SEATTLE, Jul 23, 2008 (BUSINESS WIRE) -- Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its second quarter ended June 30, 2008.

Operating cash flow was $1.09 billion for the trailing twelve months, compared with $0.89 billion for the trailing twelve months ended June 30, 2007. Free cash flow increased 16% to $0.82 billion for the trailing twelve months, compared with $0.70 billion for the trailing twelve months ended June 30, 2007.

Common shares outstanding plus shares underlying stock-based awards outstanding totaled 446 million on June 30, 2008, compared with 435 million a year ago.

Net sales increased 41% to $4.06 billion in the second quarter, compared with $2.89 billion in second quarter 2007. Excluding the $0.18 billion favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 35% compared with second quarter 2007.

Operating income increased 86% to $217 million in the second quarter compared with $116 million in second quarter 2007. Excluding the $17 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, operating income grew 71% compared with second quarter 2007. Included in the second quarter 2008 operating income is a $53 million non-cash gain recognized on the sale of our European DVD rental assets.

Net income increased 102% to $158 million in the second quarter, or $0.37 per diluted share, compared with net income of $78 million, or $0.19 per diluted share, in second quarter 2007.

"Customers continue to take advantage of our low prices, free shipping and Amazon Prime," said Jeff Bezos, founder and CEO of Amazon.com. "Amazon Prime membership costs less than a tank of gas - more and more customers are joining the program and enjoying its benefits."

Highlights

-- Worldwide Media sales grew 31% to $2.41 billion in second quarter 2008, compared with $1.83 billion in second quarter 2007.

-- Worldwide Electronics & Other General Merchandise sales grew 58% to $1.53 billion in second quarter 2008, compared with $0.97 billion in second quarter 2007, and increased to 38% of worldwide net sales compared with 34%.

-- North America segment sales, representing the Company's U.S. and Canadian sites, were $2.17 billion, up 35% from second quarter 2007.

-- International segment sales, representing the Company's U.K., German, Japanese, French and Chinese sites, were $1.89 billion, up 47% from second quarter 2007, and increased to 47% of worldwide net sales compared with 45%. Excluding the favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, International sales grew 34%.

-- Amazon.com customers can now take advantage of Bill Me Later, a new alternative payment method. Bill Me Later's next-generation payments service provides customers another convenient payment option when shopping on Amazon.com.

-- The Company acquired Fabric.com, a leading online fabric store that offers custom measured and cut fabrics, as well as patterns, sewing tools and accessories.

-- Amazon.co.jp launched Convenience Store Pickup Service, which offers customers the option to pick up their orders at any of the 8,500 Lawson stores throughout Japan.

-- Over 400,000 developers have registered to use Amazon Web Services (AWS), up more than 30,000 from last quarter.

-- AWS released a new family of instance types, the high CPU family. These instances have proportionally more CPU resources than RAM (compared to standard instances) and are well suited for compute-intensive applications such as rendering, search indexing and computational analysis.

-- Amazon.com introduced a limited beta version of Amazon Video On Demand. The service lets customers rent or buy ad-free movies and television shows and watch them instantly within their web browser on Macs or PCs and through Sony BRAVIA television sets with the use of the Sony BRAVIA Internet Video Link.

-- Kindle selection continued to grow with more than 140,000 titles available.

Financial Guidance

The following forward-looking statements reflect Amazon.com's expectations as of July 23, 2008. 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.

Third Quarter 2008 Guidance

-- Net sales are expected to be between $4.200 billion and $4.425 billion, or to grow between 29% and 36% compared with third quarter 2007.

-- Operating income is expected to be between $115 million and $160 million, or between 6% decline and 31% growth compared with third quarter 2007. This guidance includes approximately $80 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions or investments are concluded and that there are no further revisions to stock-based compensation estimates.

Full Year 2008 Expectations

-- Net sales are expected to be between $19.35 billion and $20.10 billion, or to grow between 30% and 35% compared with 2007.

-- Operating income is expected to be between $745 million and $920 million, or to grow between 14% and 40% compared with 2007. This guidance includes approximately $295 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions or investments are concluded 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, the extent to which we owe income taxes, competition, management of growth, potential fluctuations in operating results, international growth and expansion, the outcomes of legal proceedings and claims, fulfillment center optimization, risks of inventory management, seasonality, the degree to which the Company enters into, maintains and develops commercial agreements, acquisitions and strategic transactions, and risks of fulfillment throughput and productivity. Other risks and uncertainties include, among others, risks related to new products, services and technologies, system interruptions, significant indebtedness, government regulation and taxation, payments and fraud. 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, 2007, and 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 books, movies, music & games, digital downloads, electronics & computers, home & garden, toys, kids & baby, grocery, apparel, shoes & jewelry, health & beauty, sports & outdoors, tools, and auto & industrial.

Amazon Web Services provides Amazon's developer customers with access to in-the-cloud infrastructure services based on Amazon's own back-end technology platform, which developers can use to enable virtually any type of business. Examples of the services offered by Amazon Web Services are Amazon Elastic Compute Cloud (Amazon EC2), Amazon Simple Storage Service (Amazon S3), Amazon SimpleDB, Amazon Simple Queue Service (Amazon SQS), Amazon Flexible Payments Service (Amazon FPS) and Amazon Mechanical Turk.

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 the Joyo Amazon websites at www.joyo.cn and www.amazon.cn.

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     Six Months     Twelve Months                           Ended           Ended            Ended                         June 30,        June 30,         June 30,                      --------------- --------------- ----------------                        2008    2007    2008    2007    2008     2007                      ------- ------- ------- ------- ------- --------CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD  $1,496  $  748  $2,539  $1,022  $1,004  $   683OPERATING ACTIVITIES:Net income               158      78     301     189     588      306Adjustments to reconcile net income to net cash from operating activities: Depreciation of  fixed assets,  including internal-  use software and  website  development, and  other amortization      70      60     134     122     259      244 Stock-based  compensation            73      46     127      80     232      140 Other operating  expense (income),  net                    (45)      3     (39)      3     (32)       7 Losses (gains) on  sales of marketable  securities, net          -       -      (3)      1      (3)      (2) Other income, net         9       5       7       9      10        9 Deferred income  taxes                  (10)     (2)    (29)      -    (128)      14 Excess tax benefits  from stock-based  compensation           (43)    (35)   (106)    (60)   (304)    (133)Changes in operating assets and liabilities: Inventories             (35)     25     113     151    (341)    (193) Accounts receivable,  net and other          (25)    (10)    115      56    (197)    (113) Accounts payable        116      82    (886)   (520)    562      319 Accrued expenses and  other                   62      31     (63)    (28)    394      256 Additions to  unearned revenue        87      64     165     109     300      223 Amortization of  previously unearned  revenue                (70)    (48)   (134)    (92)   (252)    (182)                      ------- ------- ------- ------- ------- --------  Net cash provided   by (used in)   operating   activities            347     299    (298)     20   1,088      895INVESTING ACTIVITIES:Purchases of fixed assets, including internal-use software and website development             (69)    (47)   (130)    (82)   (272)    (195)Acquisitions, net of cash acquired, and other                   (44)    (22)   (400)    (22)   (452)     (26)Sales and maturities of marketable securities and other investments             181     161     452     945     777    2,253Purchases of marketable securities and other investments            (369)   (180)   (750)   (694)   (987)  (2,262)                      ------- ------- ------- ------- ------- --------  Net cash provided   by (used in)   investing   activities           (301)    (88)   (828)    147    (934)    (230)FINANCING ACTIVITIES:Proceeds from exercises of stock options                   6      35       8      44      56       65Excess tax benefits from stock-based compensation             43      35     106      60     304      133Common stock repurchased               -       -       -    (248)      -     (500)Proceeds from long- term debt and other       1       -      52       -      83        3Repayments of long- term debt and capital lease obligations             (36)    (29)    (60)    (46)    (96)     (67)                      ------- ------- ------- ------- ------- --------  Net cash provided   by (used in)   financing   activities             14      41     106    (190)    347     (366)Foreign-currency effect on cash and cash equivalents         (8)      4      29       5      43       22                      ------- ------- ------- ------- ------- --------  Net increase   (decrease) in cash   and cash   equivalents            52     256    (991)    (18)    544      321                      ------- ------- ------- ------- ------- --------                      ------- ------- ------- ------- ------- --------CASH AND CASH EQUIVALENTS, END OF PERIOD               $1,548  $1,004  $1,548  $1,004  $1,548  $ 1,004                      ======= ======= ======= ======= ======= ========SUPPLEMENTAL CASH FLOW INFORMATION:Cash paid for interest             $    1  $    1  $   47  $   44  $   70  $    68Cash paid for income taxes                    15       7      23      10      37       17Fixed assets acquired under capital leases and other financing arrangements             52       9      67      21     121       68Fixed assets acquired under build-to-suit leases                   13       -      17       -      31        -Conversion of debt       473       -     473       -     474        -
                           AMAZON.COM, INC.                Consolidated Statements of Operations                 (in millions, except per share data)                             (unaudited)                                        Three Months     Six Months                                            Ended           Ended                                          June 30,        June 30,                                       --------------- ---------------                                         2008    2007    2008    2007                                       ------- ------- ------- -------Net sales                              $4,063  $2,886  $8,198  $5,901Cost of sales                           3,096   2,185   6,275   4,480                                       ------- ------- ------- -------Gross profit                              967     701   1,923   1,421Operating expenses (1): Fulfillment                              361     258     715     518 Marketing                                102      65     205     137 Technology and content                   258     201     492     387 General and administrative                74      58     135     114 Other operating expense (income), net    (45)      3     (39)      3                                       ------- ------- ------- -------   Total operating expenses               750     585   1,508   1,159                                       ------- ------- ------- -------Income from operations                    217     116     415     262Interest income                            20      20      46      39Interest expense                          (21)    (19)    (43)    (38)Other expense, net                         (8)     (6)     (3)     (8)                                       ------- ------- ------- -------  Total non-operating expense              (9)     (5)      -      (7)                                       ------- ------- ------- -------Income before income taxes                208     111     415     255Provision for income taxes                 46      33     108      66Equity-method investment activity, net of tax                                     4       -       6       -                                       ------- ------- ------- -------Net income                             $  158  $   78  $  301  $  189                                       ======= ======= ======= =======Basic earnings per share               $ 0.38  $ 0.19  $ 0.72  $ 0.46                                       ======= ======= ======= =======Diluted earnings per share             $ 0.37  $ 0.19  $ 0.70  $ 0.45                                       ======= ======= ======= =======Weighted average shares used in computation of earnings per share: Basic                                    420     412     419     412                                       ======= ======= ======= ======= Diluted                                  430     423     428     421                                       ======= ======= ======= =======(1) Includes stock-based compensation as follows:  Fulfillment                          $   16  $   10  $   27  $   17  Marketing                                 4       2       6       3  Technology and content                   40      25      71      44  General and administrative               13       9      23      16
                           AMAZON.COM, INC.                         Segment Information                            (in millions)                             (unaudited)                                        Three Months     Six Months                                            Ended           Ended                                          June 30,        June 30,                                       --------------- ---------------                                        2008    2007    2008    2007                                       ------- ------- ------- -------North America  Net sales                            $2,168  $1,601  $4,294  $3,223  Cost of sales                         1,609   1,167   3,166   2,350                                       ------- ------- ------- -------  Gross profit                            559     434   1,128     873  Direct segment operating expenses   (1)                                    463     352     902     705                                       ------- ------- ------- -------  Segment operating income             $   96  $   82  $  226  $  168                                       ======= ======= ======= =======International  Net sales                            $1,895  $1,285  $3,904  $2,678  Cost of sales                         1,487   1,018   3,109   2,130                                       ------- ------- ------- -------  Gross profit                            408     267     795     548  Direct segment operating expenses   (1)                                    259     184     518     371                                       ------- ------- ------- -------  Segment operating income             $  149  $   83  $  277  $  177                                       ======= ======= ======= =======Consolidated  Net sales                            $4,063  $2,886  $8,198  $5,901  Cost of sales                         3,096   2,185   6,275   4,480                                       ------- ------- ------- -------  Gross profit                            967     701   1,923   1,421  Direct segment operating expenses       722     536   1,420   1,076                                       ------- ------- ------- -------  Segment operating income                245     165     503     345  Stock-based compensation                (73)    (46)   (127)    (80)  Other operating income (expense),   net                                     45      (3)     39      (3)                                       ------- ------- ------- -------  Income from operations                  217     116     415     262  Total non-operating expense, net         (9)     (5)      -      (7)  Provision for income taxes              (46)    (33)   (108)    (66)  Equity-method investment activity,   net of tax                              (4)      -      (6)      -                                       ------- ------- ------- -------  Net income                           $  158  $   78  $  301  $  189                                       ======= ======= ======= =======Segment Highlights:  Y/Y net sales growth:    North America                          35%     38%     33%     34%    International                          47      31      46      33    Consolidated                           41      35      39      34  Y/Y gross profit growth:    North America                          29%     40%     29%     34%    International                          52      34      45      35    Consolidated                           38      38      35      34  Y/Y segment operating income growth:    North America                          17%    233%     35%     94%    International                          80      50      57      56    Consolidated                           49     106      46      72  Net sales mix:    North America                          53%     55%     52%     55%    International                          47      45      48      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     Six Months                                            Ended           Ended                                          June 30,        June 30,                                       --------------- ---------------                                         2008    2007    2008    2007                                       ------- ------- ------- -------North America   Media                               $1,148  $  923  $2,354  $1,913   Electronics and other general    merchandise                           920     606   1,746   1,170   Other                                  100      72     194     140                                       ------- ------- ------- -------     Total North America                2,168   1,601   4,294   3,223International   Media                                1,258     910   2,596   1,910   Electronics and other general    merchandise                           611     364   1,265     747   Other                                   26      11      43      21                                       ------- ------- ------- -------     Total International                1,895   1,285   3,904   2,678Consolidated   Media                                2,406   1,833   4,950   3,823   Electronics and other general    merchandise                         1,531     970   3,011   1,917   Other                                  126      83     237     161                                       ------- ------- ------- -------     Total Consolidated                $4,063  $2,886  $8,198  $5,901                                       ======= ======= ======= =======Y/Y Net Sales Growth:North America:   Media                                   25%     26%     23%     24%   Electronics and other general    merchandise                            52      66      49      58   Other                                   38      15      39      16     Total North America                   35      38      33      34International:   Media                                   38%     27%     36%     29%   Electronics and other general    merchandise                            68      40      69      42   Other                                  140     143     100     147     Total International                   47      31      46      33Consolidated:   Media                                   31%     27%     29%     26%   Electronics and other general    merchandise                            58      55      57      52   Other                                   52      23      47      25     Total Consolidated                    41      35      39      34Y/Y Net Sales Growth Excluding Effect of Exchange Rates:International:   Media                                   25%     23%     23%     23%   Electronics and other general    merchandise                            52      34      54      34   Other                                  121     128      85     128     Total International                   34      26      32      27Consolidated:   Media                                   25%     25%     23%     24%   Electronics and other general    merchandise                            52      53      51      48   Other                                   49      22      45      23     Total Consolidated                    35      33      33      31Consolidated Net Sales Mix:   Media                                   59%     63%     60%     65%   Electronics and other general    merchandise                            38      34      37      32   Other                                    3       3       3       3
                           AMAZON.COM, INC.                     Consolidated Balance Sheets                 (in millions, except per share data)                                       June 30,   Dec. 31,  June 30,                                          2008      2007       2007                                      ----------- -------- -----------ASSETS                                (unaudited)          (unaudited)Current assets:  Cash and cash equivalents              $ 1,548  $ 2,539     $ 1,004  Marketable securities                      832      573         661  Inventories                              1,107    1,200         735  Accounts receivable, net and other         586      705         384  Deferred tax assets                        163      147          75                                      ----------- -------- -----------     Total current assets                  4,236    5,164       2,859Fixed assets, net                            651      543         443Deferred tax assets                          284      260         224Goodwill                                     400      222         214Other assets                                 751      296         244                                      ----------- -------- -----------     Total assets                        $ 6,322  $ 6,485     $ 3,984                                      =========== ======== ===========LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:  Accounts payable                       $ 1,963  $ 2,795     $ 1,295  Accrued expenses and other                 812      902         625  Current portion of long-term debt          441       17          16                                      ----------- -------- -----------     Total current liabilities             3,216    3,714       1,936Long-term debt                               433    1,282       1,256Other long-term liabilities                  443      292         242Commitments and contingenciesStockholders' 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 -- 440, 431, and     427    Outstanding shares -- 426, 416,     and 413                                   4        4           4  Treasury stock, at cost                   (500)    (500)       (500)  Additional paid-in capital               3,794    3,063       2,704  Accumulated other comprehensive   income                                      6        5           3  Accumulated deficit                     (1,074)  (1,375)     (1,661)                                      ----------- -------- -----------     Total stockholders' equity            2,230    1,197         550                                      ----------- -------- -----------     Total liabilities and      stockholders' equity               $ 6,322  $ 6,485     $ 3,984                                      =========== ======== ===========
                           AMAZON.COM, INC.       Supplemental Financial Information and Business Metrics                 (in millions, except per share data)                             (unaudited)----------------------------------------------------------------------                                                               Y/Y %                 Q2 2007  Q3 2007  Q4 2007  Q1 2008  Q2 2008   Change                 -----------------------------------------------------Cash Flows and SharesOperating cash flow -- trailing twelve months (TTM)    $   895  $ 1,001  $ 1,405  $ 1,039  $ 1,088   22%Purchases of fixed assets (incl. internal-use software & website development) -- TTM             $   195  $   201  $   224  $   251  $   272   40%Free cash flow (operating cash flow less purchases of fixed assets) -- TTM          $   700  $   800  $ 1,181  $   788  $   816   16%Free cash flow -- TTM Y/Y growth               87%     118%     143%      51%      16% N/ACommon shares and stock-based awards outstanding         435      435      435      435      446    2%Common shares outstanding         413      415      416      417      426    3%Stock-based awards outstanding          22       20       18       18       20  (10%)Stock-based awards outstanding -- % of common shares outstanding         5.3%     4.9%     4.4%     4.3%     4.6% N/AResults of OperationsWorldwide (WW) net sales       $ 2,886  $ 3,262  $ 5,673  $ 4,135  $ 4,063   41%WW net sales -- Y/Y growth, excluding F/X        33%      38%      37%      31%      35% N/AWW net sales -- TTM             $12,193  $13,149  $14,835  $15,955  $17,133   41%WW net sales -- TTM Y/Y growth, excluding F/X        29%      32%      35%      35%      35% N/AGross profit     $   701  $   762  $ 1,170  $   956  $   967   38%Gross profit -- Y/Y growth, excluding F/X        36%      36%      33%      28%      32% N/AGross margin -- % of WW net sales              24.3%    23.4%    20.6%    23.1%    23.8% N/AGross profit -- TTM             $ 2,820  $ 3,032  $ 3,353  $ 3,589  $ 3,855   37%Gross profit -- TTM Y/Y growth, excluding F/X        27%      31%      33%      33%      32% N/AGross margin -- TTM % of WW net sales              23.1%    23.1%    22.6%    22.5%    22.5% N/AOperating income $   116  $   123  $   271  $   198  $   217   86%Operating margin -- % of WW net sales               4.0%     3.8%     4.8%     4.8%     5.3% N/AOperating income -- TTM          $   498  $   581  $   655  $   708  $   808   62%Operating income -- TTM Y/Y growth, excluding F/X        29%      56%      61%      57%      52% N/AOperating margin -- TTM % of WW net sales           4.1%     4.4%     4.4%     4.4%     4.7% N/ANet income       $    78  $    80  $   207  $   143  $   158  102%Net income per diluted share   $  0.19  $  0.19  $  0.48  $  0.34  $  0.37   99%Net income -- TTM             $   306  $   367  $   476  $   508  $   588   92%Net income per diluted share -- TTM          $  0.72  $  0.87  $  1.12  $  1.20  $  1.38   90%SegmentsNorth America Segment:  Net sales      $ 1,601  $ 1,788  $ 3,084  $ 2,126  $ 2,168   35%  Net sales --   Y/Y growth,   excluding F/X      38%      42%      39%      31%      35% N/A  Net sales --   TTM           $ 6,687  $ 7,219  $ 8,095  $ 8,598  $ 9,166   37%  Gross profit   $   434  $   460  $   698  $   569  $   559   29%  Gross margin   -- % of North   America net   sales            27.1%    25.7%    22.6%    26.7%    25.8% N/A  Gross profit   -- TTM        $ 1,747  $ 1,864  $ 2,031  $ 2,160  $ 2,286   31%  Gross margin   -- TTM % of   North America   net sales        26.1%    25.8%    25.1%    25.1%    24.9% N/A  Operating   income        $    82  $    79  $   153  $   130  $    96   17%  Operating   margin -- %   of North   America net   sales             5.1%     4.4%     5.0%     6.1%     4.4% N/A  Operating   income -- TTM $   312  $   369  $   400  $   445  $   458   47%  Operating   income -- TTM   Y/Y growth,   excluding F/X      27%      84%      73%      74%      46% N/A  Operating   margin -- TTM   % of North   America net   sales             4.7%     5.1%     4.9%     5.2%     5.0% N/AInternational Segment:  Net sales      $ 1,285  $ 1,474  $ 2,589  $ 2,009  $ 1,895   47%  Net sales --   Y/Y growth,   excluding F/X      26%      33%      35%      31%      34% N/A  Net sales --   TTM           $ 5,506  $ 5,930  $ 6,740  $ 7,357  $ 7,967   45%  Net sales --   TTM % of WW   net sales          45%      45%      45%      46%      47% N/A  Gross profit   $   267  $   302  $   472  $   387  $   408   52%  Gross margin   -- % of   International   net sales        20.8%    20.5%    18.2%    19.3%    21.5% N/A  Gross profit   -- TTM        $ 1,072  $ 1,168  $ 1,322  $ 1,430  $ 1,569   46%  Gross margin   -- TTM % of   International   net sales        19.5%    19.7%    19.6%    19.4%    19.7% N/A  Operating   income        $    83  $    98  $   175  $   128  $   149   80%  Operating   margin -- %   of   International   net sales         6.4%     6.6%     6.8%     6.4%     7.9% N/A  Operating   income -- TTM $   333  $   380  $   449  $   483  $   550   65%  Operating   income -- TTM   Y/Y growth,   excluding F/X      19%      37%      53%      44%      47% N/A  Operating   margin -- TTM   % of   International   net sales         6.0%     6.4%     6.7%     6.6%     6.9% 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                 Q2 2007  Q3 2007  Q4 2007  Q1 2008  Q2 2008  % Change                 -----------------------------------------------------Segments (continued)Consolidated Segments:  Operating   expenses      $   536  $   585  $   842  $   698  $   722   35%  Operating   expenses --   TTM           $ 2,175  $ 2,283  $ 2,504  $ 2,661  $ 2,847   31%  Operating   income        $   165  $   177  $   328  $   258  $   245   49%  Operating   margin -- %   of   consolidated   sales             5.7%     5.4%     5.8%     6.2%     6.0% N/A  Operating   income -- TTM $   645  $   749  $   849  $   928  $ 1,008   56%  Operating   income -- TTM   Y/Y growth,   excluding F/X      24%      59%      64%      59%      49% N/A  Operating   margin -- TTM   % of   consolidated   net sales         5.3%     5.7%     5.7%     5.8%     5.9% N/ASupplemental North America Segment Net Sales:  Media          $   923  $ 1,081  $ 1,637  $ 1,205  $ 1,148   25%  Media -- Y/Y   growth,   excluding F/X      26%      37%      30%      21%      24% N/A  Media -- TTM   $ 3,949  $ 4,245  $ 4,630  $ 4,845  $ 5,071   28%  Electronics   and other   general   merchandise   $   606  $   631  $ 1,336  $   826  $   920   52%  Electronics   and other   general   merchandise   -- Y/Y   growth,   excluding F/X      66%      54%      53%      46%      52% N/A  Electronics   and other   general   merchandise   -- TTM        $ 2,456  $ 2,678  $ 3,139  $ 3,400  $ 3,714   51%  Electronics   and other   general   merchandise   -- TTM % of   North America   net sales          37%      37%      39%      40%      41% N/A  Other          $    72  $    76  $   111  $    95  $   100   38%  Other -- TTM   $   282  $   296  $   326  $   353  $   381   35%Supplemental International Segment Net Sales:  Media          $   910  $ 1,010  $ 1,692  $ 1,338  $ 1,258   38%  Media -- Y/Y   growth,   excluding F/X      23%      27%      26%      22%      25% N/A  Media -- TTM   $ 3,914  $ 4,167  $ 4,612  $ 4,950  $ 5,299   35%  Electronics   and other   general   merchandise   $   364  $   448  $   877  $   655  $   611   68%  Electronics   and other   general   merchandise   -- Y/Y   growth,   excluding F/X      34%      45%      55%      56%      52% N/A  Electronics   and other   general   merchandise   -- TTM        $ 1,560  $ 1,717  $ 2,071  $ 2,344  $ 2,590   66%  Electronics   and other   general   merchandise   -- TTM % of   International   net sales          28%      29%      31%      32%      33% N/A  Other          $    11  $    16  $    20  $    16  $    26  140%  Other -- TTM   $    33  $    46  $    57  $    63  $    78  140%Supplemental Worldwide Net Sales:  Media          $ 1,833  $ 2,091  $ 3,329  $ 2,543  $ 2,406   31%  Media -- Y/Y   growth,   excluding F/X      25%      32%      28%      21%      25% N/A  Media -- TTM   $ 7,863  $ 8,412  $ 9,242  $ 9,795  $10,370   32%  Electronics   and other   general   merchandise   $   970  $ 1,079  $ 2,213  $ 1,481  $ 1,531   58%  Electronics   and other   general   merchandise   -- Y/Y   growth,   excluding F/X      53%      51%      54%      50%      52% N/A  Electronics   and other   general   merchandise   -- TTM        $ 4,015  $ 4,395  $ 5,210  $ 5,744  $ 6,304   57%  Electronics   and other   general   merchandise   -- TTM % of   WW net sales       33%      33%      35%      36%      37% N/A  Other          $    83  $    92  $   131  $   111  $   126   52%  Other -- TTM   $   315  $   342  $   383  $   416  $   459   46%Balance SheetCash and marketable securities (1)  $ 1,836  $ 2,087  $ 3,309  $ 2,395  $ 2,625   43%Inventory, net -- ending       $   735  $   970  $ 1,200  $ 1,077  $ 1,107   51%Inventory -- average inventory % of TTM net sales       5.9%     6.2%     6.1%     5.9%     5.9% N/AInventory turnover, average -- TTM     12.9     12.4     12.7     13.1     13.0    1%Fixed assets, net             $   443  $   491  $   543  $   594  $   651   47%Accounts payable days -- ending       54       62       57       53       58    7%OtherEmployees (full- time and part- time; excludes contractors & temporary personnel)       14,400   15,800   17,000   17,800   18,400   28%----------------------------------------------------------------------Note: The attached "Financial and Operational Summary" is an integral part of this Supplemental Financial Information and Business Metrics.(1) Includes restricted cash, classified within "Other Assets" on our consolidated balance sheet, of: $171 million Q2 2007, $179 million Q3 2007, $197 million Q4 2007, $245 million Q1 2008 and $245 million Q2 2008.

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

-- Revenue is generally recorded gross for sales of our own inventory and net for sales by other sellers. Amounts paid in advance for subscription services, including amounts received for Amazon Prime and other membership programs, are deferred and recognized as revenue over the subscription term. For our products with multiple elements, where a standalone value for each element cannot be established, we recognize the revenue and related cost over the estimated economic life of the product.

-- Shipping revenue, which includes amounts earned from our Amazon Prime membership and Fulfillment by Amazon programs, was $186 million, up 22% from $152 million.

Cost of Sales

-- Cost of sales consists of the purchase price of products sold by us, inbound and outbound shipping charges, packaging supplies, and costs incurred in operating and staffing our fulfillment and customer service centers on behalf of other businesses.

-- Payment processing and related transaction costs, including those associated with seller transactions, are classified in "Fulfillment" on our consolidated statements of operations.

-- Shipping charges to receive products from our suppliers are included in our inventory and recognized as "Cost of sales" upon sale of products to our customers.

-- Outbound shipping costs totaled $314 million, up 38% from $227 million. Net shipping cost was $128 million, or 3.2% of net sales, up 71% from $75 million, or 2.6% of net sales. One way we offer lower prices is through free-shipping offers that result in a net cost to us in delivery of products.

Operating Expenses

-- Depreciation expense for fixed assets, including amortization of internal-use software and website development, was $74 million, up from $63 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, two or three years for our technology infrastructure, five years for furniture and fixtures, and ten years for heavy equipment).

-- Stock-based compensation was $73 million, compared with $46 million. We utilize the accelerated, rather than a straight-line, method for recognizing stock-based compensation. Under this method, over 50% of the compensation cost would be expensed in the first year of a typical four-year vesting term. The increase in stock-based compensation is primarily attributable to an increase in total stock compensation value granted to our employees.

-- Operating expenses with and without stock-based compensation are as follows:

                   Three Months Ended June   Three Months Ended June                            30, 2008                 30, 2007                   ------------------------- ------------------------                              Stock-                    Stock-                               Based                     Based                      As     Compensa-          As     Compensa-                    Reported   tion     Net   Reported   tion    Net                   ------------------------- ------------------------                                      (in millions)Operating Expenses:  Fulfillment          $361      $(16) $345       $258     $(10) $248  Marketing             102        (4)   98         65       (2)   63  Technology and   content              258       (40)  218        201      (25)  176  General and   administrative        74       (13)   61         58       (9)   49  Other operating   expense   (income), net        (45)        -   (45)         3        -     3                   --------- --------- ----- --------- --------- ----    Total operating     expenses          $750      $(73) $677       $585     $(46) $539                   --------- --------- ----- --------- --------- ----Year-over-year Percentage Growth:  Fulfillment            40%             39%        36%            36%  Marketing              58              56         23             23  Technology and   content               29              24         20             16  General and   administrative        27              22         15             11Percent of Net Sales:  Fulfillment           8.9%            8.5%       9.0%           8.6%  Marketing             2.5             2.4        2.2            2.2  Technology and   content              6.4             5.4        7.0            6.1  General and   administrative       1.8             1.5        2.0            1.7

Fulfillment

-- Certain of our fulfillment-related costs that are incurred on behalf of other businesses are classified as cost of sales rather than fulfillment.

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

-- Additionally, because payment processing costs associated with seller transactions are based on the gross purchase price of underlying transactions, and payment processing and related transaction costs are higher as a percentage of revenue versus our retail sales, sales by our sellers have higher fulfillment costs as a percent of net sales.

-- We expanded our fulfillment capacity during the first six months of 2008 and throughout 2007 through gains in efficiencies and increases in leased warehouse space. This expansion is designed to accommodate greater selection and in-stock inventory levels and meet anticipated shipment volumes from sales of our own products as well as sales by third parties for whom we provide the fulfillment services.

Technology and Content

-- Technology and content expenses consist principally of payroll and related expenses for employees involved in application development, category expansion, editorial content, buying, merchandising selection, and systems support, as well as costs associated with the compute, storage and telecommunications infrastructure.

-- We continue to invest in several areas of technology and content including seller platforms, web services, and digital initiatives, as well as expansion of new and existing product categories. We are also investing in technology infrastructure so that we can continue to enhance the customer experience and improve our process efficiency and support our infrastructure web services.

-- Certain costs relating to development of internal-use software and website development, including development of software to upgrade and enhance our websites and processes supporting our business, are capitalized and amortized over two years.

-- During Q2 2008 and Q2 2007, we capitalized $41 million (including $7 million of stock-based compensation) and $33 million (including $5 million of stock-based compensation) of costs associated with internal-use software and website development. Amortization of previously capitalized amounts was $36 million and $28 million for Q2 2008 and Q2 2007.

Stockholders' Equity and Stock-Based Awards

-- As of June 30, 2008, outstanding common shares plus shares underlying outstanding stock-based awards were 446 million, up from 435 million as of June 30, 2007. 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.

-- In Q2 2008, holders of our 4.75% Convertible Subordinated Notes elected to convert a total of $473 million in outstanding principal amount under a called redemption and we issued 6.1 million shares of common stock as a result of such elections.

-- As of June 30, 2008, stock-based awards outstanding were 19.8 million, or 4.6% of shares outstanding, down from 22.1 million, or 5.3% of outstanding shares. Outstanding stock awards consist of 18.4 million shares of restricted stock units and 1.4 million stock options with a $24.41 weighted-average exercise price.

-- We granted restricted stock units representing 4.5 million and 5.8 million shares of common stock during Q2 2008 and Q2 2007.

Other Operating Expense (Income), Net

-- Other operating expense (income), net, was $(45) million and $3 million during Q2 2008 and Q2 2007. The increase compared to comparable prior year periods is primarily attributable to the gain recognized on the sale of our European DVD rental assets. As a result of this transaction, we recorded a $53 million non-cash gain included in "Other operating expense (income), net" on our consolidated statements of operations. We believe that the positive impact of this gain on operating and net income is not predictive of future results or trends.

Other Expense, Net

-- Other expense, net, consists primarily of gains or losses on marketable securities, foreign-currency transaction gains and losses, and other miscellaneous gains and losses.

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

Income Taxes

-- Our provision for interim periods is determined using an estimate of our annual effective tax rate adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter we update our estimate of the annual effective tax rate, and if our estimated tax rate changes we make a cumulative adjustment. The 2008 annual effective tax rate is estimated to be lower than the 35% U.S. federal statutory rate primarily due to anticipated earnings of our subsidiaries outside of the U.S. in jurisdictions where our effective tax rate is lower than in the U.S.

-- Included in the total tax provision as a discrete item during Q2 2008 is the impact related to the $53 million non-cash gain associated with the sale of our European DVD rental assets. This gain will be taxed at rates substantially below the 35% U.S. federal statutory rate.

-- A majority of our tax provision is non-cash. We have current tax benefits and net operating losses relating to excess stock-based compensation that are being utilized to reduce our taxable income. As such, cash paid for income taxes in Q2 2008 was $15 million compared with $7 million in Q2 2007.

-- We are under examination, or may be subject to examination, by the Internal Revenue Service ("IRS") for calendar years 2004 through 2007. Additionally, any net operating losses that were generated in prior years and utilized in these years may also be subject to examination by the IRS. We are under examination, or may be subject to examination, in the following major jurisdictions for the years specified: Kentucky for 2003 through 2007, France for 2005 through 2007, Germany for 2003 through 2007, Luxembourg for 2003 through 2007, and the United Kingdom for 1999 through 2007. In addition, in 2007, Japanese tax authorities assessed income tax, including penalties and interest, of approximately $100 million against one of our U.S. subsidiaries for the years 2003 through 2005. We believe that these claims are without merit and are disputing the assessment. Further proceedings on the assessment will be stayed during negotiations between U.S. and Japanese authorities over the double taxation issues the assessment raises, and we have provided bank guarantees to suspend enforcement of the assessment. We also may be subject to income tax examination by Japanese tax authorities for 2006 and 2007.

Foreign Exchange

-- 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 June 30,              --------------------------------------------------------                         2008                         2007              ---------------------------- ---------------------------                                             At              At Prior Exchange             Prior  Exchange                Year     Rate               Year     Rate               Rates    Effect     As       Rates   Effect     As                 (1)      (2)    Reported    (1)      (2)    Reported              -------- -------- ---------- ------- -------- ----------                                   (in millions)Net sales     $ 3,881  $   182  $   4,063  $2,840  $    46  $   2,886Gross profit      928       39        967     691       10        701Operating expenses         728       22        750     578        7        585Income from operations       200       17        217     113        3        116Net interest income (expense) and other (3)         (1)      (8)        (9)     (3)      (2)        (5)Net income        151        7        158      77        1         78Diluted earnings per share        $  0.35  $  0.02  $    0.37  $ 0.19  $     -  $    0.19

(1) Represents the outcome that would have resulted had exchange rates in the reported 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 and losses on cross-currency investments, remeasurement of 6.875% PEACS, and intercompany balances.

Cash Flows and Balance Sheet

-- SFAS 123(R) requires tax benefits relating to excess stock-based compensation to be presented as financing cash flows. Excess tax benefits from stock-based compensation were $43 million in Q2 2008 and $304 million for the trailing twelve months, compared with $35 million in Q2 2007 and $133 million for the trailing twelve months ended June 30, 2007.

-- Our cash, cash equivalents and marketable securities of $2.38 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 $1.14 billion, primarily in Euros, British Pounds and Japanese Yen.

-- Other assets include, among other things, $245 million of marketable securities restricted for longer than one year, $250 million of certain equity investments, $149 million of other intangibles, net, and $42 million of intellectual property rights. Marketable securities restricted for longer than one year relate primarily to collateralization of bank guarantees and debt for our international operations.

-- Accrued expenses and other current liabilities include, among other things, liabilities for gift certificates of $206 million, professional fees, marketing activities, workforce costs - including accrued payroll, vacation and other benefits - and unearned revenue of $138 million, which is recorded when payments are received in advance of performing our service obligations and is recognized over the service period.

-- Long-term debt primarily includes the following:

                                               June 30,   December 31,                                                 2008         2007                                              ----------- ------------                                                   (in millions)4.75% Convertible Subordinated Notes due February 2009 (1)                            $      399  $       8996.875% PEACS due February 2010 (2)                   378          350Other long-term debt                                  97           50                                              ----------- ------------                                                     874        1,299Less current portion of long-term debt              (441)         (17)                                              ----------- ------------                                              $      433  $     1,282                                              =========== ============

(1) The 4.75% Convertible Subordinated Notes due 2009 (the "4.75% Convertible Subordinated Notes") are convertible into our common stock at the holders' option at a conversion price of $78.0275 per share. Total common stock issuable upon conversion of our outstanding 4.75% Convertible Subordinated Notes is 5.1 million shares, which is excluded from our calculation of earnings per share as its effect is currently anti-dilutive. We have the right to redeem the 4.75% Convertible Subordinated Notes, in whole or in part, by paying the principal and a redemption premium, plus any accrued and unpaid interest. At June 30, 2008, the redemption premium was 0.475%.

(2) The 6.875% Premium Adjustable Convertible Securities ("6.875% PEACS") are convertible into our common stock at the holders' option at a conversion price of EUR 84.883 per share ($133.72 per share, based on the exchange rate as of June 30, 2008). Total common stock issuable upon conversion of our outstanding 6.875% PEACS is 2.8 million shares, which is excluded from our calculation of earnings per share as its effect is currently anti-dilutive. The U.S. Dollar equivalent principal, interest, and conversion price fluctuate based on the Euro/U.S. Dollar exchange ratio. We have the right to redeem the 6.875% PEACS, in whole or in part, by paying the principal plus any accrued and unpaid interest.

-- Other long-term liabilities include tax contingencies, long-term capital lease obligations, deferred tax liabilities, non-current unearned revenue and other long-term obligations.

-- In December 2007, we entered into a series of leases and other agreements for the lease of corporate office space to be developed in Seattle, Washington with initial terms of up to 16 years commencing on completion of development in 2010 and 2012 and options to extend for two five year periods. Under the agreements we committed to occupy approximately 820,000 square feet of office space. We recently committed to occupy an additional approximately 540,000 square feet. Due to that commitment, and the receipt of certain zoning approvals, we are no longer subject to the initial termination fees. We also have an option to lease approximately 330,000 square feet at pre-negotiated rates as well as options to lease up to an additional approximately 500,000 square feet at rates based on fair market values at the time the options are exercised, subject to certain conditions. In addition, if interest rates exceed a certain threshold, we have the option to provide financing for some of the buildings.

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

-- The North America segment consists of amounts earned from retail sales of products (including from sellers) and subscriptions through North America-focused websites such as www.amazon.com, www.audible.com, www.shopbop.com, www.endless.com and www.amazon.ca; from our Amazon Prime membership program; and from non-retail activities such as our North America-focused Amazon Enterprise Solutions program, Amazon Web Services, 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 sellers) and subscriptions through internationally focused websites such as www.amazon.co.uk, www.amazon.de, www.amazon.co.jp, www.amazon.fr, and our Joyo Amazon websites at www.joyo.cn and www.amazon.cn; from our Amazon Prime membership program; and from non-retail activities such as internationally-focused Amazon Enterprise Solutions program, 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 retail sales from all sellers in categories such as books, movies, music, digital downloads, software and video games (including game consoles). Electronics and Other General Merchandise consists of amounts earned from retail sales from all sellers of items in categories not included in Media, such as electronics and computers, devices, home and garden, toys, kids and baby, grocery, apparel, shoes and jewelry, health and beauty, sports and outdoors, tools, and auto and industrial. Other consists of non-retail activities, such as the Amazon Enterprise Solutions program, Amazon Web Services, 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 excess tax benefits from stock-based compensation. 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 trade accounts receivable minus accounts payable days. Accounts payable days are calculated as the quotient of ending 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 (excluding current portion of our long-term debt) 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 other sellers on our websites. Customer accounts exclude certain customers, including customers associated with certain of our acquisitions (including Joyo.com customers), Amazon Enterprise Solutions program customers, Amazon.com Payments customers, Amazon Web Services 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 means seller accounts, which are established when a seller receives an order from a customer account. Seller accounts exclude Amazon Enterprise Solutions sellers. Sellers are considered active when they have received an order from a customer during the preceding twelve-month period.

-- References to registered developers mean cumulative registered developer accounts, which are established when potential developers enroll with Amazon Web Services and receive a developer access key.

-- References to units mean physical and digital units sold (net of returns and cancellations) by us and 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, www.amazon.ca and the Joyo Amazon websites at www.joyo.cn and www.amazon.cn, as well as Amazon.com-owned items sold through non-Amazon.com domains, such as books, music and movie items ordered from Amazon.com's store at www.target.com. Units sold do not include units associated with certain of our acquisitions or Amazon.com gift certificates.

SOURCE: Amazon.com, Inc.

Amazon.com Investor Relations
Rob Eldridge, 206-266-2171
ir@amazon.com
www.amazon.com/ir
or
Amazon.com Public Relations
Patty Smith, 206-266-7180