stock-based compensation and amortization of
        intangible assets, and it assumes, among other things, that no
        additional intangible assets are recorded and that there are
        no further revisions to stock-based compensation estimates.

    Full Year 2006 Guidance

    --  Net sales are expected to be between $10.350 billion and
        $10.675 billion, or to grow between 22% and 26% compared with
        2005.

    --  Operating income is expected to be between $339 million and
        $429 million, or between (22%) decline and (1%) decline,
        compared with 2005. This guidance includes $113 million for
        stock-based compensation and amortization of intangible
        assets, and it assumes, among other things, that no additional
        intangible assets are recorded and that there are no further
        revisions to stock-based compensation 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, payments risks, 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, 2005, and all subsequent filings.

About Amazon.com

Amazon.com, Inc., (Nasdaq:AMZN), a Fortune 500 company based in Seattle, opened on the World Wide Web in July 1995 and today offers Earth's Biggest Selection. Amazon.com, Inc. 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 its customers the lowest possible prices. Amazon.com and other 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 and its affiliates operate websites, including 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
                               Ended     Nine Months    Twelve Months
                             September       Ended          Ended
                                30,      September 30,   September 30,
                            ----------- --------------- --------------
                            2006  2005    2006    2005   2006    2005
                            ----- ----- ------- ------- ------ -------

CASH AND CASH EQUIVALENTS,
 BEGINNING OF PERIOD        $683  $629  $1,013  $1,303   $600    $746

OPERATING ACTIVITIES:
Net income                    19    30      93     160    292     507
Adjustments to reconcile
 net income to net cash
 from operating activities:
  Depreciation of fixed
   assets, including
   internal-use software
   and website development,
   and other amortization     63    30     146      85    182     106
  Stock-based compensation    30    26      71      71     87      90
  Other operating expense      2     -       9       3     13      (3)
  Losses (gains) on sales
   of marketable
   securities, net            (3)    -      (2)      -     (4)      -
  Remeasurements and other    (1)   (6)    (10)    (38)   (14)     (6)
  Non-cash interest expense
   and other                   1     1       3       4      4       5
  Deferred income taxes        7    23      15     116    (31)   (128)
  Cumulative effect of
   change in accounting
   principle                   -     -       -     (26)     -     (26)
Changes in operating assets
 and liabilities:
  Inventories               (218)  (76)   (155)     10   (269)    (98)
  Accounts receivable, net
   and other current assets  (53)  (12)     13       6    (77)     14
  Accounts payable           252   147    (187)   (224)   312     201
  Accrued expenses and
   other current
   liabilities                27    (6)    (44)    (72)    87      (3)
  Additions to unearned
   revenue                    39    28     131      95    192     120
  Amortization of
   previously unearned
   revenue                   (35)  (32)   (125)    (87)  (187)   (118)
                            ----- ----- ------- ------- ------ -------
    Net cash provided by
     (used in) operating
     activities              130   153     (42)    103    587     661

INVESTING ACTIVITIES:
Purchases of fixed assets,
 including internal-use
 software and website
 development                 (62)  (76)   (166)   (149)  (221)   (186)
Acquisitions, net of cash
 acquired                     (2)   (4)    (30)    (24)   (30)    (24)
Sales and maturities of
 marketable securities and
 other investments           438   163     975     653  1,159   1,072
Purchases of marketable
 securities                 (227) (289)   (589) (1,027)  (947) (1,475)
                            ----- ----- ------- ------- ------ -------
    Net cash provided by
     (used in) investing
     activities              147  (206)    190    (547)   (39)   (613)

FINANCING ACTIVITIES:
Proceeds from exercises of
 stock options                 4    21      17      38     36      55
Excess tax benefit on stock
 awards                        9     2      38       4     43       4
Common stock repurchased    (252)    -    (252)      -   (252)      -
Proceeds from long-term
 debt and other               13    13      81      13     81      13
Repayments of long-term
 debt and capital lease
 obligations                 (42)   (6)   (376)   (272)  (376)   (272)
                            ----- ----- ------- ------- ------ -------
    Net cash provided by
     (used in) financing
     activities             (268)   30    (492)   (217)  (468)   (200)

Foreign-currency effect on
 cash and cash equivalents     1    (6)     24     (42)    13       6
                            ----- ----- ------- ------- ------ -------
    Net increase (decrease)
     in cash and cash
     equivalents              10   (29)   (320)   (703)    93    (146)
                            ----- ----- ------- ------- ------ -------

CASH AND CASH EQUIVALENTS,
 END OF PERIOD              $693  $600    $693    $600   $693    $600
                            ===== ===== ======= ======= ====== =======

SUPPLEMENTAL CASH FLOW
 INFORMATION:
Cash paid for interest       $22   $21     $85    $105    $85    $105
Cash paid for income taxes     5     6      13      11     15      12
                           AMAZON.COM, INC.
                Consolidated Statements of Operations
                 (in millions, except per share data)
                             (unaudited)

                                      Three Months      Nine Months
                                           Ended            Ended
                                      September 30,    September 30,
                                     ---------------- ----------------
                                      2006     2005    2006     2005
                                     -------- ------- ----------------
Net sales                             $2,307  $1,858   $6,725  $5,513
Cost of sales                          1,758   1,395    5,119   4,141
                                     -------- ------- -------- -------
Gross profit                             549     463    1,606   1,372

Operating expenses (1):
  Fulfillment                            217     171      599     495
  Marketing                               64      44      171     131
  Technology and content                 172     121      485     319
  General and administrative              54      32      150     117
  Other operating expense                  2      40        9      43
                                     -------- ------- -------- -------
          Total operating expenses       509     408    1,414   1,105
                                     -------- ------- -------- -------

Income from operations                    40      55      192     267

Interest income                           14      12       41      30
Interest expense                         (21)    (22)     (58)    (70)
Other income, net                          4       -        4       2
Remeasurements and other                   1       6       10      38
                                     -------- ------- -------- -------
          Total non-operating expense     (2)     (4)      (3)      -
                                     -------- ------- -------- -------

Income before income taxes                38      51      189     267

Provision for income taxes                19      21       96     133
                                     -------- ------- -------- -------

Income before cumulative effect of
 change in accounting principle           19      30       93     134

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

Net income                               $19     $30      $93    $160
                                     ======== ======= ======== =======

Basic earnings per share:
  Prior to cumulative effect of
   change in accounting principle      $0.05   $0.07    $0.22   $0.33
  Cumulative effect of change in
   accounting principle                    -       -        -    0.06
                                     -------- ------- -------- -------
                                       $0.05   $0.07    $0.22   $0.39
                                     ======== ======= ======== =======

Diluted earnings per share:
  Prior to cumulative effect of
   change in accounting principle      $0.05   $0.07    $0.22   $0.32
  Cumulative effect of change in
   accounting principle                    -       -        -    0.06
                                     -------- ------- -------- -------
                                       $0.05   $0.07    $0.22   $0.38
                                     ======== ======= ======== =======

Weighted average shares used in
 computation of earnings per share:
  Basic                                  417     413      417     411
                                     ======== ======= ======== =======

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

(1) Includes stock-based compensation
 as follows:
  Fulfillment                             $8      $5      $18     $13
  Marketing                                1       2        3       5
  Technology and content                  16      13       38      36
  General and administrative               5       6       12      17
                           AMAZON.COM, INC.
                         Segment Information
                            (in millions)
                             (unaudited)

                                        Three Months    Nine Months
                                            Ended           Ended
                                        September 30,   September 30,
                                       --------------- ---------------
                                        2006    2005    2006    2005
                                       ------- ------- ------- -------
North America
 Net sales                             $1,257  $1,041  $3,661  $3,028
 Cost of sales                            914     749   2,668   2,179
                                       ------- ------- ------- -------
 Gross profit                             343     292     993     849
 Direct segment operating expenses (1)    321     226     885     645
                                       ------- ------- ------- -------
 Segment operating income              $   22  $   66  $  108  $  204
                                       ======= ======= ======= =======

International
 Net sales                              1,050     817   3,064   2,485
 Cost of sales                            844     646   2,451   1,962
                                       ------- ------- ------- -------
 Gross profit                             206     171     613     523
 Direct segment operating expenses (1)    156     116     449     346
                                       ------- ------- ------- -------
 Segment operating income              $   50  $   55  $  164  $  177
                                       ======= ======= ======= =======

Consolidated
 Net sales                              2,307   1,858   6,725   5,513
 Cost of sales                          1,758   1,395   5,119   4,141
                                       ------- ------- ------- -------
 Gross profit                             549     463   1,606   1,372
 Direct segment operating expenses        477     342   1,334     991
                                       ------- ------- ------- -------
 Segment operating income                  72     121     272     381
 Stock-based compensation                 (30)    (26)    (71)    (71)
 Other operating expense                   (2)    (40)     (9)    (43)
                                       ------- ------- ------- -------
 Income from operations                    40      55     192     267
 Total non-operating expense, net          (2)     (4)     (3)      -
 Provision for income taxes               (19)    (21)    (96)   (133)
 Cumulative effect of change in
  accounting principle                      -       -       -      26
                                       ------- ------- ------- -------

Net income                             $   19  $   30  $   93  $  160
                                       ======= ======= ======= =======

Segment Highlights:
 Y/Y net sales growth:
  North America                            21%     28%     21%     23%
  International                            29      26      23      29
  Consolidated                             24      27      22      26
 Y/Y gross profit growth:
  North America                            17%     31%     17%     27%
  International                            21      29      17      35
  Consolidated                             18      30      17      30
 Y/Y segment operating income growth:
  North America                          (67%)     16%   (47%)      3%
  International                            (8)     46      (8)     56
  Consolidated                            (40)     28     (29)     22
 Net sales mix:
  North America                            54%     56%     54%     55%
  International                            46      44      46      45


(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,
                                       --------------- ---------------
                                        2006    2005    2006    2005
                                       ------- ------- ------- -------
North America
 Media                                 $  785  $  684  $2,330  $2,015
 Electronics and other general
  merchandise                             409     304   1,148     863
 Other                                     63      53     183     150
                                       ------- ------- ------- -------
  Total North America                  $1,257  $1,041  $3,661  $3,028
                                       ======= ======= ======= =======

International
 Media                                    757     629   2,237   1,917
 Electronics and other general
  merchandise                             290     187     815     565
 Other                                      3       1      12       3
                                       ------- ------- ------- -------
  Total International                  $1,050  $  817  $3,064  $2,485
                                       ======= ======= ======= =======

Consolidated
 Media                                  1,542   1,313   4,567   3,932
 Electronics and other general
  merchandise                             699     491   1,963   1,428
 Other                                     66      54     195     153
                                       ------- ------- ------- -------
  Total Consolidated                   $2,307  $1,858  $6,725  $5,513
                                       ======= ======= ======= =======

Year-Over-Year Percentage Net Sales
 Growth:
North America:
 Media                                     15%     21%     16%     18%
 Electronics and other general
  merchandise                              35      33      33      27
 Other                                     17     122      22     108
  Total North America                      21      28      21      23

International:
 Media                                     20%     19%     17%     20%
 Electronics and other general
  merchandise                              55      62      44      76
 Other                                    144     177     286      85
  Total International                      29      26      23      29

Consolidated:
 Media                                     17%     20%     16%     19%
 Electronics and other general
  merchandise                              43      43      38      43
 Other                                     20     123      27     107
  Total Consolidated                       24      27      22      26

Year-Over-Year Percentage Net Sales
 Growth Excluding Effect of Exchange
 Rates:
International:
 Media                                     19%     20%     21%     18%
 Electronics and other general
  merchandise                              51      64      48      72
 Other                                    135     178     296      82
  Total International                      26      28      27      27

Consolidated:
 Media                                     17%     21%     18%     18%
 Electronics and other general
  merchandise                              41      43      39      42
 Other                                     20     123      27     107
  Total Consolidated                       23      28      24      25

Consolidated Net Sales Mix:
 Media                                     67%     71%     68%     71%
 Electronics and other general
  merchandise                              30      26      29      26
 Other                                      3       3       3       3
                           AMAZON.COM, INC.
                     Consolidated Balance Sheets
                 (in millions, except per share data)

                                      September   December September
                                          30,        31,       30,
                                         2006      2005       2005
                                      ----------- -------- -----------
ASSETS                                (unaudited)          (unaudited)
Current assets:
      Cash and cash equivalents             $693   $1,013        $600
      Marketable securities                  526      987         819
      Inventories                            736      566         456
      Deferred tax assets, current
       portion                                79       89          58
      Accounts receivable, net and
       other current assets                  281      274         188
                                      ----------- -------- -----------
          Total current assets             2,315    2,929       2,121

Fixed assets, net                            449      348         322
Deferred tax assets, long-term
 portion                                     180      223         190
Goodwill                                     194      159         159
Other assets                                 130       37          40
                                      ----------- -------- -----------
          Total assets                    $3,268   $3,696      $2,832
                                      =========== ======== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Accounts payable                    $1,196   $1,366        $876
      Accrued expenses and other
       current liabilities                   572      563         437
                                      ----------- -------- -----------
          Total current liabilities        1,768    1,929       1,313

Long-term debt and other                   1,304    1,521       1,513

Commitments and contingencies

Stockholders' equity:
      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: 411, 416, and 414             4        4           4
      Treasury stock, at cost               (252)       -           -
      Additional paid-in capital           2,377    2,263       2,215
      Accumulated other
       comprehensive income                    1        6          13
      Accumulated deficit                 (1,934)  (2,027)     (2,226)
                                      ----------- -------- -----------
          Total stockholders' equity         196      246           6
                                      ----------- -------- -----------
            Total liabilities and
             stockholders' equity         $3,268   $3,696      $2,832
                                      =========== ======== ===========
                           AMAZON.COM, INC.
       Supplemental Financial Information and Business Metrics
                 (in millions, except per share data)
                             (unaudited)

----------------------------------------------------------------------
                                                                Y/Y %
                               Q3     Q4     Q1     Q2     Q3   Change
                              2005   2005   2006   2006   2006
                             -----------------------------------------
Cash Flows and Shares

Operating cash flow --
 trailing twelve months (TTM)
 (1)                           $661   $733   $724   $610   $587  (11%)

Purchase of fixed assets
 (incl. internal-use software
 & website development) --
 TTM                           $186   $204   $223   $235   $221    19%

Free cash flow (operating
 cash flow less purchases of
 fixed assets) -- TTM (1)      $475   $529   $501   $375   $366  (23%)

Common shares and stock-based
 awards outstanding             438    438    438    443    435   (1%)
Common shares outstanding       414    416    417    419    411   (1%)
Stock-based awards
 outstanding                     24     22     21     24     24   (1%)
Stock-based awards
 outstanding -- % of common
 shares outstanding             5.8%   5.2%   4.9%   5.8%   5.8%  N/A

Results of Operations

Worldwide (WW) net sales     $1,858 $2,977 $2,279 $2,139 $2,307    24%
WW net sales -- Y/Y growth,
 excluding the effect of
 foreign exchange rates        27.6%  21.9%  24.8%  23.4%  23.1%  N/A
WW net sales -- TTM          $8,054 $8,490 $8,867 $9,253 $9,701    20%
WW net sales -- TTM Y/Y
 growth, excluding the effect
 of foreign exchange rates     25.2%  23.7%  24.3%  24.0%  23.2%  N/A

Gross profit                   $463   $667   $547   $509   $549    18%
Gross margin -- % of WW net
 sales                         24.9%  22.4%  24.0%  23.8%  23.8%  N/A
Gross profit -- TTM          $1,917 $2,039 $2,128 $2,187 $2,273    19%
Gross margin -- TTM % of WW
 net sales                     23.8%  24.0%  24.0%  23.6%  23.4%  N/A

Operating income (1)(3)         $55   $165   $106    $47    $40  (28%)
Operating margin -- % of WW
 net sales (1)                  3.0%   5.5%   4.6%   2.2%   1.7%  N/A
Operating income -- TTM
 (1)(3)                        $430   $432   $430   $372   $357  (17%)
Operating margin -- TTM % of
 WW net sales (1)               5.3%   5.1%   4.8%   4.0%   3.7%  N/A

Net income (1) (2)              $30   $199    $51    $22    $19  (35%)
Net income per diluted share
 (1) (2)                      $0.07  $0.47  $0.12  $0.05  $0.05  (34%)
Net income -- TTM (1) (2)      $507   $359   $332   $302   $292  (42%)
Net income per diluted share
 -- TTM (1) (2)               $1.19  $0.84  $0.78  $0.71  $0.69  (42%)

Segments

North America Segment:
  Net sales                  $1,041 $1,683 $1,247 $1,157 $1,257    21%
  Net sales -- Y/Y growth,
   excluding the effect of
   foreign exchange rates      27.4%  20.8%  21.3%  20.4%  20.5%  N/A
  Net sales -- TTM           $4,420 $4,711 $4,931 $5,128 $5,343    21%
  Gross profit                 $292   $418   $341   $309   $343    17%
  Gross margin -- % of North
   America net sales           28.1%  24.8%  27.3%  26.7%  27.3%  N/A
  Gross profit -- TTM        $1,204 $1,267 $1,329 $1,361 $1,411    17%
  Gross margin -- TTM % of
   North America net sales     27.2%  26.9%  27.0%  26.5%  26.4%  N/A
  Operating income (3)          $66    $92    $62    $25    $22  (67%)
  Operating margin -- % of
   North America net sales      6.4%   5.5%   5.0%   2.1%   1.7%  N/A
  Operating income -- TTM (3)  $326   $296   $292   $245   $200  (39%)
  Operating margin -- TTM %
   of North America net sales   7.4%   6.3%   5.9%   4.8%   3.8%  N/A

International Segment:
  Net sales                    $817 $1,294 $1,032   $982 $1,050    29%
  Net sales -- Y/Y growth,
   excluding the effect of
   foreign exchange rates      27.8%  23.2%  28.9%  27.0%  26.3%  N/A
  Net sales -- TTM           $3,634 $3,779 $3,936 $4,125 $4,358    20%
  Net sales -- TTM % of WW
   net sales                   45.1%  44.5%  44.4%  44.6%  44.9%  N/A
  Gross profit                 $171   $249   $206   $200   $206    21%
  Gross margin -- % of
   International net sales     20.9%  19.3%  20.0%  20.4%  19.6%  N/A
  Gross profit -- TTM          $713   $772   $799   $827   $862    21%
  Gross margin -- TTM % of
   International net sales     19.6%  20.4%  20.3%  20.0%  19.8%  N/A
  Operating income              $55    $93    $58    $55    $50   (8%)
  Operating margin -- % of
   International net sales      6.7%   7.1%   5.6%   5.6%   4.8%  N/A
  Operating income -- TTM      $233   $270   $265   $260   $256    10%
  Operating margin -- TTM %
   of International net sales   6.4%   7.1%   6.7%   6.3%   5.9%  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     Q4     Q1     Q2     Q3   Change
                              2005   2005   2006   2006   2006
                             -----------------------------------------
Segments (continued)

Consolidated Segments:
  Operating expenses           $342   $482   $427   $429   $477    39%
  Operating expenses -- TTM  $1,358 $1,473 $1,570 $1,681 $1,816    34%
  Operating income (3)         $121   $185   $120    $80    $72  (40%)
  Operating margin -- % of
   consolidated sales           6.5%   6.2%   5.3%   3.7%   3.1%  N/A
  Operating income -- TTM (3)  $559   $566   $558   $506   $457  (18%)
  Operating margin -- TTM %
   of consolidated net sales    6.9%   6.7%   6.3%   5.5%   4.7%  N/A

Supplemental North America
 Segment Net Sales:
  Media                        $684 $1,030   $815   $730   $785    15%
  Media -- TTM               $2,901 $3,046 $3,163 $3,260 $3,361    16%
  Electronics and other
   general merchandise         $304   $580   $374   $365   $409    35%
  Electronics and other
   general merchandise--TTM  $1,311 $1,443 $1,534 $1,622 $1,727    32%
  Electronics and other
   general merchandise -- TTM
   % of North America net
   sales                         30%    31%    31%    32%    32%  N/A
  Other                         $53    $73    $58    $62    $63    17%
  Other -- TTM                 $208   $222   $234   $246   $255    23%

Supplemental International
 Segment Net Sales:
  Media                        $629   $968   $763   $718   $757    20%
  Media -- TTM               $2,828 $2,885 $2,972 $3,077 $3,205    13%
  Electronics and other
   general merchandise         $187   $321   $265   $259   $290    55%
  Electronics and other
   general merchandise -- TTM  $801   $886   $952 $1,033 $1,136    42%
  Electronics and other
   general merchandise -- TTM
   % of International net
   sales                         22%    23%    24%    25%    26%  N/A
  Other                          $1     $5     $4     $5     $3   144%
  Other -- TTM                   $4     $8    $11    $15    $17   341%

Supplemental Worldwide Net
 Sales:
  Media                      $1,313 $1,998 $1,578 $1,448 $1,542    17%
  Media -- TTM               $5,730 $5,931 $6,135 $6,337 $6,566    15%
  Electronics and other
   general merchandise         $491   $901   $639   $624   $699    43%
  Electronics and other
   general merchandise--TTM  $2,113 $2,329 $2,486 $2,655 $2,863    36%
  Electronics and other
   general merchandise -- TTM
   % of WW net sales             26%    27%    28%    29%    30%  N/A
  Other                         $54    $78    $62    $67    $66    20%
  Other -- TTM                 $211   $230   $245   $261   $272    29%

Balance Sheet

Cash and marketable
 securities                  $1,419 $2,000 $1,334 $1,419 $1,219  (14%)

Inventory, net -- ending       $456   $566   $538   $521   $736    61%
Inventory -- average
 inventory % of TTM net sales   5.2%   5.4%   5.3%   5.3%   5.8%  N/A
Inventory turnover, average
 -- TTM                        14.8   14.1   14.4   14.3   13.2  (11%)

Fixed assets, net              $322   $348   $361   $405   $449    40%

Accounts payable days --
 ending                          58     54     48     53     63     8%

Other

Employees (full-time and
 part-time; excludes
 contractors & temporary
 personnel)                  11,200 12,000 12,400 12,700 13,300    19%

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

(1) The Company settled a patent lawsuit on terms including a one-time
 payment of $40 million in Q3 2005. This negatively impacts TTM
 operating cash flow and free cash flow by $40 million for all periods
 that include Q3 2005. The settlement negatively affected Q3 2005
 operating income by $40 million, and Q3 2005 net income by $20
 million after tax.

(2) Q4 2005 net income includes a tax benefit of $90 million related
 to determining that certain of our deferred tax assets are
 realizable.

(3) In Q2 2006, a fee dispute with Toysrus.com reduced our operating
 income by $20 million.


                           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

    --  Net sales increased 24%, or 23% excluding the $20 million
        favorable impact of year-over-year changes in foreign
        exchange.

    --  In the prior year, we sold over 1.6 million copies of Harry
        Potter and the Half-Blood Prince.

    --  Shipping revenue was $118 million, up 5% from $112 million.

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

    --  Net sales include fixed fees, commissions and per-unit fees
        earned from third-party sellers and similar amounts earned
        through Amazon Enterprise Solutions.

    Cost of Sales

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

    --  Inbound shipping charges to receive products from our
        suppliers are included in inventory cost and recognized as
        cost of sales upon sale to our customers.

    --  Outbound shipping costs totaled $182 million, up 14% from $159
        million. Net shipping loss was $64 million, or 2.8% of net
        sales, up 36% from a net shipping loss of $47 million, or 2.5%
        of net sales, resulting primarily from our free shipping
        offers and Amazon Prime. To the extent our customers use free
        shipping offers at an increasing rate, including memberships
        in Amazon Prime, our net cost of shipping will increase.

    --  While costs associated with free shipping, including Amazon
        Prime, 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 offer
        promotions, such as free membership trials, for Amazon Prime
        and expect to continue to offer these promotions in the
        future.

    Operating Expenses

    --  Depreciation expense for fixed assets, including amortization
        of internal-use software and website development, was $62
        million, up from $29 million. Depreciation is recorded on a
        straight-line basis over the estimated useful lives of the
        assets -- generally two years or less for assets such as
        internal-use software and our DVD rental library, three years
        for our technology infrastructure, five years for furniture
        and fixtures and ten years for heavy equipment. Depreciation
        expense is generally classified within operating expense
        categories on the consolidated statements of operations, and
        certain assets, such as our DVD rental library, are amortized
        to cost of sales.

    --  Stock-based compensation was $30 million compared to $26
        million in the prior year, with the increase primarily due to
        increased restricted stock unit grants generally corresponding
        with an increase in employees. The estimation of stock awards
        that will ultimately vest requires judgment, and to the extent
        actual results or updated estimates differ from our current
        estimates, such amounts will be recorded as a cumulative
        adjustment in the period estimates are revised. We consider
        many factors when estimating expected forfeitures, including
        types of awards, employee class and historical experience.
        Actual results, and future changes in estimates, may differ
        substantially from our current estimates.

    --  Operating expenses with and without stock-based compensation
        are as follows:
                   Three Months Ended          Three Months Ended
                    September 30, 2006          September 30, 2005
               --------------------------- ---------------------------
                  As    Stock-Based           As    Stock-Based
               Reported Compensation  Net  Reported Compensation Net
               --------------------------- --------------------------
Operating             (in millions)               (in millions)
 Expenses:
Fulfillment     $  217    $      (8) $209   $  171    $     (5) $166
Marketing           64           (1)   63       44          (2)   42
Technology and
 content           172          (16)  156      121         (13)  108
General and
 administrative     54           (5)   49       32          (6)   26
Other operating
 expense             2            -     2       40           -    40
               -------- ------------ ----- -------- ----------- -----
Total operating
 expenses       $  509    $     (30) $479   $  408    $    (26) $382
               ======== ============ ===== ======== =========== =====

Year-over-year
 Percentage
 Growth:
Fulfillment         27 %               26 %     24 %              23 %
Marketing           45                 49       28                23
Technology and
 content            42                 45       74                66
General and
 administrative     69                 87       12                 1

Percent of Net
 Sales:
Fulfillment        9.4 %              9.1 %    9.2 %             8.9 %
Marketing          2.8                2.7      2.4               2.3
Technology and
 content           7.4                6.8      6.5               5.8
General and
 administrative    2.4                2.1      1.7               1.4
    Fulfillment

    --  The increase in fulfillment costs in absolute dollars relates
        to costs from expanding fulfillment capacity and variable
        costs. Variable costs correspond with sales volume and
        inventory levels, our mix of product sales, and payment
        processing and related transaction costs, including mix of
        payment methods and costs from our guarantee for certain
        third-party seller transactions.

    --  Fulfillment costs represent 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; and payment processing fees and
        transaction costs, including costs associated with our
        guarantee of certain third-party seller transactions and
        responding to inquiries from customers. Fulfillment costs also
        include amounts paid to third parties who assist us in
        fulfillment and customer service operations.

    --  Payment processing fees charged to us associated with
        third-party seller sales are based on the gross purchase price
        of underlying transactions, and transaction costs, such as our
        A to Z Guarantee, are higher as a percentage of revenue versus
        our retail sales. Accordingly, third-party sales have higher
        fulfillment costs as a percentage of net sales.

    --  Our worldwide fulfillment capacity expansion in 2006, which
        will add less space than 2005, is designed to accommodate
        greater selection and meet anticipated shipment volumes from
        sales of our own products as well as sales by third parties
        for which we provide the fulfillment.

    Marketing

    --  We direct customers to our websites primarily through a number
        of 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 or its
        effect.

    --  Marketing costs increased in absolute dollars in Q3 2006 due
        to increased spending in variable online marketing channels,
        such as our Associates program, sponsored search, and other
        variable marketing initiatives.

    --  While costs associated with free shipping are not included in
        marketing expense, we view free shipping offers as an
        effective worldwide marketing tool, and intend to continue
        offering them indefinitely.

    Technology and Content

    --  In 2005, we added a significant number of computer scientists,
        software engineers and employees involved in editorial
        content, buying, merchandising, and systems support. We are
        investing in several areas of technology including seller
        platforms, web services and digital initiatives. In addition,
        we increased spending on our technology infrastructure so that
        we can continue to enhance the customer experience and improve
        our process efficiency.

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

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

    --  Certain costs relating to the development of internal-use
        software and website development, including software to
        upgrade and enhance our websites and processes supporting our
        business, are capitalized and depreciated over two years. In
        Q3 2006 and Q3 2005, we capitalized $34 million (including $5
        million of stock-based compensation) and $25 million
        (including $3 million of stock-based compensation) of costs
        associated with internal-use software and website development.
        Amortization of previously capitalized amounts was $23 million
        and $14 million for Q3 2006 and Q3 2005.

    --  We expect the year-over-year percentage growth in technology
        and content, excluding stock-based compensation, to continue
        to decrease in Q4 2006.

    General and Administrative

    --  The increase in general and administrative costs in Q3 2006 is
        primarily due to increases in payroll and related expenses.

    --  In Q3 2005 we recorded a $12 million benefit for actual and
        expected reimbursement by an insurer of certain legal costs
        previously incurred by us.

    Stock-Based Awards

    --  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).
        The adoption of SFAS 123(R) in Q1 2005 resulted in a
        cumulative benefit from accounting change of $26 million,
        which reflects the net cumulative impact of estimating future
        forfeitures in the determination of period expense, rather
        than recording forfeitures when they occur as previously
        permitted.

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

    --  We granted stock awards, substantially all of which have been
        restricted stock units since October 2002, of 1 million shares
        in the quarter. Our annual stock awards are granted in the
        second quarter.

    --  As of September 30, 2006, there were 24 million shares
        underlying outstanding stock awards, consisting of 10 million
        shares underlying stock options with a $16 weighted-average
        exercise price and 14 million shares underlying restricted
        stock units.

    --  As of September 30, 2006, outstanding common shares plus
        shares underlying outstanding stock-based awards were 435
        million, down 1% from 438 million as of September 30, 2005.
        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.

    Other Operating Expense

    --  Other operating expense primarily includes costs related to
        intangibles amortization.

    --  We acquired certain companies during the first nine months of
        2006 for an aggregate purchase price of $50 million, including
        cash payments of $30 million in the nine months ended
        September 30, 2006, and future cash payments of $19 million
        and $1 million due in 2007 and 2008. Acquired intangibles
        totaled $17 million and have estimated useful lives of between
        one and ten years. The excess of purchase price over the fair
        value of the net assets acquired was $33 million and is
        classified as goodwill on our consolidated balance sheets. The
        results of operations of the acquired business have been
        included in our consolidated results from each closing date
        forward. The effect of these acquisitions on consolidated net
        sales and operating income during the first nine months of
        2006 was not significant.

    Remeasurements and Other

    --  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.

    --  Remeasurement of the principal amount of our 6.875% PEACS from
        Euros to U.S. dollars resulted in a foreign-currency gain of
        $3 million, compared with a gain of $4 million.

    --  Remeasurement of foreign-currency intercompany balances that
        are to be repaid among subsidiaries resulted in a
        foreign-currency loss of $4 million, compared with a loss of
        $2 million.

    Income Taxes

    --  Our tax provision for interim periods is determined using an
        estimate of the annual effective tax rate. There is a
        potential for significant volatility of our 2006 effective tax
        rate due to several factors, including from variability in
        accurately predicting our taxable income and the taxable
        jurisdictions to which it relates.

    --  Our provision for income taxes was $19 million in Q3 -- and
        our current estimate of our annual effective tax rate is 51%.

    --  The effective tax rate was higher than the 35% statutory rate,
        resulting from steps we initiated to establish our European
        headquarters in Luxembourg, which we expect will benefit our
        effective tax rate over time. Associated with the
        establishment of our European headquarters, we transferred
        certain of our operating assets in 2005 and 2006 from the U.S.
        to international locations. These transfers resulted in
        taxable income and an increase in our effective tax rate.

    --  We expect cash taxes paid in 2006 to be approximately $25
        million compared with $12 million in 2005. We endeavor to
        optimize our global taxes on a cash basis, rather than on a
        financial reporting basis.

    Foreign Exchange

    --  Our financial reporting currency is the U.S. dollar, and
        changes in exchange rates significantly affect our reported
        results and consolidated trends.

    --  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:
                           Three Months Ended September 30,
                 -----------------------------------------------------
                           2006                       2005
                 -------------------------- --------------------------
                   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        $2,287   $   20    $2,307  $1,865   $   (7) $  1,858
Gross profit        545        4       549     464       (1)      463
Operating
 expenses           506        3       509     408        -       408
Income from
 operations          39        1        40      56       (1)       55
Net interest
 expense and
 other                3        -         3      10        -        10
Remeasurements
 and other
 income (3)           2       (1)        1       4        2         6
Net income           19        -        19      29        1        30
Diluted earnings
 per share       $ 0.05   $    -    $ 0.05  $ 0.07   $    -  $   0.07

(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 or 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

    --  Free cash flow, a non-GAAP financial measure, was $366 million
        for the trailing twelve months ended September 30, 2006,
        compared to $475 million for the trailing twelve months ended
        September 30, 2005, a decrease of 23%, primarily driven by our
        increased expenditure in technology and content. Other items
        reducing free cash flow for the trailing twelve months ended
        September 30, 2006, include changes in working capital, the
        termination of our contract with Toysrus.com LLC and $43
        million from excess tax benefits for stock-based compensation
        now classified as financing cash flows.

    --  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, inventory management and category
        expansion, the timing of expense payments and cash receipts,
        discounts offered by vendors, vendor payment terms and
        fluctuations in foreign exchange rates.

    --  During Q3 2006, we paid Toysrus.com LLC $13 million previously
        retained by us against payments otherwise due to them.

    --  Free cash flow for the twelve months ended September 30, 2005,
        was reduced by a $40 million payment for a patent litigation
        settlement in Q3 2005.

    --  In August 2006, our Board of Directors authorized a 24-month
        program to repurchase up to an aggregate of $500 million of
        our common stock. We repurchased 8 million shares of our
        common stock for $252 million in Q3 2006 under this program.

    --  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 -- effectively a reclassification
        between operating cash flows and financing cash flows. Tax
        benefits resulting from stock-based compensation deductions in
        excess of amounts reported for financial reporting purposes --
        which negatively impacted operating cash flow - were $9
        million in Q3 2006 and $43 million for the trailing twelve
        months. We expect amounts for 2006 to increase substantially
        from comparable amounts in 2005. Accordingly, amounts
        presented for operating cash flows and free cash flows for
        2006 will be negatively affected in comparison to prior
        results; however, the underlying economic substance is not
        affected by this change in reporting classification.

    --  Our cash, cash equivalents and marketable securities of $1.22
        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 $383
        million, primarily in Euros, British Pounds and Japanese Yen.

    --  Accounts receivable, net and other current assets include
        accounts receivable from merchant partners, vendors and credit
        card companies, interest receivables and prepaid expenses,
        such as advance payments for insurance, licenses and other
        miscellaneous 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.

    --  Other assets include, among other things, $83 million of
        marketable securities restricted for longer than one year, $8
        million of deferred issuance costs on long-term debt, $8
        million of certain equity investments, and $24 million of
        other intangibles, net. Marketable securities restricted for
        longer than one year are related to collateralization of debt
        for our international operations -- such amounts at December
        31, 2005, were insignificant.

    --  Accrued expenses and other current liabilities include, among
        other things, liabilities for gift certificates of $135
        million, professional fees, marketing activities, workforce
        costs -- including accrued payroll, vacation and other
        benefits--and unearned revenue of $57 million, which is
        recorded when payments are received or due in advance of
        performing our service obligations and is amortized over the
        service period.

    --  Long-term debt and other primarily include the following (in
        millions):

                                 Principal          Interest Principal
                                at Maturity           Rate   Due Date
                               --------------       -------- ---------
Convertible Subordinated Notes                               February
                                        $900 (1)      4.750%    2009
Premium Adjustable Convertible                               February
 Securities ("PEACS")                    304 (2)(4)   6.875%    2010
                               --------------
                                      $1,204 (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 101.425% of the principal, which decreases every February 1 by 47.5 basis points until maturity, plus any accrued and unpaid interest.

(2) EUR 240 million principal amount, convertible at the holders' option into our common stock at EUR 84.883 per share ($108 per share based on the Euro/U.S. dollar exchange rate as of September 30, 2006). 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 fluctuate based on the Euro/U.S. dollar exchange ratio.

(3) The "if converted" number of shares associated with our convertible debt instruments (approximately 14 million total shares) is excluded from diluted shares as they are antidilutive.

(4) As previously announced, in Q1 2006 we redeemed EUR 250 million -- or $300 million at the Euro to U.S. dollar exchange rate on the redemption date--in principal amount of our PEACS at par.


    Certain Definitions and Other

    --  We present segment information for 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 expense, 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.borders.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 Enterprise Solutions program,
        and 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 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 rentals 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 Amazon Enterprise Solutions program
        and miscellaneous marketing and promotional activities, such
        as our co-branded credit card programs.

    --  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 trailing twelve month cost of
        sales to average inventory over five quarter ends.

    --  Return on invested capital is trailing-twelve-month free cash
        flow divided by average total assets less current liabilities
        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, and our Merchants@
        and Syndicated Stores programs, but exclude certain customers,
        including DVD rental customers, customers associated with
        certain of our acquisitions (including Joyo.com customers),
        Amazon Enterprise Solutions 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. Customers are
        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, and Merchants@ platforms, but exclude
        Amazon Enterprise Solutions sellers. Sellers are 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 by 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
             Kim Nelson, 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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