~~Operating income is expected to be between $2.1 billion and $3.6 billion, compared with $2.1 billion in fourth quarter 2017.~~


•	Net sales are expected to be between $80.0 billion and $86.5 billion, or to grow between 11% and 20% compared with fourth quarter 2018. This guidance anticipates an unfavorable impact of approximately 80 basis points from foreign exchange rates.


•	Operating income is expected to be between $1.2 billion and $2.9 billion, compared with $3.8 billion in fourth quarter 2018.

This guidance assumes, among other things, that no additional business acquisitions, investments, restructurings, or legal settlements are concluded.



Item 3.	Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk for the effect of interest rate changes, foreign currency fluctuations, and changes in the market values of our investments. Information relating to quantitative and qualitative disclosures about market risk is set forth below and in Item 2 of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio and our long-term debt. Our long-term debt is carried at amortized cost and fluctuations in interest rates do not impact our consolidated financial statements. However, the fair value of our debt, which pays interest at a fixed rate, will generally fluctuate with movements of interest rates, increasing in periods of declining rates of interest and declining in periods of increasing rates of interest. ~~All of our cash equivalent and marketable fixed income securities are designated as available-for-sale and, accordingly, are presented at fair value on our consolidated balance sheets.~~ We generally invest our excess cash in AAA-rated money market funds and investment grade short- to intermediate-term fixed income ~~securities and AAA-rated money market funds.~~securities. Fixed income securities may have their fair market value adversely affected due to a rise in interest rates, and we may suffer losses in principal if forced to sell securities that have declined in market value due to changes in interest rates.

Foreign Exchange Risk

During Q3 ~~2018,~~2019, net sales from our International segment accounted for ~~27%~~26% of our consolidated revenues. Net sales and related expenses generated from our internationally-focused ~~websites,~~stores, including within Canada and ~~from~~ ~~www.amazon.ca~~ ~~and~~ ~~www.amazon.com.mx~~Mexico (which are included in our North America segment), are primarily denominated in the functional currencies of the corresponding ~~websites~~stores and primarily include Euros, British Pounds, and Japanese ~~Yen, and British Pounds.~~Yen. The results of operations of, and certain of our intercompany balances associated with, our internationally-focused ~~websites~~stores and AWS are exposed to foreign exchange rate fluctuations. Upon consolidation, as foreign exchange rates vary, net sales and other operating results may differ materially from expectations, and we may record significant gains or losses on the remeasurement of intercompany balances. For example, as a result of fluctuations in foreign exchange rates throughout the period compared to rates in effect the prior year, International segment net sales in Q3 ~~2018~~2019 decreased by ~~$202~~$479 million in comparison with Q3 ~~2017.~~2018.

We have foreign exchange risk related to foreign-denominated cash, cash equivalents, and marketable securities (“foreign funds”). Based on the balance of foreign funds as of September 30, ~~2018,~~2019, of ~~$9.0~~$9.9 billion, an assumed 5%, 10%, and 20% adverse change to foreign exchange would result in fair value declines of ~~$450~~$495 million, ~~$895~~$990 million, and ~~$1.8~~$2.0 billion. ~~All cash equivalent and marketable fixed income securities are classified as “available-for-sale.”~~ Fluctuations in fair value are recorded in “Accumulated other comprehensive loss,” a separate component of stockholders’ equity. Equity securities with readily determinable fair values are included in “Marketable securities” on our consolidated balance sheets and are measured at fair value with changes recognized in net income.

We have foreign exchange risk related to our intercompany balances denominated in various foreign currencies. Based on the intercompany balances as of September 30, ~~2018,~~2019, an assumed 5%, 10%, and 20% adverse change to foreign exchange would result in losses of ~~$320~~$180 million, ~~$680~~$360 million, and ~~$1.5 billion,~~$720 million, recorded to “Other income (expense), net.”

See Item 2 of Part I, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Effect of Foreign Exchange Rates” for additional information on the effect on reported results of changes in foreign exchange rates.

Investment Risk

As of September 30, ~~2018,~~2019, our recorded value in equity and equity warrant investments in public and private companies was ~~$1.1~~$2.4 billion. Our equity and equity warrant investments in publicly traded companies represent ~~$628~~$587 million of our investments as of September 30, ~~2018,~~2019, and are recorded at fair value, which is subject to market price volatility. We perform a qualitative assessment for our equity ~~and equity warrant~~ investments in private companies to identify impairment. If this assessment indicates that an impairment exists, we estimate the fair value of the investment and, if the fair value is less than carrying value, we write down the investment to fair value. Our assessment includes a review of recent operating results and trends, recent sales/acquisitions of the investee securities, and other publicly available data. The current global economic climate provides additional uncertainty. Valuations of private companies are inherently more complex due to the lack of readily available market data. As such, we believe that market sensitivities are not practicable.



Item 4.	Controls and Procedures

We carried out an evaluation required by the Securities Exchange Act of 1934 (the “1934 Act”), under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the 1934 Act, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the 1934 Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

During the most recent fiscal quarter, there has not occurred any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

PART II. OTHER INFORMATION



Item 1.	Legal Proceedings

See Item 1 of Part I, “Financial Statements — Note 34 — Commitments and Contingencies — Legal Proceedings.”



Item 1A.	Risk Factors

Please carefully consider the following risk factors. If any of the following risks occur, our business, financial condition, operating results, and cash flows could be materially adversely affected. In addition, the current global economic climate amplifies many of these risks.

We Face Intense Competition

Our businesses are rapidly evolving and intensely competitive, and we have many competitors in different industries, including physical, e-commerce, and omnichannel retail, e-commerce services, digital content and electronic devices, ~~and~~ web and infrastructure computing services, and transportation and logistics services, and across geographies, including cross-border competition. Some of our current and potential competitors have greater resources, longer histories, more customers, and/or greater brand recognition, particularly with our newly-launched products and services and in our newer geographic regions. They may secure better terms from vendors, adopt more aggressive pricing, and devote more resources to technology, infrastructure, fulfillment, and marketing.

Competition may intensify, including with the development of new business models and the entry of new and well-funded competitors, and as our competitors enter into business combinations or alliances and established companies in other market segments expand to become competitive with our business. In addition, new and enhanced technologies, including search, web and infrastructure computing services, digital content, and electronic devices, may increase our competition. The Internet facilitates competitive entry and comparison shopping, and increased competition may reduce our sales and profits.

Our Expansion Places a Significant Strain on our Management, Operational, Financial, and Other Resources

We are rapidly and significantly expanding our global operations, including increasing our product and service offerings and scaling our infrastructure to support our retail and services businesses. This expansion increases the complexity of our business and places significant strain on our management, personnel, operations, systems, technical performance, financial resources, and internal financial control and reporting functions. We may not be able to manage growth effectively, which could damage our reputation, limit our growth, and negatively affect our operating results.

Our Expansion into New Products, Services, Technologies, and Geographic Regions Subjects Us to Additional Business, Legal, Financial, and Competitive Risks

We may have limited or no experience in our newer market segments, and our customers may not adopt our ~~new~~ offerings. These offerings may present new and difficult technology challenges, and we may be subject to claims if customers of these offerings experience service disruptions or failures or other quality issues. In addition, profitability, if any, in our newer activities may be lower than in our older activities, and we may not be successful enough in these newer activities to recoup our investments in them. If any of this were to occur, it could damage our reputation, limit our growth, and negatively affect our operating results.

We May Experience Significant Fluctuations in Our Operating Results and Growth Rate

We may not be able to accurately forecast our growth rate. We base our expense levels and investment plans on sales estimates. A significant portion of our expenses and investments is fixed, and we may not be able to adjust our spending quickly enough if our sales are less than expected.

Our revenue growth may not be sustainable, and our percentage growth rates may decrease. Our revenue and operating profit growth depends on the continued growth of demand for the products and services offered by us or our sellers, and our business is affected by general economic and business conditions worldwide. A softening of demand, whether caused by changes in customer preferences or a weakening of the U.S. or global economies, may result in decreased revenue or growth.

Our sales and operating results will also fluctuate for many other reasons, including due to risks described elsewhere in this section and the following:

our ability to retain and increase sales to existing customers, attract new customers, and satisfy our customers’ demands;

our ability to retain and expand our network of sellers;

our ability to offer products on favorable terms, manage inventory, and fulfill orders;

the introduction of competitive stores, websites, products, services, price decreases, or improvements;

changes in usage or adoption rates of the Internet, e-commerce, electronic devices, and web services, including outside the U.S.;

timing, effectiveness, and costs of expansion and upgrades of our systems and infrastructure;

the success of our geographic, service, and product line expansions;

the extent to which we finance, and the terms of any such financing for, our current operations and future growth;

the outcomes of legal proceedings and claims, which may include significant monetary damages or injunctive relief and could have a material adverse impact on our operating results;

variations in the mix of products and services we sell;

variations in our level of merchandise and vendor returns;

the extent to which we offer free shipping, continue to reduce prices worldwide, and provide additional benefits to our customers;

factors affecting our reputation or brand image;

the extent to which we invest in technology and content, fulfillment, and other expense categories;

increases in the prices of fuel and gasoline, as well as increases in the prices of other energy products and commodities like paper and packing supplies;

the extent to which our equity-method investees record significant operating and non-operating items;

the extent to which operators of the networks between our customers and our ~~websites~~stores successfully charge fees to grant our customers unimpaired and unconstrained access to our online services;

our ability to collect amounts owed to us when they become due;

the extent to which use of our services is affected by spyware, viruses, phishing and other spam emails, denial of service attacks, data theft, computer intrusions, outages, and similar events; and

terrorist attacks and armed hostilities.

Our International Operations Expose Us to a Number of Risks

Our international activities are significant to our revenues and profits, and we plan to further expand internationally. In certain international market segments, we have relatively little operating experience and may not benefit from any first-to-market advantages or otherwise succeed. It is costly to establish, develop, and maintain international operations and ~~websites,~~stores, and promote our brand internationally. Our international operations may not be profitable on a sustained basis.

In addition to risks described elsewhere in this section, our international sales and operations are subject to a number of risks, including:

local economic and political conditions;

government regulation (such as regulation of ~~e-commerce~~our product and ~~other services, physical, e-commerce,~~service offerings and ~~omnichannel retail, electronic devices, and competition, and~~of competition); restrictive governmental actions (such as trade protection measures, including export duties and quotas and custom duties and tariffs)~~, nationalization,~~; nationalization; and restrictions on foreign ownership;

restrictions on sales or distribution of certain products or services and uncertainty regarding liability for products, services, and content, including uncertainty as a result of less Internet-friendly legal systems, local laws, lack of legal precedent, and varying rules, regulations, and practices regarding the physical and digital distribution of media products and enforcement of intellectual property rights;

business licensing or certification requirements, such as for imports, exports, web services, and electronic devices;

limitations on the repatriation and investment of funds and foreign currency exchange restrictions;

limited fulfillment and technology infrastructure;

shorter payable and longer receivable cycles and the resultant negative impact on cash flow;

laws and regulations regarding consumer and data protection, privacy, network security, encryption, payments, and restrictions on pricing or discounts;

lower levels of use of the Internet;

lower levels of consumer spending and fewer opportunities for growth compared to the U.S.;

lower levels of credit card usage and increased payment risk;

difficulty in staffing, developing, and managing foreign operations as a result of distance, language, and cultural differences;

different employee/employer relationships and the existence of works councils and labor unions;

compliance with the U.S. Foreign Corrupt Practices Act and other applicable U.S. and foreign laws prohibiting corrupt payments to government officials and other third parties;

laws and policies of the U.S. and other jurisdictions affecting trade, foreign investment, loans, and taxes; and

geopolitical events, including war and terrorism.

As international physical, e-commerce, and ~~other online~~omnichannel retail and ~~web~~other services grow, competition will intensify, including through adoption of evolving business ~~models such as omnichannel retail.~~models. Local companies may have a substantial competitive advantage because of their greater understanding of, and focus on, the local customer, as well as their more established local brand names. We may not be able to hire, train, retain, and manage required personnel, which may limit our international growth.

The People’s Republic of China (“PRC”) and India regulate Amazon’s and its affiliates’ businesses and operations in country through regulations and license requirements that may restrict (i) foreign investment in and operation of the Internet, IT infrastructure, data centers, retail, delivery, and other sectors, (ii) Internet content, and (iii) the sale of media and other products and services. For example, in order to meet local ownership, ~~and~~ regulatory licensing, and cybersecurity requirements, ~~www.amazon.cn is operated by PRC companies that are indirectly owned, either wholly or partially, by PRC nationals. In addition,~~ we provide certain technology services in China ~~in conjunction~~through contractual relationships with third parties that hold PRC licenses to provide services. In India, the government restricts the ownership or control of Indian companies by foreign entities involved in online multi-brand retail trading activities. For www.amazon.in, we provide certain marketing tools and logistics services to third-party sellers to enable them to sell online and deliver to customers, and we hold indirect minority interests in entities that are third-party sellers on the www.amazon.in marketplace. Although we believe these structures and activities comply with existing laws, they involve unique risks, and the PRC ~~is actively considering~~and India may from time to time consider and implement additional changes in ~~its foreign investment rules~~their regulatory, licensing, or other requirements that could impact these structures and activities. There are substantial uncertainties regarding the interpretation of PRC and Indian laws and regulations, and it is possible that these governments will ultimately take a view contrary to ours. In addition, our Chinese and Indian businesses and operations may be unable to continue to operate if we or our affiliates are unable to access sufficient funding or in China enforce contractual relationships with respect to management ~~and control~~ of such businesses. If our international activities were found to be in violation of any existing or future PRC, Indian or other laws or regulations or if interpretations of those laws and regulations were to change, our businesses in those countries could be subject to fines and other financial penalties, have licenses revoked, or be forced to restructure our operations or shut down entirely.

If We Do Not Successfully Optimize and Operate Our Fulfillment Network and Data Centers, Our Business Could Be Harmed

If we do not adequately predict customer demand or otherwise optimize and operate our fulfillment network and data centers successfully, it could result in excess or insufficient fulfillment or data center capacity, or result in increased costs, impairment charges, or both, or harm our business in other ways. As we continue to add fulfillment and data center capability or add new businesses with different requirements, our fulfillment and data center networks become increasingly complex and operating them becomes more challenging. There can be no assurance that we will be able to operate our networks effectively.

In addition, a failure to optimize inventory in our fulfillment network will increase our net shipping cost by requiring long-zone or partial shipments. We and our co-sourcers may be unable to adequately staff our fulfillment network and customer service centers. If the other businesses on whose behalf we perform inventory fulfillment services deliver product to our fulfillment centers in excess of forecasts, we may be unable to secure sufficient storage space and may be unable to optimize our fulfillment network.

We rely on a limited number of shipping companies to deliver inventory to us and completed orders to our customers. If we are not able to negotiate acceptable terms with these companies or they experience performance problems or other difficulties, it could negatively impact our operating results and customer experience. In addition, our ability to receive inbound

inventory efficiently and ship completed orders to customers also may be negatively affected by inclement weather, fire, flood, power loss, earthquakes, labor disputes, acts of war or terrorism, acts of God, and similar factors.

Under some of our commercial agreements, we maintain the inventory of other companies, thereby increasing the complexity of tracking inventory and operating our fulfillment network. Our failure to properly handle such inventory or the inability of these other companies to accurately forecast product demand would result in unexpected costs and other harm to our business and reputation.

The Seasonality of Our Business Places Increased Strain on Our Operations

We expect a disproportionate amount of our net sales to occur during our fourth quarter. If we do not stock or restock popular products in sufficient amounts such that we fail to meet customer demand, it could significantly affect our revenue and our future growth. If we overstock products, we may be required to take significant inventory markdowns or write-offs and incur commitment costs, which could reduce profitability. We may experience an increase in our net shipping cost due to complimentary upgrades, split-shipments, and additional long-zone shipments necessary to ensure timely delivery for the holiday season. If too many customers access our websites within a short period of time due to increased ~~holiday~~ demand, we may experience system interruptions that make our websites unavailable or prevent us from efficiently fulfilling orders, which may reduce the volume of goods we sell and the attractiveness of our products and services. In addition, we may be unable to adequately staff our fulfillment network and customer service centers during these peak periods and delivery and other fulfillment companies and customer service co-sourcers may be unable to meet the seasonal demand. We also face risks described elsewhere in this Item 1A relating to fulfillment network optimization and inventory.

We generally have payment terms with our retail vendors that extend beyond the amount of time necessary to collect proceeds from our consumer customers. As a result of holiday sales, as of December 31 of each year, our cash, cash equivalents, and marketable securities balances typically reach their highest level (other than as a result of cash flows provided by or used in investing and financing activities). This operating cycle results in a corresponding increase in accounts payable as of December 31. Our accounts payable balance generally declines during the first three months of the year, resulting in a corresponding decline in our cash, cash equivalents, and marketable securities balances.

Our Business Could Suffer if We Are Unsuccessful in Making, Integrating, and Maintaining Commercial Agreements, Strategic Alliances, and Other Business Relationships

We provide physical, e-commerce, and omnichannel retail and other services to businesses through commercial agreements, strategic alliances, and business relationships. Under these agreements, we provide web services, technology, fulfillment, computing, digital storage, and other services, as well as enable sellers to offer products or services through our ~~websites.~~stores. These arrangements are complex and require substantial infrastructure capacity, personnel, and other resource commitments, which may limit the amount of business we can service. We may not be able to implement, maintain, and develop the components of these commercial relationships, which may include web services, fulfillment, customer service, inventory management, tax collection, payment processing, hardware, content, and third-party software, and engaging third parties to perform services. The amount of compensation we receive under certain of our commercial agreements is partially dependent on the volume of the other company’s sales. Therefore, if the other company’s ~~offering is~~offerings are not successful, the compensation we receive may be lower than expected or the agreement may be terminated. Moreover, we may not be able to enter into additional commercial relationships and strategic alliances on favorable terms. We also may be subject to claims from businesses to which we provide these services if we are unsuccessful in implementing, maintaining, or developing these services.

As our agreements terminate, we may be unable to renew or replace these agreements on comparable terms, or at all. We may in the future enter into amendments on less favorable terms or encounter parties that have difficulty meeting their contractual obligations to us, which could adversely affect our operating results.

Our present and future e-commerce services agreements, other commercial agreements, and strategic alliances create additional risks such as:

disruption of our ongoing business, including loss of management focus on existing businesses;

impairment of other relationships;

variability in revenue and income from entering into, amending, or terminating such agreements or relationships; and

difficulty integrating under the commercial agreements.

Our Business Could Suffer if We Are Unsuccessful in Making, Integrating, and Maintaining Acquisitions and Investments

We have acquired and invested in a number of companies, and we may acquire or invest in or enter into joint ventures with additional companies. These transactions (such as our acquisition of Whole Foods Market, Inc.) create risks such as:

disruption of our ongoing business, including loss of management focus on existing businesses;

problems retaining key personnel;

additional operating losses and expenses of the businesses we acquired or in which we invested;

the potential impairment of tangible and intangible assets and goodwill, including as a result of acquisitions;

the potential impairment of customer and other relationships of the company we acquired or in which we invested or our own customers as a result of any integration of operations;

the difficulty of completing such transactions and achieving anticipated benefits within expected timeframes, or at all;

the difficulty of incorporating acquired operations, technology, and rights into our offerings, and unanticipated expenses related to such integration;

the difficulty of integrating a new company’s accounting, financial reporting, management, information and information security, human resource, and other administrative systems to permit effective management, and the lack of control if such integration is delayed or not implemented;

for investments in which an investee’s financial performance is incorporated into our financial results, either in full or in part, the dependence on the investee’s accounting, financial reporting, and similar systems, controls, and processes;

the difficulty of implementing at companies we acquire the controls, procedures, and policies appropriate for a larger public company;

the risks associated with businesses we acquire or invest in, which may differ from or be more significant than the risks our other businesses face;

potential unknown liabilities associated with a company we acquire or in which we invest; and

for foreign transactions, additional risks related to the integration of operations across different cultures and languages, and the economic, political, and regulatory risks associated with specific countries.

As a result of future acquisitions or mergers, we might need to issue additional equity securities, spend our cash, or incur debt, contingent liabilities, or amortization expenses related to intangible assets, any of which could reduce our profitability and harm our business or only be available on unfavorable terms, if at all. In addition, valuations supporting our acquisitions and strategic investments could change rapidly given the current global economic climate. We could determine that such valuations have experienced impairments or other-than-temporary declines in fair value which could adversely impact our financial results.

We Have Foreign Exchange Risk

The results of operations of, and certain of our intercompany balances associated with, our international ~~websites~~stores and product and service offerings are exposed to foreign exchange rate fluctuations. Upon translation, operating results may differ materially from expectations, and we may record significant gains or losses on the remeasurement of intercompany balances. As we have expanded our international operations, our exposure to exchange rate fluctuations has increased. We also hold cash equivalents and/or marketable securities in foreign currencies including British Pounds, Euros, and Japanese Yen. If the U.S. Dollar strengthens compared to these currencies, cash equivalents, and marketable securities balances, when translated, may be materially less than expected and vice versa.

The Loss of Key Senior Management Personnel or the Failure to Hire and Retain Highly Skilled and Other Key Personnel Could Negatively Affect Our Business

We depend on our senior management and other key personnel, particularly Jeffrey P. Bezos, our President, CEO, and Chairman. We do not have “key person” life insurance policies. We also rely on other highly skilled personnel. Competition for qualified personnel in the technology industry has historically been intense, particularly for software engineers, computer scientists, and other technical staff. The loss of any of our executive officers or other key employees or the inability to hire, train, retain, and manage qualified personnel, could harm our business.

We Could Be Harmed by Data Loss or Other Security Breaches

~~As a result of our services being web-based and the fact that~~Because we process, store, and transmit large amounts of data, including personal information, ~~for our customers,~~ failure to prevent or mitigate data loss or other security breaches, including breaches of our vendors’ or customers’ technology and systems, could expose us or our customers to a risk of loss or misuse of such information, adversely affect our operating results, result in litigation, orregulatory action, and potential liability for us, deter customers or sellers from using our stores and services, and otherwise harm our ~~business.~~business and reputation. We use third-party technology and systems for a variety of reasons, including, without limitation, encryption and authentication technology, employee email, content delivery to customers, back-office support, and other functions. Some ~~subsidiaries had~~of our systems have experienced past security breaches, and, although they did not have a material adverse effect on our operating results, there can be no assurance of a similar result in the future. Although we have developed systems and processes that are designed to protect customer information and prevent data loss and other security breaches, including systems and processes designed to reduce the impact of a security breach at a third-party vendor or customer, such measures cannot provide absolute security.

We Face Risks Related to System Interruption and Lack of Redundancy

We experience occasional system interruptions and delays that make our websites and services unavailable or slow to respond and prevent us from efficiently fulfilling orders or providing services to third parties, which may reduce our net sales and the attractiveness of our products and services. If we are unable to continually add software and hardware, effectively upgrade our systems and network infrastructure, and take other steps to improve the efficiency of our systems, it could cause system interruptions or delays and adversely affect our operating results.

Our computer and communications systems and operations could be damaged or interrupted by fire, flood, power loss, telecommunications failure, earthquakes, acts of war or terrorism, acts of God, computer viruses, physical or electronic break-ins, and similar events or disruptions. Any of these events could cause system interruption, delays, and loss of critical data, and could prevent us from accepting and fulfilling customer orders and providing services, which could make our product and service offerings less attractive and subject us to liability. Our systems are not fully redundant and our disaster recovery planning may not be sufficient. In addition, we may have inadequate insurance coverage to compensate for any related losses. Any of these events could damage our reputation and be expensive to remedy.

We Face Significant Inventory Risk

In addition to risks described elsewhere in this Item 1A relating to fulfillment network and inventory optimization by us and third parties, we are exposed to significant inventory risks that may adversely affect our operating results as a result of seasonality, new product launches, rapid changes in product cycles and pricing, defective merchandise, changes in consumer demand and consumer spending patterns, changes in consumer tastes with respect to our products, spoilage, and other factors. We endeavor to accurately predict these trends and avoid overstocking or understocking products we manufacture and/or sell. Demand for products, however, can change significantly between the time inventory or components are ordered and the date of sale. In addition, when we begin selling or manufacturing a new product, it may be difficult to establish vendor relationships, determine appropriate product or component selection, and accurately forecast demand. The acquisition of certain types of inventory or components may require significant lead-time and prepayment and they may not be returnable. We carry a broad selection and significant inventory levels of certain products, such as consumer electronics, and we may be unable to sell products in sufficient quantities or during the relevant selling seasons. Any one of the inventory risk factors set forth above may adversely affect our operating results.

We May Not Be Able to Adequately Protect Our Intellectual Property Rights or May Be Accused of Infringing Intellectual Property Rights of Third Parties

We regard our trademarks, service marks, copyrights, patents, trade dress, trade secrets, proprietary technology, and similar intellectual property as critical to our success, and we rely on trademark, copyright, and patent law, trade secret protection, and confidentiality and/or license agreements with our employees, customers, and others to protect our proprietary rights. Effective intellectual property protection may not be available in every country in which our products and services are made available. We also may not be able to acquire or maintain appropriate domain names in all countries in which we do business. Furthermore, regulations governing domain names may not protect our trademarks and similar proprietary rights. We may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon, or diminish the value of our trademarks and other proprietary rights.

We may not be able to discover or determine the extent of any unauthorized use of our proprietary rights. Third parties that license our proprietary rights also may take actions that diminish the value of our proprietary rights or reputation. The protection of our intellectual property may require the expenditure of significant financial and managerial resources. Moreover, the steps we take to protect our intellectual property may not adequately protect our rights or prevent third parties from

infringing or misappropriating our proprietary rights. We also cannot be certain that others will not independently develop or otherwise acquire equivalent or superior technology or other intellectual property rights.

Other parties also may claim that we infringe their proprietary rights. We have been subject to, and expect to continue to be subject to, claims and legal proceedings regarding alleged infringement by us of the intellectual property rights of third parties. Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources, injunctions against us, or the payment of damages, including to satisfy indemnification obligations. We may need to obtain licenses from third parties who allege that we have infringed their rights, but such licenses may not be available on terms acceptable to us or at all. In addition, we may not be able to obtain or utilize on terms that are favorable to us, or at all, licenses or other rights with respect to intellectual property we do not own. These risks have been amplified by the increase in third parties whose sole or primary business is to assert such claims.

Our digital content offerings depend in part on effective digital rights management technology to control access to digital content. If the digital rights management technology that we use is compromised or otherwise malfunctions, we could be subject to claims, and content providers may be unwilling to include their content in our service.

We Have a Rapidly Evolving Business Model and Our Stock Price Is Highly Volatile

We have a rapidly evolving business model. The trading price of our common stock fluctuates significantly in response to, among other risks, the risks described elsewhere in this Item 1A, as well as:

changes in interest rates;

conditions or trends in the Internet and the industry segments we operate in;

quarterly variations in operating results;

fluctuations in the stock market in general and market prices for Internet-related companies in particular;

changes in financial estimates by us or securities analysts and recommendations by securities analysts;

changes in our capital structure, including issuance of additional debt or equity to the public;

changes in the valuation methodology of, or performance by, other e-commerce or technology companies; and

transactions in our common stock by major investors and certain analyst reports, news, and speculation.

Volatility in our stock price could adversely affect our business and financing opportunities and force us to increase our cash compensation to employees or grant larger stock awards than we have historically, which could hurt our operating results or reduce the percentage ownership of our existing stockholders, or both.

Government Regulation Is Evolving and Unfavorable Changes Could Harm Our Business

We are subject to general business regulations and laws, as well as regulations and laws specifically governing the Internet, physical, e-commerce, and omnichannel retail, electronic devices, and other services. Existing and future laws and regulations may impede our growth. These regulations and laws may cover taxation, privacy, data protection, pricing, content, copyrights, distribution, transportation, mobile communications, electronic device certification, electronic waste, energy consumption, environmental regulation, electronic contracts and other communications, competition, consumer protection, employment, trade and protectionist measures, web services, the provision of online payment services, information reporting requirements, unencumbered Internet access to our services or access to our facilities, the design and operation of websites, health and sanitation standards, the characteristics, legality, and quality of products and services, product labeling, and the commercial operation of unmanned aircraft systems. It is not clear how existing laws governing issues such as property ownership, libel, data protection, and personal privacy apply to the Internet, e-commerce, digital content, web services, and ~~web~~artificial intelligence technologies and services. Jurisdictions may regulate consumer-to-consumer online businesses, including certain aspects of our seller programs. Unfavorable regulations, laws, and decisions interpreting or applying those laws and regulations could diminish the demand for, or availability of, our products and services and increase our cost of doing business.

~~We Could Be Subject to Additional Sales Tax or Other Tax Liabilities~~

An increasing number of states and foreign jurisdictions have considered or adopted laws or administrative practices, with or without notice, that impose new taxes on all or a portion of gross revenue or other similar amounts or impose additional obligations on remote sellers and online marketplaces to collect transaction taxes such as sales, consumption, value added, or similar taxes. Additionally, a June 2018 U.S. Supreme Court decision held that states can require remote sellers to collect state and local sales taxes, which, given the scope of our operations, could increase the complexity and risks for us to comply with such laws. We may not have sufficient lead time to build systems and processes to collect these taxes properly, or at all. Failure to comply with such laws or administrative practices, or a successful assertion by such states or foreign jurisdictions requiring us to collect taxes where we do not, could result in substantial tax liabilities, including for past sales, as well as penalties and interest. In addition, if the tax authorities in jurisdictions where we are already subject to sales tax or other indirect tax obligations were successfully to challenge our positions, our tax liability could increase substantially.

We are also subject to U.S. (federal and state) and foreign laws, regulations, and administrative practices that require us to collect information from our customers, vendors, merchants, and other third parties for tax reporting purposes and report such information to various government agencies. The scope of such requirements continues to expand, requiring us to develop and implement new compliance systems. Failure to comply with such laws and regulations could result in significant penalties.

We Could Be Subject to Additional ~~Income~~ Tax Liabilities and Collection Obligations

We are subject to ~~income~~a variety of taxes and tax collection obligations in the U.S. (federal and state) and numerous foreign jurisdictions. ~~Tax laws, regulations,~~We may recognize additional tax expense and ~~administrative practices in various jurisdictions may~~ be subject to ~~significant change, with or without notice,~~additional tax liabilities, including other liabilities for tax collection obligations due to changes in laws, regulations, administrative practices, principles, and interpretations related to tax, including changes to the global tax framework, competition, and other laws and accounting rules in various jurisdictions. Such changes could come about as a result of economic, political, and other ~~conditions,~~conditions. An increasing number of jurisdictions are considering or have adopted laws or administrative practices that impose new tax measures, including revenue-based taxes, targeting online commerce and ~~significant judgment is required~~the remote selling of goods and services. These include new obligations to collect sales, consumption, value added, or other taxes on online marketplaces and remote sellers, or other requirements that may result in ~~evaluating~~liability for third party obligations. For example, the European Union, certain member states, and ~~estimating~~other countries have proposed or enacted taxes on online advertising and marketplace service revenues. Our results of operations and cash flows could be adversely effected by additional taxes of this nature imposed on us or additional taxes or penalties resulting from the failure to comply with any collection obligations or failure to provide information about our ~~provision~~customers, suppliers, and ~~accruals~~other third parties for ~~these taxes. There are many transactions that occur during~~tax reporting purposes to various government agencies. In some cases we also may not have sufficient notice to enable us to build systems and adopt processes to properly comply by the ~~ordinary course of business for which the ultimate~~effective date.

Our tax ~~determination is uncertain. Our effective tax rates could~~expense and liabilities may also be affected by ~~numerous~~other factors, such as changes in our business operations, acquisitions, investments, entry into new businesses and geographies, intercompany transactions, the relative amount of our foreign earnings, including earnings being lower than anticipated in jurisdictions where we have lower statutory rates and higher than anticipated in jurisdictions where we have higher statutory rates, the applicability of special tax regimes, losses incurred in jurisdictions for which we are not able to realize ~~the~~ related tax ~~benefit,~~benefits, the applicability of special tax regimes, changes in foreign currency exchange rates, ~~entry into new businesses and geographies, changes to our existing businesses and operations, acquisitions (including integrations) and investments and how they are financed,~~ changes in our stock price, and changes in our deferred tax assets and liabilities and their ~~valuation,~~valuation. Significant judgment is required in evaluating and ~~changes in~~estimating our tax expense and liabilities. In the ~~laws, regulations, administrative practices, principles,~~ordinary course of our business, there are many transactions and ~~interpretations related to~~calculations for which the ultimate tax accounting, and other areas, including European Union state aid rules. In addition, a number of countries are actively pursuing changes to their tax laws applicable to corporate multinationals, such asdetermination is uncertain. For example, the ~~recently enacted U.S. tax reform~~ legislation ~~commonly referred to~~known as the U.S. Tax Cuts and Jobs Act of 2017 (the ~~“2017~~“U.S. Tax Act”). Finally, foreign governments may enact tax laws in response to the 2017 Tax Act that could result in further changes to global taxation and materially affect our financial position and results of operations.

~~The 2017 Tax Act significantly changes how the U.S. taxes corporations. The 2017 Tax Act~~ requires complex computations to be performed that were not previously required inby U.S. tax law, significant judgments to be made in interpretation of the provisions of the ~~2017~~U.S. Tax Act, ~~and~~ significant estimates in calculations, and the preparation and analysis of information not previously relevant or regularly produced. The U.S. Treasury Department, the IRS, and other standard-setting bodies ~~could~~will continue to interpret or issue guidance on how provisions of the ~~2017~~U.S. Tax Act will be applied or otherwise ~~administered that~~administered. As future guidance is ~~different from our interpretation. As we complete our analysis of the 2017 Tax Act, collect and prepare necessary data, and interpret any additional guidance,~~issued, we may make adjustments to ~~provisional~~ amounts that we have previously recorded that may materially impact our ~~provision for income taxes~~financial statements in the period in which the adjustments are made.

We are also currently subject to ~~audit~~tax controversies in various jurisdictions, and these jurisdictions may assess additional ~~income~~ tax liabilities against us. Developments in an audit, ~~litigation,~~investigation, or ~~the relevant laws, regulations, administrative practices, principles, and interpretations~~other tax controversy could have a material effect on our operating results or cash flows in the period or periods for which that development occurs, as well as for prior and subsequent periods. We regularly assess the likelihood of an adverse outcome resulting from these proceedings to determine the adequacy of our tax accruals. Although we believe our tax estimates are reasonable, the final outcome of ~~tax~~ audits, investigations, and any ~~related litigation~~other tax controversies could be materially different from our historical ~~income~~ tax ~~provisions and~~ accruals.

Our Supplier Relationships Subject Us to a Number of Risks

We have significant suppliers, including licensors, and in some cases, limited or single-sources of supply, that are important to our sourcing, services, manufacturing, and any related ongoing servicing of merchandise and content. We do not have long-term arrangements with most of our suppliers to guarantee availability of merchandise, content, components, or services, particular payment terms, or the extension of credit limits. If our current suppliers were to stop selling or licensing merchandise, content, components, or services to us on acceptable terms, or delay delivery, including as a result of one or more supplier bankruptcies due to poor economic conditions, as a result of natural disasters, or for other reasons, we may be unable to procure alternatives from other suppliers in a timely and efficient manner and on acceptable terms, or at all. In addition, if our suppliers or other vendors violate applicable laws, regulations, our code of standards and responsibilities, or implement practices regarded as unethical, unsafe, or hazardous to the environment, it could damage our reputation, limit our growth, and negatively affect our operating results.

We May Be Subject to Risks Related to Government Contracts and Related Procurement Regulations

Our contracts with U.S., as well as state, local, and foreign, government entities are subject to various procurement regulations and other requirements relating to their formation, administration, and performance. We may be subject to audits and investigations relating to our government contracts, and any violations could result in various civil and criminal penalties and administrative sanctions, including termination of contract, refunding or suspending of payments, forfeiture of profits, payment of fines, and suspension or debarment from future government business. In addition, such contracts may provide for termination by the government at any time, without cause.

We May Be Subject to Product Liability Claims if People or Property Are Harmed by the Products We Sell or Manufacture

Some of the products we sell or manufacture may expose us to product liability or food safety claims relating to personal injury or illness, death, or environmental or property damage, and may require product recalls or other actions. Certain third parties also sell products using our ~~e-commerce~~ services and stores that may increase our exposure to product liability claims, such as if these sellers do not have sufficient protection from such claims. Although we maintain liability insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all. In addition, some of our agreements with our vendors and sellers do not indemnify us from product liability.

We Are Subject to Payments-Related Risks

We accept payments using a variety of methods, including credit card, debit card, credit accounts (including promotional financing), gift cards, direct debit from a customer’s bank account, consumer invoicing, physical bank check, and payment upon delivery. For existing and future payment options we offer to our customers, we may become subject to additional regulations and compliance requirements (including obligations to implement enhanced authentication processes that could result in significant costs and reduce the ease of use of our payments products), as well as fraud. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs and lower profitability. We rely on third parties to provide certain Amazon-branded payment methods and payment processing services, including the processing of credit cards, debit cards, electronic checks, and promotional financing. In each case, it could disrupt our business if these companies become unwilling or unable to provide these services to us. We also offer co-branded credit card programs, which could adversely affect our operating results if terminated. We are also subject to payment card association operating rules, including data security rules, certification requirements, and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, or if our data security systems are breached, compromised, or ~~compromised,~~otherwise unable to detect or prevent fraudulent activity, we may be liable for card issuing banks’ costs, subject to fines and higher transaction fees, and lose our ability to accept credit and debit card payments from our customers, process electronic funds transfers, or facilitate other types of online payments, and our business and operating results could be adversely affected.

In addition, we provide regulated services in certain jurisdictions because we enable customers to keep account balances with us and transfer money to third parties, and because we provide services to third parties to facilitate payments on their behalf. In these jurisdictions, we may be subject to requirements for licensing, regulatory inspection, bonding and capital maintenance, the use, handling, and segregation of transferred funds, consumer disclosures, maintaining or processing data, and authentication. We are also subject to or voluntarily comply with a number of other laws and regulations relating to payments, money laundering, international money transfers, privacy and information security, and electronic fund transfers. If we were found to be in violation of applicable laws or regulations, we could be subject to additional requirements and civil and criminal penalties, or forced to cease providing certain services.

We Could Be Liable for Fraudulent or Unlawful Activities of Sellers

The law relating to the liability of ~~providers of~~ online ~~payment services~~service providers is currently unsettled. In addition, governmental agencies could require changes in the way this business is conducted. Under our seller programs, we may be unable to prevent sellers from collecting payments, fraudulently or otherwise, when buyers never receive the products they ordered or when the products received are materially different from the sellers’ descriptions. We also may be unable to prevent sellers in our stores or through other stores from selling unlawful, counterfeit, pirated, or stolen goods, selling goods in an unlawful or unethical manner, violating the proprietary rights of others, or otherwise violating our policies. Under our A2Z Guarantee, we reimburse buyers for payments up to certain limits in these situations, and as our third-party seller sales grow, the cost of this program will increase and could negatively affect our operating results. ~~We also may be unable~~In addition, to ~~prevent sellers on~~the extent any of this occurs, it could harm our ~~sites~~business or ~~through other seller sites from selling unlawful goods, selling goods in an unlawful manner, or violating the proprietary rights of others,~~damage our reputation and we could face civil or criminal liability for unlawful activities by our sellers.



Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

None.



Item 3.	Defaults Upon Senior Securities

None.



Item 4.	Mine Safety Disclosures

Not applicable.



Item 5.	Other Information

Disclosure Pursuant to Section 13(r) of the Exchange Act

We determined that, between January 2012 and September ~~2018,~~2019, we processed and delivered orders of consumer products for certain individuals and entities located outside Iran covered by the Iran Threat Reduction and Syria Human Rights Act (“ITRA”), in addition to those we have previously disclosed, as follows: consumer products valued at approximately ~~$1,800 for an Iranian embassy located in a country other than Iran; consumer products valued at approximately $66,900~~$6,600 for individuals who may have been acting for 2212 Iranian embassies and diplomatic organizations located in countries other than Iran; consumer products valued at approximately ~~$20~~$400 for ~~an entity owned or controlled by the Iranian government; consumer products valued at approximately $10,100 for~~three individuals ~~who may have been acting for seven entities owned or controlled by the Iranian government; consumer products valued at approximately $2,900 for seven individuals and entities~~ who are designated under Executive Order 13224 or Executive Order ~~13882;~~13382; and consumer products valued at approximately ~~$51,900~~$400 for individuals ~~and entities~~ who may have been acting for 16five individuals and entities designated under Executive Order 13224 or Executive Order ~~13882, three~~13382, two of which are owned or controlled by the Iranian government. The consumer products included books, other media, apparel, home and kitchen, jewelry, ~~office, toys,~~ health and beauty, office, toys, consumer electronics, ~~lawn and patio, automotive, musical instruments, software, grocery,~~ and pet products. We are unable to accurately calculate the net profit attributable to these transactions. We do not plan to continue selling to these accounts in the future. Our review is ongoing and we are enhancing our processes designed to identify transactions associated with individuals and entities covered by the ITRA.



Item 6.	Exhibits



Exhibit Number		Description

3.1		Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 2000).

3.2		Amended and Restated Bylaws of the Company (incorporated by reference to the Company’s Current Report on Form 8-K, filed February 25, 2016).

31.1		Certification of Jeffrey P. Bezos, Chairman and Chief Executive Officer of Amazon.com, Inc., pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2		Certification of Brian T. Olsavsky, Senior Vice President and Chief Financial Officer of Amazon.com, Inc., pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

32.1		Certification of Jeffrey P. Bezos, Chairman and Chief Executive Officer of Amazon.com, Inc., pursuant to 18 U.S.C. Section 1350.

32.2		Certification of Brian T. Olsavsky, Senior Vice President and Chief Financial Officer of Amazon.com, Inc., pursuant to 18 U.S.C. Section 1350.

101		The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2018,~~2019, formatted in Inline XBRL: (i) Consolidated Statements of Cash Flows, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Balance Sheets, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL (included as Exhibit 101).

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	AMAZON.COM, INC. (REGISTRANT)

	By:	/s/ Shelley L. Reynolds
		Shelley L. Reynolds
		Vice President, Worldwide Controller
		(Principal Accounting Officer)

Dated: October ~~25, 2018~~24, 2019



Delaware		91-1646860
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $.01 per share	AMZN	Nasdaq Global Select Market



Large accelerated filer	x☒	Accelerated filer	¨☐

Non-accelerated filer	¨ ☐	Smaller reporting company	¨☐

		Emerging growth company	¨☐



	Three Months Ended September 30,						Nine Months Ended September 30,						Twelve Months Ended September 30,
	2018			2019			2018			2019			2018			2019
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD	$	20,536		$	22,965		$	21,856		$	32,173		$	13,960		$	21,032
OPERATING ACTIVITIES:
Net income	2,883			2,134			7,046			8,320			8,902			11,347
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization of property and equipment and capitalized content costs, operating lease assets, and other	3,778			5,563			11,079			15,619			14,577			19,881
Stock-based compensation	1,350			1,779			4,001			5,024			5,180			6,441
Other operating expense (income), net	62			47			202			114			258			186
Other expense (income), net	96			388			22			246			17			443
Deferred income taxes	266			92			268			612			(40		)	784
Changes in operating assets and liabilities:
Inventories	(1,094		)	(381		)	36			(1,762		)	(2,220		)	(3,112		)
Accounts receivable, net and other	(2,884		)	(1,181		)	(3,220		)	(3,776		)	(5,983		)	(5,172		)
Accounts payable	3,894			226			(3,618		)	(2,490		)	5,285			4,393
Accrued expenses and other	237			(722		)	(2,193		)	(4,277		)	(131		)	(1,612		)
Unearned revenue	—			(53		)	623			1,225			759			1,753
Net cash provided by (used in) operating activities	8,588			7,892			14,246			18,855			26,604			35,332
INVESTING ACTIVITIES:
Purchases of property and equipment	(3,352		)	(4,697		)	(9,693		)	(11,549		)	(13,312		)	(15,282		)
Proceeds from property and equipment sales and incentives	825			1,312			1,490			2,800			2,073			3,414
Acquisitions, net of cash acquired, and other	(976		)	(398		)	(1,855		)	(1,684		)	(1,936		)	(2,015		)
Sales and maturities of marketable securities	1,964			7,251			6,301			15,056			9,787			16,994
Purchases of marketable securities	(4,033		)	(8,542		)	(5,040		)	(25,368		)	(7,390		)	(27,428		)
Net cash provided by (used in) investing activities	(5,572		)	(5,074		)	(8,797		)	(20,745		)	(10,778		)	(24,317		)
FINANCING ACTIVITIES:
Proceeds from long-term debt and other	143			702			363			1,175			472			1,581
Repayments of long-term debt and other	(183		)	(355		)	(533		)	(819		)	(1,675		)	(953		)
Principal repayments of finance leases	(2,247		)	(2,307		)	(5,544		)	(6,848		)	(7,016		)	(8,754		)
Principal repayments of financing obligations	(82		)	—			(211		)	(3		)	(277		)	(129		)
Net cash provided by (used in) financing activities	(2,369		)	(1,960		)	(5,925		)	(6,495		)	(8,496		)	(8,255		)
Foreign currency effect on cash, cash equivalents, and restricted cash	(151		)	(269		)	(348		)	(234		)	(258		)	(238		)
Net increase (decrease) in cash, cash equivalents, and restricted cash	496			589			(824		)	(8,619		)	7,072			2,522
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD	$	21,032		$	23,554		$	21,032		$	23,554		$	21,032		$	23,554
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest on long-term debt	$	283		$	287		$	733		$	720		$	907		$	842
Cash paid for operating leases	—			872			—			2,420			—			2,420
Cash paid for interest on finance leases	118			167			277			481			335			585
Cash paid for interest on financing obligations	47			14			142			20			168			72
Cash paid for income taxes, net of refunds	200			241			1,013			692			1,106			863
Assets acquired under operating leases	—			2,299			—			5,393			—			5,393
Property and equipment acquired under finance leases	2,329			3,606			6,934			9,541			9,704			13,222
Property and equipment acquired under build-to-suit arrangements	962			390			2,498			1,109			3,340			2,252



	Three Months Ended September 30,				Nine Months Ended September 30,				Twelve Months Ended September 30,
	2017		2018		2017		2018		2017		2018
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD	13,851		20,536		19,934		21,856		14,124		13,960
OPERATING ACTIVITIES:
Net income	256		2,883		1,176		7,046		1,926		8,902
Adjustments to reconcile net income to net cash from operating activities:
Depreciation of property and equipment, including internal-use software and website development, and other amortization, including capitalized content costs	2,912		3,778		7,980		11,079		10,277		14,577
Stock-based compensation	1,085		1,350		3,036		4,001		3,923		5,180
Other operating expense, net	43		62		146		202		177		258
Other expense (income), net	(128	)	96		(288	)	22		(267	)	17
Deferred income taxes	(74	)	266		279		268		(2	)	(40	)
Changes in operating assets and liabilities:
Inventories	(1,593	)	(1,094	)	(1,328	)	36		(2,371	)	(2,220	)
Accounts receivable, net and other	(1,760	)	(2,884	)	(2,016	)	(3,220	)	(3,938	)	(5,983	)
Accounts payable	2,974		3,894		(1,803	)	(3,618	)	5,479		5,285
Accrued expenses and other	(122	)	237		(1,778	)	(2,193	)	476		(131	)
Unearned revenue	184		—		603		623		1,316		759
Net cash provided by (used in) operating activities	3,777		8,588		6,007		14,246		16,996		26,604
INVESTING ACTIVITIES:
Purchases of property and equipment, including internal-use software and website development	(3,074	)	(3,352	)	(8,336	)	(9,693	)	(10,750	)	(13,312	)
Proceeds from property and equipment incentives	415		825		1,314		1,490		1,723		2,073
Acquisitions, net of cash acquired, and other	(13,213	)	(976	)	(13,891	)	(1,855	)	(13,893	)	(1,936	)
Sales and maturities of marketable securities	2,211		1,964		6,191		6,301		7,384		9,787
Purchases of marketable securities	(4,817	)	(4,033	)	(10,381	)	(5,040	)	(13,633	)	(7,390	)
Net cash provided by (used in) investing activities	(18,478	)	(5,572	)	(25,103	)	(8,797	)	(29,169	)	(10,778	)
FINANCING ACTIVITIES:
Proceeds from long-term debt and other	16,049		143		16,119		363		16,653		472
Repayments of long-term debt and other	(71	)	(183	)	(159	)	(533	)	(217	)	(1,675	)
Principal repayments of capital lease obligations	(1,267	)	(2,247	)	(3,327	)	(5,544	)	(4,331	)	(7,016	)
Principal repayments of finance lease obligations	(49	)	(82	)	(134	)	(211	)	(175	)	(277	)
Net cash provided by (used in) financing activities	14,662		(2,369	)	12,499		(5,925	)	11,930		(8,496	)
Foreign currency effect on cash, cash equivalents, and restricted cash	148		(151	)	623		(348	)	79		(258	)
Net increase (decrease) in cash, cash equivalents, and restricted cash	109		496		(5,974	)	(824	)	(164	)	7,072
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD	13,960		21,032		13,960		21,032		13,960		21,032
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest on long-term debt	5		283		155		733		299		907
Cash paid for interest on capital and finance lease obligations	112		165		235		419		296		503
Cash paid for income taxes, net of refunds	172		200		865		1,013		960		1,106
Property and equipment acquired under capital leases	2,256		2,329		6,867		6,934		8,905		9,704
Property and equipment acquired under build-to-suit leases	750		962		2,698		2,498		3,114		3,340



x☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



¨☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Statements of Cash Flows	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Comprehensive Income	5
	Consolidated Balance Sheets	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2120
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3332
Item 4.	Controls and Procedures	3433

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	3534
Item 1A.	Risk Factors	3534
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	44
~~Item 3.~~		~~Defaults Upon Senior Securities~~	44
~~Item 4.~~	~~Mine Safety Disclosures~~	44
~~Item 5.~~	~~Other Information~~	44
~~Item 6.~~	~~Exhibits~~Signatures	45
~~Signatures~~		46


	December 31, 2017			September 30, 2018			December 31, 2018			September 30, 2019
				(unaudited)						(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	20,522		$	20,425		$	31,750		$	23,255
Marketable securities	10,464			9,340			9,500			20,146
Inventories	16,047			15,862			17,174			18,766
Accounts receivable, net and other	13,164			14,258			16,677			16,887
Total current assets	60,197			59,885			75,101			79,054
Property and equipment, net	48,866			58,019			61,797			67,662
Operating leases							—			23,114
Goodwill	13,350			14,553			14,548			14,734
Other assets	8,897			11,238			11,202			14,535
Total assets	$	131,310		$	143,695		$	162,648		$	199,099
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	34,616		$	30,904		$	38,192		$	35,794
Accrued expenses and other	18,170			18,420			23,663			28,961
Unearned revenue	5,097			6,000			6,536			7,381
Total current liabilities	57,883			55,324			68,391			72,136
Long-term lease liabilities							9,650			37,058
Long-term debt	24,743			24,684			23,495			22,472
Other long-term liabilities	20,975			24,562			17,563			10,925
Commitments and contingencies (Note 3)
Commitments and contingencies (Note 4)
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 shares — 507 and 512
Outstanding shares — 484 and 489	5			5
Issued shares — 514 and 519
Outstanding shares — 491 and 495							5			5
Treasury stock, at cost	(1,837		)	(1,837		)	(1,837		)	(1,837		)
Additional paid-in capital	21,389			25,375			26,791			31,817
Accumulated other comprehensive loss	(484		)	(1,034		)	(1,035		)	(1,429		)
Retained earnings	8,636			16,616			19,625			27,952
Total stockholders’ equity	27,709			39,125			43,549			56,508
Total liabilities and stockholders’ equity	$	131,310		$	143,695		$	162,648		$	199,099



Three Months Ended September 30, 2017	Previously Reported			Adjustments			As Revised
Operating activities	$	3,851		$	(74	)	$	3,777
Investing activities	(19,120		)	642			(18,478		)
Financing activities	14,685			(23		)	14,662
Net change in cash, cash equivalents, and restricted cash	$	(584	)	$	545		$	(39	)



Nine Months Ended September 30, 2017	Previously Reported			Adjustments			As Revised
Operating activities	$	6,090		$	(83	)	$	6,007
Investing activities	(25,787		)	684			(25,103		)
Financing activities	12,507			(8		)	12,499
Net change in cash, cash equivalents, and restricted cash	$	(7,190	)	$	593		$	(6,597	)



Twelve Months Ended September 30, 2017	Previously Reported			Adjustments			As Revised
Operating activities	$	17,077		$	(81	)	$	16,996
Investing activities	(29,961		)	792			(29,169		)
Financing activities	11,916			14			11,930
Net change in cash, cash equivalents, and restricted cash	$	(968	)	$	725		$	(243	)


(1)	The related unrealized gain (loss) recorded in “Other income (expense), net” was $(55) million in Q3 2019 and $27 million for the nine months ended September 30, 2019.



	Amortized Cost		Estimated Fair Value
Due within one year	$	24,194	$	24,202
Due after one year through five years	9,104		9,146
Due after five years through ten years	309		310
Due after ten years	912		915
Total	$	34,519	$	34,573



	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019

Operating lease cost (1)	$	934	$	2,644
Finance lease cost:
Amortization of lease assets	2,609		7,319
Interest on lease liabilities	164		479
Finance lease cost	2,773		7,798
Variable lease cost	244		775
Total lease cost	$	3,951	$	11,217


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2018			2017			2018			2018			2019			2018			2019
Net product sales	$	28,768		$	33,746		$	77,248		$	97,215		$	33,746		$	39,726		$	97,215		$	109,866
Net service sales	14,976			22,830			40,165			63,289			22,830			30,255			63,289			83,220
Total net sales	43,744			56,576			117,413			160,504			56,576			69,981			160,504			193,086
Operating expenses:
Cost of sales	27,549			33,003			73,439			94,370			33,003			41,302			94,370			111,559
Fulfillment	6,420			8,275			16,275			23,999			8,275			10,167			23,999			28,040
Marketing	2,479			3,303			6,629			8,902			3,303			4,752			8,902			12,707
Technology and content	5,944			7,162			16,306			21,168			7,162			9,200			21,168			26,191
General and administrative	960			1,041			2,630			3,219			1,041			1,348			3,219			3,791
Other operating expense, net	45			68			155			211
Other operating expense (income), net													68			55			211			136
Total operating expenses	43,397			52,852			115,434			151,869			52,852			66,824			151,869			182,424
Operating income	347			3,724			1,979			8,635			3,724			3,157			8,635			10,662
Interest income	54			117			137			290			117			224			290			621
Interest expense	(228		)	(358		)	(510		)	(1,030		)	(358		)	(396		)	(1,030		)	(1,145		)
Other income (expense), net	143			(93		)	329			16			(93		)	(353		)	16			(215		)
Total non-operating income (expense)	(31		)	(334		)	(44		)	(724		)	(334		)	(525		)	(724		)	(739		)
Income before income taxes	316			3,390			1,935			7,911			3,390			2,632			7,911			9,923
Provision for income taxes	(58		)	(508		)	(755		)	(870		)	(508		)	(494		)	(870		)	(1,588		)
Equity-method investment activity, net of tax	(2		)	1			(4		)	5			1			(4		)	5			(15		)
Net income	$	256		$	2,883		$	1,176		$	7,046		$	2,883		$	2,134		$	7,046		$	8,320
Basic earnings per share	$	0.53		$	5.91		$	2.46		$	14.49		$	5.91		$	4.31		$	14.49		$	16.87
Diluted earnings per share	$	0.52		$	5.75		$	2.39		$	14.10		$	5.75		$	4.23		$	14.10		$	16.53
Weighted-average shares used in computation of earnings per share:
Basic	481			488			479			486			488			495			486			493
Diluted	494			501			492			500			501			504			500			503



	Operating Leases			Finance Leases			Total

Gross lease liabilities	$	30,550		$	27,310		$	57,860
Less: imputed interest	(6,646		)	(1,936		)	(8,582		)
Present value of lease liabilities	23,904			25,374			49,278
Less: current portion of lease liabilities	(2,842		)	(9,378		)	(12,220		)
Total long-term lease liabilities	$	21,062		$	15,996		$	37,058



	Three Months Ended December 31,		Year Ended December 31,
	2018		2019		2020		2021		2022		Thereafter		Total
Debt principal and interest	$	213	$	2,186	$	2,111	$	1,833	$	2,049	$	31,769	$	40,161
Capital lease obligations, including interest (1)	1,363		6,912		4,753		1,740		583		773		16,124
Finance lease obligations, including interest (2)	145		609		625		636		647		5,654		8,316
Operating leases	748		2,902		2,752		2,468		2,200		13,453		24,523
Unconditional purchase obligations (3)	137		3,760		3,488		3,265		3,054		8,096		21,800
Other commitments (4) (5)	841		1,734		1,157		1,184		649		7,936		13,501
Total commitments	$	3,447	$	18,103	$	14,886	$	11,126	$	9,182	$	67,681	$	124,425



	Three Months Ended December 31,		Year Ended December 31,
	2019		2020		2021		2022		2023		Thereafter		Total
Debt principal and interest	$	1,556	$	2,345	$	1,928	$	2,144	$	1,848	$	30,047	$	39,868
Operating lease liabilities	795		3,594		3,337		2,977		2,657		17,190		30,550
Finance lease liabilities, including interest	2,124		9,364		6,355		2,754		1,158		5,555		27,310
Financing obligations, including interest	21		100		102		103		105		1,796		2,227
Unconditional purchase obligations (1)	270		3,864		3,388		3,126		2,991		5,219		18,858
Other commitments (2) (3)	1,377		2,589		1,554		1,434		1,011		10,521		18,486
Total commitments	$	6,143	$	21,856	$	16,664	$	12,538	$	9,770	$	70,328	$	137,299


(1)	Rental expense under operating lease agreements was $859 million for Q3 2018 and $2.5 billion for the nine months ended September 30, 2018.



	September 30, 2019

Weighted-average remaining lease term – operating leases	11.7 years
Weighted-average remaining lease term – finance leases	5.7 years
Weighted-average discount rate – operating leases	3.2	%
Weighted-average discount rate – finance leases	2.8	%


(1)	Excluding interest, current capital lease obligations of $5.8 billion and $6.9 billion are recorded within “Accrued expenses and other” as of December 31, 2017 and September 30, 2018, and $8.4 billion and $8.7 billion are recorded within “Other long-term liabilities” as of December 31, 2017 and September 30, 2018.


~~(2)~~	Excluding interest, current finance lease obligations of $282 million and $391 million are recorded within “Accrued expenses and other” as of December 31, 2017 and September 30, 2018, and $4.7 billion and $6.5 billion are recorded within “Other long-term liabilities” as of December 31, 2017 and September 30, 2018.


~~(4)~~(2)	Includes the estimated timing and amounts of payments for rent and tenant improvements associated with build-to-suit lease arrangements and ~~equipment~~ lease arrangements ~~that have not been placed in service~~prior to the lease commencement date and digital media content liabilities associated with long-term digital media content assets with initial terms greater than one year.


~~(5)~~(3)	Excludes approximately ~~$3.4~~$3.8 billion of accrued tax contingencies for which we cannot make a reasonably reliable estimate of the amount and period of payment, if any.



Purchase Price
Cash paid, net of cash acquired	$	1,609
Indemnification holdback	29
	$	1,638

Allocation
Goodwill	$	1,222
Intangible assets (1):
Marketing-related	186
Contract-based	13
Technology-based	279
Customer-related	193
	671
Property and equipment	11
Deferred tax assets	174
Other assets acquired	282
Long-term debt	(176		)
Deferred tax liabilities	(159		)
Other liabilities assumed	(387		)
	$	1,638


~~(1)~~	~~Acquired intangible assets have estimated useful lives of between two and seven years, with a weighted-average amortization period of six years.~~



	North America			International			AWS			Consolidated
Goodwill - December 31, 2017	$	11,165		$	1,108		$	1,077		$	13,350
New acquisitions (1)	1,030			177			15			1,222
Other adjustments (2)	(2		)	(10		)	(7		)	(19		)
Goodwill - September 30, 2018	$	12,193		$	1,275		$	1,085		$	14,553


~~(1)~~	~~Primarily includes the acquisitions of Ring and PillPack in the North America and International segments.~~


~~(2)~~	~~Primarily includes changes in foreign exchange rates.~~



	December 31, 2018			September 30, 2019
2.600% Notes due on December 5, 2019 (2)	1,000			1,000
1.900% Notes due on August 21, 2020 (3)	1,000			1,000
3.300% Notes due on December 5, 2021 (2)	1,000			1,000
2.500% Notes due on November 29, 2022 (1)	1,250			1,250
2.400% Notes due on February 22, 2023 (3)	1,000			1,000
2.800% Notes due on August 22, 2024 (3)	2,000			2,000
3.800% Notes due on December 5, 2024 (2)	1,250			1,250
5.200% Notes due on December 3, 2025 (4)	1,000			1,000
3.150% Notes due on August 22, 2027 (3)	3,500			3,500
4.800% Notes due on December 5, 2034 (2)	1,250			1,250
3.875% Notes due on August 22, 2037 (3)	2,750			2,750
4.950% Notes due on December 5, 2044 (2)	1,500			1,500
4.050% Notes due on August 22, 2047 (3)	3,500			3,500
4.250% Notes due on August 22, 2057 (3)	2,250			2,250
Credit Facility	594			603
Other long-term debt	121			558
Total debt	24,965			25,411
Less current portion of long-term debt	(1,371		)	(2,841		)
Face value of long-term debt	$	23,594		$	22,570


(1)	Issued in November 2012, effective interest rate of the 2022 Notes was 2.66%.


(2)	Issued in December 2014, effective interest rates of the 2019, 2021, 2024, 2034, and 2044 Notes were 2.73%, 3.43%, 3.90%, 4.92%, and 5.11%.


(3)	Issued in August 2017, effective interest rates of the 2020, 2023, 2024, 2027, 2037, 2047, and 2057 Notes were 2.16%, 2.56%, 2.95%, 3.25%, 3.94%, 4.13%, and 4.33%.


(4)	Consists of $872 million of 2025 Notes issued in December 2017 in exchange for notes assumed in connection with the acquisition of Whole Foods Market and $128 million of 2025 Notes issued by Whole Foods Market that did not participate in our December 2017 exchange offer. The effective interest rate of the 2025 Notes was 3.02%.



	Number of Units		Weighted-Average Grant-Date Fair Value
Outstanding as of December 31, 2018	15.9		$	1,024
Units granted	5.8		1,811
Units vested	(4.6	)	793
Units forfeited	(1.3	)	1,179
Outstanding as of September 30, 2019	15.8		1,367



	Number of Units		Weighted-Average Grant-Date Fair Value
Outstanding as of December 31, 2017	20.1		$	725
Units granted	4.4		1,512
Units vested	(4.8	)	551
Units forfeited	(1.7	)	831
Outstanding as of September 30, 2018	18.0		$	954


(1)	We recorded cumulative effect adjustments related to the new revenue and income tax standards in Q1 2018 and the new lease standard in Q1 2019. See Item 1 of Part I, “Financial Statements — Note 1 — Accounting Policies — Accounting Pronouncements Recently Adopted” for additional information.


(2)	Includes product sales where our customers physically select items in a store. Sales from customers who order goods online for delivery or pickup at our physical stores are included in “Online stores.”