10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 ____________________________________

FORM 10-Q

____________________________________ 

(Mark One)

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

For the quarterly period ended June 30, 2018

or

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

For the transition period from            to             .

Commission File No. 000-22513

____________________________________

AMAZON.COM, INC.

(Exact name of registrant as specified in its charter)

 ____________________________________

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

410 Terry Avenue North, Seattle, Washington 98109-5210

(206) 266-1000

(Address and telephone number, including area code, of registrant’s principal executive offices)

 ____________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨
		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

487,741,189 shares of common stock, par value $0.01 per share, outstanding as of July 18, 2018

AMAZON.COM, INC.

FORM 10-Q

For the Quarterly Period Ended June 30, 2018

INDEX

		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	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	34
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	45
Signatures		46

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AMAZON.COM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(unaudited)

	Three Months Ended   June 30,						Six Months Ended   June 30,						Twelve Months Ended   June 30,
	2017			2018			2017			2018			2017			2018
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD	$	16,301		$	17,616		$	19,934		$	21,856		$	12,977		$	13,851
OPERATING ACTIVITIES:
Net income	197			2,534			921			4,163			1,922			6,275
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	2,633			3,630			5,068			7,301			9,448			13,711
Stock-based compensation	1,158			1,468			1,952			2,651			3,615			4,914
Other operating expense, net	60			85			102			141			164			240
Other expense (income), net	(120		)	110			(160		)	(75		)	(162		)	(207		)
Deferred income taxes	376			(139		)	354			3			(8		)	(380		)
Changes in operating assets and liabilities:
Inventories	(682		)	(1,090		)	265			1,130			(1,874		)	(2,717		)
Accounts receivable, net and other	(1,221		)	(1,364		)	(257		)	(336		)	(2,925		)	(4,859		)
Accounts payable	2,088			2,703			(4,777		)	(7,513		)	5,046			4,364
Accrued expenses and other	(252		)	(205		)	(1,657		)	(2,430		)	1,039			(491		)
Unearned revenue	(387		)	(283		)	419			623			1,537			943
Net cash provided by (used in) operating activities	3,850			7,449			2,230			5,658			17,802			21,793
INVESTING ACTIVITIES:
Purchases of property and equipment, including internal-use software and website development	(3,113		)	(3,243		)	(5,261		)	(6,341		)	(9,763		)	(13,035		)
Proceeds from property and equipment incentives	612			294			899			665			1,556			1,663
Acquisitions, net of cash acquired, and other	(633		)	(866		)	(678		)	(879		)	(765		)	(14,173		)
Sales and maturities of marketable securities	2,070			1,660			3,980			4,337			6,530			10,034
Purchases of marketable securities	(4,210		)	(537		)	(5,564		)	(1,007		)	(10,731		)	(8,173		)
Net cash provided by (used in) investing activities	(5,274		)	(2,692		)	(6,624		)	(3,225		)	(13,173		)	(23,684		)
FINANCING ACTIVITIES:
Proceeds from long-term debt and other	49			96			70			221			612			16,380
Repayments of long-term debt and other	(48		)	(149		)	(88		)	(351		)	(170		)	(1,564		)
Principal repayments of capital lease obligations	(1,228		)	(1,284		)	(2,060		)	(3,297		)	(4,003		)	(6,037		)
Principal repayments of finance lease obligations	(47		)	(57		)	(85		)	(129		)	(170		)	(244		)
Net cash provided by (used in) financing activities	(1,274		)	(1,394		)	(2,163		)	(3,556		)	(3,731		)	8,535
Foreign currency effect on cash, cash equivalents, and restricted cash	248			(443		)	474			(197		)	(24		)	41
Net increase (decrease) in cash, cash equivalents, and restricted cash	(2,450		)	2,920			(6,083		)	(1,320		)	874			6,685
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD	$	13,851		$	20,536		$	13,851		$	20,536		$	13,851		$	20,536
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest on long-term debt	$	146		$	168		$	150		$	450		$	295		$	628
Cash paid for interest on capital and finance lease obligations	62			125			123			254			234			449
Cash paid for income taxes, net of refunds	447			300			693			813			879			1,077
Property and equipment acquired under capital leases	2,724			2,335			4,612			4,605			8,019			9,631
Property and equipment acquired under build-to-suit leases	748			795			1,948			1,536			2,575			3,128

See accompanying notes to consolidated financial statements.

3

AMAZON.COM, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(unaudited)

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2017			2018			2017			2018
Net product sales	$	24,745		$	31,864		$	48,479		$	63,468
Net service sales	13,210			21,022			25,190			40,460
Total net sales	37,955			52,886			73,669			103,928
Operating expenses:
Cost of sales	23,451			30,632			45,891			61,367
Fulfillment	5,158			7,932			9,855			15,724
Marketing	2,229			2,901			4,150			5,600
Technology and content	5,549			7,247			10,363			14,006
General and administrative	874			1,111			1,669			2,177
Other operating expense, net	66			80			109			143
Total operating expenses	37,327			49,903			72,037			99,017
Operating income	628			2,983			1,632			4,911
Interest income	44			94			83			173
Interest expense	(143		)	(343		)	(282		)	(673		)
Other income (expense), net	137			(129		)	185			109
Total non-operating income (expense)	38			(378		)	(14		)	(391		)
Income before income taxes	666			2,605			1,618			4,520
Provision for income taxes	(467		)	(74		)	(695		)	(361		)
Equity-method investment activity, net of tax	(2		)	3			(2		)	4
Net income	$	197		$	2,534		$	921		$	4,163
Basic earnings per share	$	0.41		$	5.21		$	1.93		$	8.58
Diluted earnings per share	$	0.40		$	5.07		$	1.87		$	8.34
Weighted-average shares used in computation of earnings per share:
Basic	479			486			478			485
Diluted	492			500			491			499

See accompanying notes to consolidated financial statements.

4

AMAZON.COM, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

(unaudited)

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2017			2018			2017			2018
Net income	$	197		$	2,534		$	921		$	4,163
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax of $(2), $(1), $(15), and $17	194			(466		)	381			(411		)
Net change in unrealized gains (losses) on available-for-sale debt securities:
Unrealized gains (losses), net of tax of $3, $0, $2, and $9	(6		)	1			(8		)	(40		)
Reclassification adjustment for losses (gains) included in “Other income (expense), net,” net of tax of $0, $0, $0, and $0	2			1			5			1
Net unrealized gains (losses) on available-for-sale debt securities	(4		)	2			(3		)	(39		)
Total other comprehensive income (loss)	190			(464		)	378			(450		)
Comprehensive income	$	387		$	2,070		$	1,299		$	3,713

See accompanying notes to consolidated financial statements.

5

AMAZON.COM, INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except per share data)

	December 31, 2017			June 30, 2018
				(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	20,522		$	19,823
Marketable securities	10,464			7,227
Inventories	16,047			14,824
Accounts receivable, net and other	13,164			12,607
Total current assets	60,197			54,481
Property and equipment, net	48,866			54,768
Goodwill	13,350			13,944
Other assets	8,897			10,907
Total assets	$	131,310		$	134,100
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	34,616		$	27,657
Accrued expenses and other	18,170			17,140
Unearned revenue	5,097			6,004
Total current liabilities	57,883			50,801
Long-term debt	24,743			24,638
Other long-term liabilities	20,975			23,666
Commitments and contingencies (Note 3)
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 511
Outstanding shares — 484 and 487	5			5
Treasury stock, at cost	(1,837		)	(1,837		)
Additional paid-in capital	21,389			24,028
Accumulated other comprehensive loss	(484		)	(934		)
Retained earnings	8,636			13,733
Total stockholders’ equity	27,709			34,995
Total liabilities and stockholders’ equity	$	131,310		$	134,100

See accompanying notes to consolidated financial statements.

6

AMAZON.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1 — ACCOUNTING POLICIES

Unaudited Interim Financial Information

We have prepared the accompanying consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These consolidated financial statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of our consolidated balance sheets, operating results, and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for 2018 due to seasonal and other factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with the rules and regulations of the SEC. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in Item 8 of Part II, “Financial Statements and Supplementary Data,” of our 2017 Annual Report on Form 10-K.

Prior Period Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation, including the addition of restricted cash to cash and cash equivalents on the consolidated statements of cash flows as a result of the adoption of new accounting guidance.

Principles of Consolidation

The consolidated financial statements include the accounts of Amazon.com, Inc., its wholly-owned subsidiaries, and those entities in which we have a variable interest and of which we are the primary beneficiary, including certain entities in India and China and that support our seller lending financing activities (collectively, the “Company”). Intercompany balances and transactions between consolidated entities are eliminated. The financial results of Whole Foods Market, Inc. (“Whole Foods Market”) have been included in our consolidated financial statements from the date of acquisition on August 28, 2017.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, income taxes, commitments and contingencies, valuation of acquired intangibles and goodwill, stock-based compensation forfeiture rates, vendor funding, and inventory valuation. Actual results could differ materially from those estimates.

Earnings per Share

Basic earnings per share is calculated using our weighted-average outstanding common shares. Diluted earnings per share is calculated using our weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method. In periods when we have a net loss, stock awards are excluded from our calculation of earnings per share as their inclusion would have an antidilutive effect.

The following table shows the calculation of diluted shares (in millions):

	Three Months Ended   June 30,		Six Months Ended   June 30,
	2017	2018	2017	2018
Shares used in computation of basic earnings per share	479	486	478	485
Total dilutive effect of outstanding stock awards	13	14	13	14
Shares used in computation of diluted earnings per share	492	500	491	499

7

Revenue

Revenue is measured based on the amount of consideration that we expect to receive, reduced by estimates for return allowances, promotional discounts, and rebates. Revenue also excludes any amounts collected on behalf of third parties, including sales and indirect taxes. In arrangements where we have multiple performance obligations, the transaction price is allocated to each performance obligation using the relative stand-alone selling price. We generally determine stand-alone selling prices based on the prices charged to customers or using expected cost plus a margin.

A description of our principal revenue generating activities is as follows:

Retail sales - We offer consumer products through our online and physical stores. Revenue is recognized when control of the goods is transferred to the customer, which generally occurs upon our delivery to the carrier or the customer.

Third-party seller services - We offer programs that enable sellers to sell their products on our websites and their own branded websites, and fulfill orders through us. We are not the seller of record in these transactions. The commissions and any related fulfillment and shipping fees we earn from these arrangements are recognized as the services are rendered.

Subscription services - Our subscription sales include fees associated with Amazon Prime memberships and access to content including audiobooks, e-books, digital video, digital music, and other non-AWS subscription services. Prime memberships provide our customers with access to an evolving suite of benefits that represent a single stand-ready obligation. Subscriptions are paid for at the time of or in advance of delivering the services. Revenue from such arrangements is recognized over the subscription period.

AWS - Our AWS sales arrangements include global sales of compute, storage, database, and other service offerings. Revenue is allocated to the services provided based on stand-alone selling prices and is recognized as the services are rendered. Sales commissions we pay in connection with contracts that exceed one year are capitalized and amortized over the contract term.

Other - Other revenue primarily includes sales of advertising services and is recognized as the services are rendered.

Return Allowances

Return allowances, which reduce revenue and cost of sales, are estimated using historical experience. Liabilities for return allowances are included in “Accrued expenses and other” and were $468 million and $355 million as of December 31, 2017 and June 30, 2018. Included in “Inventories” on our consolidated balance sheets are assets totaling $406 million and $287 million as of December 31, 2017 and June 30, 2018, for the rights to recover products from customers associated with our liabilities for return allowances.

Cost of Sales

Cost of sales primarily consists of the purchase price of consumer products, digital media content costs, including video and music, packaging supplies, sortation and delivery centers and related equipment costs, and inbound and outbound shipping costs, including where we are the transportation service provider. Shipping costs to receive products from our suppliers are included in our inventory, and recognized as cost of sales upon sale of products to our customers. Payment processing and related transaction costs, including those associated with seller transactions, are classified in “Fulfillment” on our consolidated statements of operations.

Vendor Agreements

We have agreements with our vendors to receive funds primarily for cooperative marketing efforts, promotions, incentives, and volume rebates. We generally consider these amounts received from vendors to be a reduction of the prices we pay for their goods, including property and equipment, or services, and are recorded as a reduction of the cost of inventory, cost of services, or cost of property and equipment. Volume rebates typically depend on reaching minimum purchase thresholds. We evaluate the likelihood of reaching purchase thresholds using past experience and current year forecasts. When volume rebates can be reasonably estimated, we record a portion of the rebate as we make progress towards the purchase threshold.

Accounts Receivable, Net and Other

Included in “Accounts receivable, net and other” on our consolidated balance sheets are amounts primarily related to customers, vendors, and sellers. As of December 31, 2017 and June 30, 2018, customer receivables, net, were $6.4 billion and $6.9 billion, vendor receivables, net, were $2.6 billion and $2.2 billion, and seller receivables, net, were $692 million and $640 million. Seller receivables are amounts due from sellers related to our seller lending program, which provides funding to sellers primarily to procure inventory.

8

We estimate losses on receivables based on known troubled accounts and historical experience of losses incurred. Receivables are considered impaired and written-off when it is probable that all contractual payments due will not be collected in accordance with the terms of the agreement. The allowance for doubtful accounts was $348 million and $403 million as of December 31, 2017 and June 30, 2018.

Unearned Revenue

Unearned revenue is recorded when payments are received or due in advance of performing our service obligations and is recognized over the service period. Unearned revenue primarily relates to prepayments of Amazon Prime memberships and AWS services. Our total unearned revenue as of December 31, 2017 was $6.1 billion, of which $3.9 billion was recognized as revenue during the six months ended June 30, 2018, including adjustments related to the new revenue recognition guidance. Included in “Other long-term liabilities” on our consolidated balance sheets was $1.0 billion and $1.2 billion of unearned revenue as of December 31, 2017 and June 30, 2018.

Additionally, we have performance obligations, primarily related to AWS, associated with commitments in customer contracts for future services that have not yet been recognized in our financial statements. For contracts with original terms that exceed one year, the amount of revenue not yet recognized was $16.0 billion as of June 30, 2018. The weighted average remaining life of our long-term contracts is 3.5 years. However, the timing of revenue recognition is largely driven by customer activity, some of which can extend beyond the original contractual term.

Accrued Expenses and Other

Included in “Accrued expenses and other” on our consolidated balance sheets are amounts primarily related to unredeemed gift cards, customer liabilities, leases and asset retirement obligations, current debt, acquired digital media content, and other operating expenses.

As of December 31, 2017 and June 30, 2018, our liabilities for unredeemed gift cards were $3.0 billion and $1.8 billion. We reduce the liability for a gift card when redeemed by a customer. The portion of gift cards that we do not expect to be redeemed is recognized based on customer usage patterns.

Accounting Pronouncements Recently Adopted

In May 2014, the FASB issued an Accounting Standards Update (“ASU”) amending revenue recognition guidance and requiring more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. We adopted this ASU on January 1, 2018 for all revenue contracts with our customers using the modified retrospective approach and increased retained earnings by approximately $650 million. The adjustment primarily relates to the unredeemed portion of our gift cards, which are now recognized over the expected customer usage period rather than waiting until gift cards expire or when the likelihood of redemption becomes remote. We changed the recognition and classification of Amazon Prime memberships, which are now accounted for as a single performance obligation and recognized ratably over the membership period as service sales. Previously, Prime memberships were considered to be arrangements with multiple deliverables and were allocated among product sales and service sales. Other changes relate primarily to the presentation of revenue. Certain advertising services are now classified as revenue rather than a reduction in cost of sales, and sales of apps, in-app content, and certain digital media content are presented on a net basis.

The impact of applying this ASU for the six months ended June 30, 2018 primarily resulted in a decrease in product sales and an increase in service sales driven by a reclassification of Prime membership fees of approximately $1.7 billion, which are now accounted for as a single performance obligation and recognized over the membership period. Service sales also increased by approximately $1.2 billion for the six months ended June 30, 2018 due to the reclassification of certain advertising services that were previously classified as a reduction of cost of sales.

In January 2016, the FASB issued an ASU that updates certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Under this ASU, certain equity investments are measured at fair value with changes recognized in net income. We adopted this ASU in Q1 2018 with no material impact to our consolidated financial statements.

In October 2016, the FASB issued an ASU amending the accounting for income taxes. The new guidance requires the recognition of the income tax consequences of an intercompany asset transfer, other than transfers of inventory, when the transfer occurs. For intercompany transfers of inventory, the income tax effects will continue to be deferred until the inventory has been sold to a third party. We adopted this ASU in Q1 2018 with an increase of approximately $250 million to retained earnings and deferred tax assets net of valuation allowances.

9

In November 2016, the FASB issued an ASU amending the presentation of restricted cash within the consolidated statements of cash flows. The new guidance requires that restricted cash be added to cash and cash equivalents on the consolidated statements of cash flows. We adopted this ASU in Q1 2018 on a retrospective basis with the following impacts to our consolidated statements of cash flows (in millions):

Three Months Ended June 30, 2017	Previously Reported			Adjustments			As Revised
Operating activities	$	3,829		$	21		$	3,850
Investing activities	(5,051		)	(223		)	(5,274		)
Financing activities	(1,263		)	(11		)	(1,274		)
Net change in cash, cash equivalents, and restricted cash	$	(2,485	)	$	(213	)	$	(2,698	)

Six Months Ended June 30, 2017	Previously Reported			Adjustments			As Revised
Operating activities	$	2,239		$	(9	)	$	2,230
Investing activities	(6,667		)	43			(6,624		)
Financing activities	(2,177		)	14			(2,163		)
Net change in cash, cash equivalents, and restricted cash	$	(6,605	)	$	48		$	(6,557	)

Twelve Months Ended June 30, 2017	Previously Reported			Adjustments			As Revised
Operating activities	$	17,885		$	(83	)	$	17,802
Investing activities	(13,410		)	237			(13,173		)
Financing activities	(3,769		)	38			(3,731		)
Net change in cash, cash equivalents, and restricted cash	$	706		$	192		$	898

Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued an ASU amending the accounting for leases. The new guidance requires the recognition of lease assets and liabilities for operating leases with terms of more than 12 months, in addition to those currently recorded, on our consolidated balance sheets. Presentation of leases within the consolidated statements of operations and consolidated statements of cash flows will be generally consistent with the current lease accounting guidance. The ASU is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. We plan to adopt this ASU beginning in Q1 2019. We are continuing to evaluate the impact and expect the ASU will have a material impact on our consolidated financial statements, primarily to the consolidated balance sheets and related disclosures.

Note 2 — CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND MARKETABLE SECURITIES

As of December 31, 2017 and June 30, 2018, our cash, cash equivalents, restricted cash, and marketable securities primarily consisted of cash, U.S. and foreign government and agency securities, AAA-rated money market funds, and other investment grade securities. Cash equivalents and marketable securities are recorded at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

We measure the fair value of money market funds and equity securities based on quoted prices in active markets for identical assets or liabilities. All other financial instruments were valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. We did not hold any cash, cash equivalents, restricted cash, or marketable securities categorized as Level 3 assets as of December 31, 2017 and June 30, 2018.

10

The following table summarizes, by major security type, our cash, cash equivalents, restricted cash, and marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in millions):

	December 31, 2017			June 30, 2018
	Total Estimated Fair Value			Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Total Estimated Fair Value
Cash	$	9,982		$	8,107	$	—	$	—		$	8,107
Level 1 securities:
Money market funds	11,343			10,094		—		—			10,094
Equity securities	53			25		83		—			108
Level 2 securities:
Foreign government and agency securities	620			389		—		—			389
U.S. government and agency securities	4,823			5,465		1		(25		)	5,441
Corporate debt securities	4,257			2,638		1		(18		)	2,621
Asset-backed securities	905			756		—		(8		)	748
Other fixed income securities	338			225		—		(2		)	223
Equity securities	—			29		6		—			35
	$	32,321		$	27,728	$	91	$	(53	)	$	27,766
Less: Restricted cash, cash equivalents, and marketable securities (1)	(1,335		)								(716		)
Total cash, cash equivalents, and marketable securities	$	30,986									$	27,050

___________________

(1) We are required to pledge or otherwise restrict a portion of our cash, cash equivalents, and marketable securities as collateral for real estate leases, amounts due to third-party sellers in certain jurisdictions, debt, and standby and trade letters of credit. We classify cash, cash equivalents, and marketable securities with use restrictions of less than twelve months as “Accounts receivable, net and other” and of twelve months or longer as non-current “Other assets” on our consolidated balance sheets. See “Note 3 — Commitments and Contingencies.”

The following table summarizes the remaining contractual maturities of our cash equivalents and marketable fixed-income securities as of June 30, 2018 (in millions):

	Amortized Cost		Estimated Fair Value
Due within one year	$	16,023	$	16,016
Due after one year through five years	2,895		2,864
Due after five years through ten years	216		212
Due after ten years	433		424
Total	$	19,567	$	19,516

Actual maturities may differ from the contractual maturities because borrowers may have certain prepayment conditions.

We also hold equity warrant assets giving us the right to acquire stock of other companies. As of December 31, 2017 and June 30, 2018, these warrants had a fair value of $441 million and $577 million, and are recorded within “Other assets” on our consolidated balance sheets. The related gain (loss) recorded in “Other income (expense), net” was $54 million and $40 million in Q2 2017 and Q2 2018, and $69 million and $86 million for the six months ended June 30, 2017 and 2018. These assets are primarily classified as Level 2 assets.

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The following table provides a reconciliation of the amount of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets to the total of the same such amounts shown in the consolidated statements of cash flows (in millions):

	December 31, 2017		June 30, 2018
Cash and cash equivalents	$	20,522	$	19,823
Restricted cash included in accounts receivable, net and other	1,329		707
Restricted cash included in other assets	5		6
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	$	21,856	$	20,536

Note 3 — COMMITMENTS AND CONTINGENCIES

Commitments

We have entered into non-cancellable operating, capital, and finance leases for equipment and office, fulfillment, sortation, delivery, data center, physical store, and renewable energy facilities. Rental expense under operating lease agreements was $439 million and $815 million for Q2 2017 and Q2 2018, and $850 million and $1.6 billion for the six months ended June 30, 2017 and 2018.

The following summarizes our principal contractual commitments, excluding open orders for purchases that support normal operations and are generally cancellable, as of June 30, 2018 (in millions):

	Six Months Ended December 31,		Year Ended December 31,
	2018		2019		2020		2021		2022		Thereafter		Total
Debt principal and interest	$	480	$	2,162	$	2,086	$	1,833	$	2,049	$	31,769	$	40,379
Capital lease obligations, including interest (1)	3,503		6,191		4,022		1,212		520		673		16,121
Finance lease obligations, including interest (2)	246		512		523		532		542		4,326		6,681
Operating leases	1,503		2,727		2,609		2,286		2,221		12,325		23,671
Unconditional purchase obligations (3)	1,258		3,661		3,285		3,127		2,993		7,957		22,281
Other commitments (4) (5)	1,223		1,546		1,058		1,190		647		7,521		13,185
Total commitments	$	8,213	$	16,799	$	13,583	$	10,180	$	8,972	$	64,571	$	122,318

___________________

(1) Excluding interest, current capital lease obligations of $5.8 billion and $6.6 billion are recorded within “Accrued expenses and other” as of December 31, 2017 and June 30, 2018, and $8.4 billion and $9.0 billion are recorded within “Other long-term liabilities” as of December 31, 2017 and June 30, 2018.

(2) Excluding interest, current finance lease obligations of $282 million and $320 million are recorded within “Accrued expenses and other” as of December 31, 2017 and June 30, 2018, and $4.7 billion and $5.2 billion are recorded within “Other long-term liabilities” as of December 31, 2017 and June 30, 2018.

(3) Includes unconditional purchase obligations related to certain products offered in our Whole Foods Market stores and long-term agreements to acquire and license digital media content that are not reflected on the consolidated balance sheets. For those digital media content agreements with variable terms, we do not estimate the total obligation beyond any minimum quantities and/or pricing as of the reporting date. Purchase obligations associated with renewal provisions solely at the option of the content provider are included to the extent such commitments are fixed or a minimum amount is specified.

(4) 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 and digital media content liabilities associated with long-term digital media content assets with initial terms greater than one year.

(5) Excludes approximately $3.3 billion of accrued tax contingencies for which we cannot make a reasonably reliable estimate of the amount and period of payment, if any.

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Pledged Assets

As of December 31, 2017 and June 30, 2018, we have pledged or otherwise restricted $1.4 billion and $803 million of our cash, cash equivalents, and marketable securities, and certain property and equipment as collateral for real estate leases, amounts due to third-party sellers in certain jurisdictions, debt, and standby and trade letters of credit.

Other Contingencies

In 2016, we determined that 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 or other United States sanctions and export control laws. The consumer products included books, music, other media, apparel, home and kitchen, health and beauty, jewelry, office, consumer electronics, software, lawn and patio, grocery, and automotive products. Our review is ongoing and we have voluntarily reported these orders to the United States Treasury Department’s Office of Foreign Assets Control and the United States Department of Commerce’s Bureau of Industry and Security. We intend to cooperate fully with OFAC and BIS with respect to their review, which may result in the imposition of penalties. For additional information, see Item 5 of Part II, “Other Information — Disclosure Pursuant to Section 13(r) of the Exchange Act.”

We are subject to claims related to various indirect taxes (such as sales, value added, consumption, service, and similar taxes), including in jurisdictions in which we already collect and remit such taxes. If the relevant taxing authorities were successfully to pursue these claims, we could be subject to significant additional tax liabilities. For example, in June 2017, the State of South Carolina issued an assessment for uncollected sales and use taxes for the period from January 2016 to March 2016, including interest and penalties. South Carolina is alleging that we should have collected sales and use taxes on transactions by our third-party sellers. We believe the assessment is without merit. If South Carolina or other states were successfully to seek additional adjustments of a similar nature, we could be subject to significant additional tax liabilities. We intend to defend ourselves vigorously in this matter.

Legal Proceedings

The Company is involved from time to time in claims, proceedings, and litigation, including the matters described in Item 8 of Part II, “Financial Statements and Supplementary Data — Note 7 — Commitments and Contingencies — Legal Proceedings” of our 2017 Annual Report on Form 10-K and in Item 1 of Part I, “Financial Statements — Note 3 — Commitments and Contingencies — Legal Proceedings” of our Quarterly Report on Form 10-Q for the period ended March 31, 2018 as supplemented by the following:

In March 2014, Kaavo, Inc. filed a complaint against Amazon.com, Inc. and Amazon Web Services, Inc. for patent infringement in the United States District Court for the District of Delaware. The complaint alleges, among other things, that Amazon Web Services’ Elastic Beanstalk and CloudFormation infringe U.S. Patent No. 8,271,974, entitled “Cloud Computing Lifecycle Management For N-Tier Applications.” The complaint seeks injunctive relief, an unspecified amount of damages, costs, and interest. In July 2015, Kaavo Inc. filed another complaint against Amazon.com, Inc. and Amazon Web Services, Inc. in the United States District Court for the District of Delaware. The 2015 complaint alleges, among other things, that CloudFormation infringes U.S. Patent No. 9,043,751, entitled “Methods And Devices For Managing A Cloud Computing Environment.” The 2015 complaint seeks injunctive relief, an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, and interest. In September 2017, the 2015 case was stayed pending resolution of a review petition we filed with the United States Patent and Trademark Office. In June 2018, the court granted our motion for summary judgment in the 2014 case. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in these matters.

In May 2018, Rensselaer Polytechnic Institute and CF Dynamic Advances LLC filed a complaint against Amazon.com, Inc. in the United States District Court for the Northern District of New York. The complaint alleges, among other things, that “Alexa Voice Software and Alexa enabled devices” infringe U.S. Patent No. 7,177,798, entitled “Natural Language Interface Using Constrained Intermediate Dictionary of Results.” The complaint seeks an injunction, an unspecified amount of damages, enhanced damages, an ongoing royalty, pre- and post-judgment interest, attorneys’ fees, and costs. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.

In June 2018, VoIP-Pal.com, Inc. filed a complaint against Amazon Technologies, Inc. and Amazon.com, Inc. in the United States District Court for the District of Nevada. The complaint alleges, among other things, that the Alexa calling and messaging system, the Alexa app, and Echo, Tap, and Fire devices with Alexa support infringe U.S. Patent Nos. 9,537,762; 9,813,330; 9,826,002; and 9,948,549, all entitled “Producing Routing Messages For Voice Over IP Communications.” The complaint seeks an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, and interest. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.

The outcomes of our legal proceedings and other contingencies are inherently unpredictable, subject to significant uncertainties, and could be material to our operating results and cash flows for a particular period. In addition, for the matters disclosed above that do not include an estimate of the amount of loss or range of losses, such an estimate is not possible or is

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immaterial, and we may be unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies.

See also “Note 7 — Income Taxes.”

Note 4 — ACQUISITIONS, GOODWILL, AND ACQUIRED INTANGIBLE ASSETS

2018 Acquisition Activity

On April 12, 2018, we acquired Ring Inc. (“Ring”) for cash consideration of approximately $853 million, net of cash acquired, to expand our product and service offerings. During the six months ended June 30, 2018, we also acquired certain other companies for an aggregate purchase price of $39 million. The primary reason for our other 2018 acquisitions was to acquire technologies and know-how to enable Amazon to serve customers more effectively.

Acquisition-related costs were expensed as incurred and were not significant. Due to the limited amount of time since the Ring acquisition, the valuation of certain assets and liabilities is preliminary and subject to change. The aggregate purchase price of Ring and the other 2018 acquisitions was allocated as follows (in millions):

Purchase Price
Cash paid, net of cash acquired	$	865
Indemnification holdback	27
	$	892
Allocation
Goodwill	$	607
Intangible assets (1):
Marketing-related	141
Technology-based	165
Customer-related	140
	446
Property and equipment	3
Deferred tax assets	106
Other assets acquired	254
Long-term debt	(97		)
Deferred tax liabilities	(106		)
Other liabilities assumed	(321		)
	$	892

___________________

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

We determined the estimated fair value of identifiable intangible assets acquired primarily by using the income approach. These assets are included within “Other assets” on our consolidated balance sheets and are being amortized to operating expenses on a straight-line basis over their estimated useful lives.

Pro forma results of operations have not been presented because the effects of these acquisitions, individually and in the aggregate, were not material to our consolidated results of operations.

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Goodwill

The goodwill of the acquired companies is primarily related to expected improvements in technology performance and functionality, as well as sales growth from future product and service offerings and new customers, together with certain intangible assets that do not qualify for separate recognition. The goodwill of acquired companies is generally not deductible for tax purposes. The following summarizes our goodwill activity in the first six months of 2018 by segment (in millions):

	North America			International			AWS			Consolidated
Goodwill - December 31, 2017	$	11,165		$	1,108		$	1,077		$	13,350
New acquisitions (1)	409			183			15			607
Other adjustments (2)	(3		)	(3		)	(7		)	(13		)
Goodwill - June 30, 2018	$	11,571		$	1,288		$	1,085		$	13,944

 ___________________

(1) Primarily includes the acquisition of Ring in the North America and International segments.

(2) Primarily includes changes in foreign exchange rates.

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Note 5 — DEBT

As of June 30, 2018, we had $24.3 billion of unsecured senior notes outstanding (the “Notes”). As of December 31, 2017 and June 30, 2018, the net unamortized discount and debt issuance costs on the Notes was $99 million and $101 million. We also have other long-term debt with a carrying amount, including the current portion and borrowings under our credit facility, of $692 million and $520 million as of December 31, 2017 and June 30, 2018. The face value of our total long-term debt obligations is as follows (in millions):

	December 31, 2017			June 30, 2018
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	592			489
Other long-term debt	100			31
Total debt	24,942			24,770
Less current portion of long-term debt	(100		)	(31		)
Face value of long-term debt	$	24,842		$	24,739

_____________________________

(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%.

Interest on the Notes issued in 2012 is payable semi-annually in arrears in May and November. Interest on the Notes issued in 2014 is payable semi-annually in arrears in June and December. Interest on the Notes issued in 2017 is payable semi-annually in arrears in February and August. Interest on the 2025 Notes is payable semi-annually in arrears in June and December. We may redeem the Notes at any time in whole, or from time to time, in part at specified redemption prices. We are not subject to any financial covenants under the Notes. The proceeds from the November 2012 and the December 2014 Notes were used for general corporate purposes. The proceeds from the August 2017 Notes were used to fund the consideration for the acquisition of Whole Foods Market, to repay notes due in 2017, and for general corporate purposes. The estimated fair value of the Notes was approximately $25.7 billion and $24.2 billion as of December 31, 2017 and June 30, 2018, which is based on quoted prices for our debt as of those dates.

In October 2016, we entered into a $500 million secured revolving credit facility with a lender that is secured by certain seller receivables, which we subsequently increased to $600 million and may from time to time increase in the future subject to lender approval (the “Credit Facility”). The Credit Facility is available for a term of three years, bears interest at the London interbank offered rate (“LIBOR”) plus 1.65%, and has a commitment fee of 0.50% on the undrawn portion. There were $592 million and $489 million of borrowings outstanding under the Credit Facility as of December 31, 2017 and June 30, 2018, with weighted-average interest rates of 2.7% and 2.9% as of December 31, 2017 and June 30, 2018. As of December 31, 2017 and June 30, 2018, we have pledged $686 million and $576 million of our cash and seller receivables as collateral for debt related

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to our Credit Facility. The estimated fair value of the Credit Facility, which is based on Level 2 inputs, approximated its carrying value as of December 31, 2017 and June 30, 2018.

The other debt, including the current portion, had a weighted-average interest rate of 5.8% and 4.3% as of December 31, 2017 and June 30, 2018. We used the net proceeds from the issuance of this debt primarily to fund certain business operations. The estimated fair value of the other long-term debt, which is based on Level 2 inputs, approximated its carrying value as of December 31, 2017 and June 30, 2018.

In April 2018, we established a commercial paper program (the “Commercial Paper Program”) under which we may from time to time issue unsecured commercial paper up to a total of $7.0 billion at any time, with individual maturities that may vary but will not exceed 397 days from the date of issue. There were no borrowings outstanding under the Commercial Paper Program as of June 30, 2018.

In April 2018, in connection with our Commercial Paper Program, we amended and restated our unsecured revolving credit facility (the “Credit Agreement”) with a syndicate of lenders to increase our borrowing capacity thereunder to $7.0 billion. As amended and restated, the Credit Agreement has a term of three years, but it may be extended for up to three additional one-year terms if approved by the lenders. The interest rate applicable to outstanding balances under the amended and restated Credit Agreement is LIBOR plus 0.50%, with a commitment fee of 0.04% on the undrawn portion of the credit facility. There were no borrowings outstanding under the Credit Agreement as of December 31, 2017 and June 30, 2018.

Note 6 — STOCKHOLDERS’ EQUITY

Stock Repurchase Activity

In February 2016, the Board of Directors authorized a program to repurchase up to $5.0 billion of our common stock, with no fixed expiration. There were no repurchases of common stock during the six months ended June 30, 2017 or 2018.

Stock Award Activity

Common shares outstanding plus shares underlying outstanding stock awards totaled 504 million and 506 million as of December 31, 2017 and June 30, 2018. These totals include all vested and unvested stock awards outstanding, including those awards we estimate will be forfeited. Stock-based compensation expense is as follows (in millions):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2017		2018		2017		2018
Cost of sales	$	12	$	19	$	21	$	34
Fulfillment	261		320		425		564
Marketing	133		190		228		351
Technology and content	633		788		1,073		1,419
General and administrative	119		151		205		284
Total stock-based compensation expense	$	1,158	$	1,468	$	1,952	$	2,652

The following table summarizes our restricted stock unit activity for the six months ended June 30, 2018 (in millions):

	Number of Units		Weighted-Average Grant-Date Fair Value
Outstanding as of December 31, 2017	20.1		$	725
Units granted	3.7		1,437
Units vested	(3.6	)	552
Units forfeited	(1.2	)	808
Outstanding as of June 30, 2018	19.0		$	891

Scheduled vesting for outstanding restricted stock units as of June 30, 2018, is as follows (in millions):

	Six Months Ended December 31,	Year Ended December 31,
	2018	2019	2020	2021	2022	Thereafter	Total
Scheduled vesting—restricted stock units	3.5	7.1	5.6	2.1	0.4	0.3	19.0

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As of June 30, 2018, there was $7.6 billion of net unrecognized compensation cost related to unvested stock-based compensation arrangements. This compensation is recognized on an accelerated basis with approximately half of the compensation expected to be expensed in the next twelve months, and has a weighted-average recognition period of 1.1 years. The estimated forfeiture rate as of December 31, 2017 and June 30, 2018 was 28% and 27%. Changes in our estimates and assumptions relating to forfeitures may cause us to realize material changes in stock-based compensation expense in the future.

Note 7 — INCOME TAXES

Our tax provision or benefit from income taxes 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.

Our quarterly tax provision, and our quarterly estimate of our annual effective tax rate, is subject to significant variation due to several factors, including variability in accurately predicting our pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, intercompany transactions, the applicability of special tax regimes, changes in how we do business, acquisitions (including integrations) and investments, audit-related developments, changes in our stock price, changes in our deferred tax assets and liabilities and their valuation, foreign currency gains (losses), changes in statutes, regulations, case law, and administrative practices, principles, and interpretations related to tax, accounting, and other areas, including European Union state aid rules, and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income or loss. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower.

The 2017 Tax Act was signed into law on December 22, 2017. The 2017 Tax Act significantly revised the U.S. corporate income tax by, among other things, lowering the statutory corporate tax rate from 35% to 21%, eliminating certain deductions, imposing a mandatory one-time tax on accumulated earnings of foreign subsidiaries, introducing new tax regimes, and changing how foreign earnings are subject to U.S. tax. The 2017 Tax Act also enhanced and extended through 2026 the option to claim accelerated depreciation deductions on qualified property. We have not completed our determination of the accounting implications of the 2017 Tax Act on our tax accruals. However, we reasonably estimated the effects of the 2017 Tax Act and recorded provisional amounts in our financial statements as of December 31, 2017. We recorded a provisional tax benefit for the impact of the 2017 Tax Act of approximately $789 million. This amount was primarily comprised of the remeasurement of federal net deferred tax liabilities resulting from the permanent reduction in the U.S. statutory corporate tax rate to 21% from 35%, after taking into account the mandatory one-time tax on the accumulated earnings of our foreign subsidiaries. The amount of this one-time tax is not material. As we complete our analysis of the 2017 Tax Act, collect and prepare necessary data, and interpret any additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, we may make adjustments to the provisional amounts. Those adjustments may materially impact our provision for income taxes in the period in which the adjustments are made.

For 2018, we estimate that our effective tax rate will be favorably affected by the impact of excess tax benefits from stock-based compensation and the U.S. federal research and development credit and adversely affected by losses incurred in certain foreign jurisdictions for which we may not realize a tax benefit. Losses for which we may not realize a related tax benefit, primarily due to losses of foreign subsidiaries, reduce our pre-tax income without a corresponding reduction in our tax expense, and therefore increase our effective tax rate. We record valuation allowances against the deferred tax assets associated with losses for which we may not realize a related tax benefit.

Our income tax provision for the six months ended June 30, 2017 was $695 million, which included $197 million of net discrete tax benefits primarily attributable to excess tax benefits from stock-based compensation, partially offset by the estimated impact of audit-related developments. Our income tax provision for the six months ended June 30, 2018 was $361 million, which included $964 million of net discrete tax benefits primarily attributable to excess tax benefits from stock-based compensation.

Cash paid for income taxes, net of refunds was $447 million and $300 million in Q2 2017 and Q2 2018, and $693 million and $813 million for the six months ended June 30, 2017 and 2018.

As of December 31, 2017 and June 30, 2018, tax contingencies were approximately $2.3 billion and $3.3 billion. We expect the total amount of tax contingencies will grow in 2018. In addition, changes in state, federal, and foreign tax laws may increase our tax contingencies. The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued. It is reasonably possible that within the next 12 months we will receive additional assessments by various tax authorities or possibly reach resolution of income tax examinations in one or more jurisdictions. These assessments or settlements could result in changes to our contingencies related to positions on tax filings on prior years’ tax filings.

We are under examination, or may be subject to examination, by the Internal Revenue Service (“IRS”) for the calendar year 2005 and thereafter. These examinations may lead to ordinary course adjustments or proposed adjustments to our taxes or

18

our net operating losses with respect to years under examination as well as subsequent periods. As previously disclosed, we have received Notices of Proposed Adjustment (“NOPAs”) from the IRS for transactions undertaken in the 2005 and 2006 calendar years relating to transfer pricing with our foreign subsidiaries. The IRS is seeking to increase our U.S. taxable income by an amount that would result in additional federal tax of approximately $1.5 billion, subject to interest. On March 23, 2017, the U.S. Tax Court issued its decision regarding the issues raised in the IRS NOPAs. The Tax Court rejected the approach from the IRS NOPAs in determining transfer pricing adjustments in 2005 and 2006 for the transactions undertaken with our foreign subsidiaries and adopted, with adjustments, our suggested approach. In September 2017, the IRS appealed the decision to the U.S. Court of Appeals for the Ninth Circuit. We will continue to defend ourselves vigorously in this matter. If the Tax Court decision were reversed on appeal or if the IRS were to successfully assert transfer pricing adjustments of a similar nature to the NOPAs for transactions in subsequent years, we could be subject to significant additional tax liabilities.

In October 2014, the European Commission opened a formal investigation to examine whether decisions by the tax authorities in Luxembourg with regard to the corporate income tax paid by certain of our subsidiaries comply with European Union rules on state aid. On October 4, 2017, the European Commission announced its decision that determinations by the tax authorities in Luxembourg did not comply with European Union rules on state aid. Based on that decision the European Commission announced an estimated recovery amount of approximately €250 million, plus interest, for the period May 2006 through June 2014, and ordered Luxembourg tax authorities to calculate the actual amount of additional taxes subject to recovery. Luxembourg computed an initial recovery amount, consistent with the European Commission’s decision, that we deposited into escrow in March 2018, subject to adjustment pending conclusion of all appeals. In December 2017, Luxembourg appealed the European Commission’s decision. In May 2018, we appealed. We believe the European Commission’s decision to be without merit and will continue to defend ourselves vigorously in this matter. We are also subject to taxation in various states and other foreign jurisdictions including Canada, China, Germany, India, Japan, Luxembourg, and the United Kingdom. We are under, or may be subject to, audit or examination and additional assessments by the relevant authorities in respect of these particular jurisdictions primarily for 2008 and thereafter.

Note 8 — SEGMENT INFORMATION

We have organized our operations into three segments: North America, International, and AWS. We allocate to segment results the operating expenses “Fulfillment,” “Marketing,” “Technology and content,” and “General and administrative” based on usage, which is generally reflected in the segment in which the costs are incurred. The majority of technology infrastructure costs are allocated to the AWS segment based on usage. The majority of the remaining non-infrastructure technology costs are incurred in the U.S. and are allocated to our North America segment. The results of Whole Foods Market are included in our North America and International segments based on physical location. There are no internal revenue transactions between our reportable segments. These segments reflect the way our chief operating decision maker evaluates the Company’s business performance and manages its operations.

North America

The North America segment primarily consists of amounts earned from retail sales of consumer products (including from sellers) and subscriptions through North America-focused websites and physical stores. This segment includes export sales from these websites.

International

The International segment primarily consists of amounts earned from retail sales of consumer products (including from sellers) and subscriptions through internationally-focused websites. This segment includes export sales from these internationally-focused websites (including export sales from these sites to customers in the U.S., Mexico, and Canada), but excludes export sales from our North America-focused websites.

AWS

The AWS segment consists of amounts earned from global sales of compute, storage, database, and other service offerings for start-ups, enterprises, government agencies, and academic institutions.

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Information on reportable segments and reconciliation to consolidated net income is as follows (in millions):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2017			2018			2017			2018
North America
Net sales	$	22,370		$	32,169		$	43,362		$	62,894
Operating expenses	21,934			30,334			42,330			59,910
Operating income	$	436		$	1,835		$	1,032		$	2,984
International
Net sales	$	11,485		$	14,612		$	22,546		$	29,487
Operating expenses	12,209			15,106			23,752			30,603
Operating income (loss)	$	(724	)	$	(494	)	$	(1,206	)	$	(1,116	)
AWS
Net sales	$	4,100		$	6,105		$	7,761		$	11,547
Operating expenses	3,184			4,463			5,955			8,504
Operating income	$	916		$	1,642		$	1,806		$	3,043
Consolidated
Net sales	$	37,955		$	52,886		$	73,669		$	103,928
Operating expenses	37,327			49,903			72,037			99,017
Operating income	628			2,983			1,632			4,911
Total non-operating income (expense)	38			(378		)	(14		)	(391		)
Provision for income taxes	(467		)	(74		)	(695		)	(361		)
Equity-method investment activity, net of tax	(2		)	3			(2		)	4
Net income	$	197		$	2,534		$	921		$	4,163

Net sales by groups of similar products and services, which also have similar economic characteristics, is as follows (in millions):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2017		2018		2017		2018
Net Sales:
Online stores (1)	$	23,754	$	27,165	$	46,580	$	54,105
Physical stores (2)	—		4,312		—		8,575
Third-party seller services (3)	6,991		9,702		13,429		18,966
Subscription services (4)	2,165		3,408		4,104		6,510
AWS	4,100		6,105		7,761		11,547
Other (5)	945		2,194		1,795		4,225
Consolidated	$	37,955	$	52,886	$	73,669	$	103,928

____________________________

(1) Includes product sales and digital media content where we record revenue gross. We leverage our retail infrastructure to offer a wide selection of consumable and durable goods that includes media products available in both a physical and digital format, such as books, music, videos, games, and software. These product sales include digital products sold on a transactional basis. Digital product subscriptions that provide unlimited viewing or usage rights are included in Subscription services.

(2) Includes product sales where our customers physically select items in a store.

(3) Includes commissions and any related fulfillment and shipping fees, and other third-party seller services.

(4) Includes annual and monthly fees associated with Amazon Prime membership, as well as audiobook, e-book, digital video, digital music, and other non-AWS subscription services.

(5) Primarily includes sales of advertising services, as well as sales related to our other service offerings.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding guidance, industry prospects, or future results of operations or financial position, made in this Quarterly Report on Form 10-Q are forward-looking. We use words such as anticipates, believes, expects, future, intends, and similar expressions to identify forward-looking statements. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Actual results could differ materially for a variety of reasons, including, among others, fluctuations in foreign exchange rates, changes in global economic conditions and customer spending, world events, the rate of growth of the Internet, online commerce, and cloud services, the amount that Amazon.com invests in new business opportunities and the timing of those investments, the mix of products and services sold to customers, the mix of net sales derived from products as compared with services, the extent to which we owe income or other taxes, competition, management of growth, potential fluctuations in operating results, international growth and expansion, the outcomes of legal proceedings and claims, fulfillment, sortation, delivery, and data center optimization, risks of inventory management, seasonality, the degree to which we enter into, maintain, and develop commercial agreements, proposed and completed acquisitions and strategic transactions, payments risks, and risks of fulfillment throughput and productivity. In addition, the current global economic climate amplifies many of these risks. These risks and uncertainties, as well as other risks and uncertainties that could cause our actual results to differ significantly from management’s expectations, are described in greater detail in Item 1A of Part II, “Risk Factors.”

For additional information, see Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” of our 2017 Annual Report on Form 10-K.

Critical Accounting Judgments

The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies, which involve the use of estimates, judgments, and assumptions that are significant to understanding our results. For additional information, see Item 8 of Part II, “Financial Statements and Supplementary Data — Note 1 — Description of Business and Accounting Policies,” of our 2017 Annual Report on Form 10-K and Item 1 of Part I, “Financial Statements — Note 1 — Accounting Policies,” of this Form 10-Q. Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions.

Inventories

Inventories, consisting of products available for sale, are primarily accounted for using the first-in first-out method, and are valued at the lower of cost and net realizable value. This valuation requires us to make judgments, based on currently-available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable values of each disposition category. These assumptions about future disposition of inventory are inherently uncertain and changes in our estimates and assumptions may cause us to realize material write-downs in the future. As a measure of sensitivity, for every 1% of additional inventory valuation allowance as of June 30, 2018, we would have recorded an additional cost of sales of approximately $160 million.

In addition, we enter into supplier commitments for certain electronic device components and certain products. These commitments are based on forecasted customer demand. If we reduce these commitments, we may incur additional costs.

Income Taxes

We are subject to income taxes in the U.S. (federal and state) and numerous foreign jurisdictions. Tax laws, regulations, and administrative practices in various jurisdictions may be subject to significant change, with or without notice, due to economic, political, and other conditions, and significant judgment is required in evaluating and estimating our provision and accruals for these taxes. There are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain. Our effective tax rates could be affected by numerous factors, such as 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

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of special tax regimes, losses incurred in jurisdictions for which we are not able to realize the related tax benefit, 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, changes in our deferred tax assets and liabilities and their valuation, and changes in the laws, regulations, administrative practices, principles, and interpretations related to 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 as the recently enacted U.S. tax reform legislation commonly referred to as the U.S. Tax Cuts and Jobs Act of 2017 (the “2017 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 in U.S. tax law, significant judgments to be made in interpretation of the provisions of the 2017 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 interpret or issue guidance on how provisions of the 2017 Tax Act will be applied or otherwise administered that 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, we may make adjustments to provisional amounts that we have recorded that may materially impact our provision for income taxes in the period in which the adjustments are made.

We are also currently subject to audit in various jurisdictions, and these jurisdictions may assess additional income tax liabilities against us. Developments in an audit, litigation, or the relevant laws, regulations, administrative practices, principles, and interpretations 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. Although we believe our tax estimates are reasonable, the final outcome of tax audits, investigations, and any related litigation could be materially different from our historical income tax provisions and accruals.

Recent Accounting Pronouncements

See Item 1 of Part I, “Financial Statements — Note 1 — Accounting Policies.”

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Liquidity and Capital Resources

Cash flow information, which reflects retrospective adjustments to our consolidated statements of cash flows as described in Item 1 of Part I, “Financial Statements — Note 1 — Accounting Policies,” is as follows (in millions):

	Three Months Ended   June 30,						Six Months Ended   June 30,						Twelve Months Ended   June 30,
	2017			2018			2017			2018			2017			2018
Cash provided by (used in):
Operating activities	$	3,850		$	7,449		$	2,230		$	5,658		$	17,802		$	21,793
Investing activities	(5,274		)	(2,692		)	(6,624		)	(3,225		)	(13,173		)	(23,684		)
Financing activities	(1,274		)	(1,394		)	(2,163		)	(3,556		)	(3,731		)	8,535

Our principal sources of liquidity are cash flows generated from operations and our cash, cash equivalents, and marketable securities balances, which, at fair value, were $31.0 billion and $27.1 billion as of December 31, 2017 and June 30, 2018. Amounts held in foreign currencies were $11.1 billion and $7.9 billion as of December 31, 2017 and June 30, 2018, and were primarily Euros, Japanese Yen, and British Pounds.

Cash provided by (used in) operating activities was $3.9 billion and $7.4 billion for Q22017 and Q22018, and $2.2 billion and $5.7 billion for the six months ended June 30, 2017 and 2018. Our operating cash flows result primarily from cash received from our consumer, seller, developer, enterprise, and content creator customers, and advertising agreements, offset by cash payments we make for products and services, employee compensation (less amounts capitalized related to internal-use software that are reflected as cash used in investing activities), payment processing and related transaction costs, operating leases, and interest payments on our long-term obligations. Cash received from our customers and other activities generally corresponds to our net sales. Because consumers primarily use credit cards to buy from us, our receivables from consumers settle quickly. The increase in operating cash flow for the trailing twelve months ended June 30, 2018, compared to the comparable prior year period, was primarily due to the increase in net income, excluding non-cash charges such as depreciation, amortization, and stock-based compensation. Cash provided by (used in) operating activities is also subject to changes in working capital. Working capital at any specific point in time is subject to many variables, including seasonality, inventory management and category expansion, the timing of cash receipts and payments, vendor payment terms, and fluctuations in foreign exchange rates.

Cash provided by (used in) investing activities corresponds with cash capital expenditures, including leasehold improvements, internal-use software and website development costs, incentives received from property and equipment vendors, intellectual property rights, and purchases, sales, and maturities of marketable securities. Cash provided by (used in) investing activities was $(5.3) billion and $(2.7) billion for Q22017 and Q22018, and $(6.6) billion and $(3.2) billion for the six months ended June 30, 2017 and 2018, with the variability caused primarily by our decision to purchase or lease property and equipment, and purchases, maturities, and sales of marketable securities. Cash capital expenditures were $2.5 billion and $2.9 billion during Q22017 and Q22018, and $4.4 billion and $5.7 billion for the six months ended June 30, 2017 and 2018, which primarily reflect additional capacity to support our fulfillment operations and additional investments in support of continued business growth in technology infrastructure (the majority of which is to support AWS). Capital expenditures included $90 million and $58 million for internal-use software and website development during Q22017 and Q22018, and $164 million and $118 million for the six months ended June 30, 2017 and 2018. Stock-based compensation capitalized for internal-use software and website development costs does not affect cash flows. We made cash payments, net of acquired cash, related to acquisition and other investment activity of $633 million and $866 million during Q22017 and Q22018, and $678 million and $879 million for the six months ended June 30, 2017 and 2018.

Cash provided by (used in) financing activities was $(1.3) billion and $(1.4) billion for Q22017 and Q22018, and $(2.2) billion and $(3.6) billion for the six months ended June 30, 2017 and 2018. Cash outflows from financing activities result from principal repayments on obligations related to capital leases and finance leases and repayments of long-term debt and other, which were $1.3 billion and $1.5 billion in Q22017 and Q22018, and $2.2 billion and $3.8 billion for the six months ended June 30, 2017 and 2018. Property and equipment acquired under capital leases was $2.7 billion and $2.3 billion during Q22017 and Q22018, and $4.6 billion for the six months ended June 30, 2017 and 2018, reflecting investments in support of continued business growth primarily due to investments in technology infrastructure for AWS, which investments we expect to continue over time. Cash inflows from financing activities primarily result from proceeds from long-term debt and other. Proceeds from long-term debt and other were $49 million and $96 million in Q22017 and Q22018, and $70 million and $221 million for the six months ended June 30, 2017 and 2018.

In April 2018, we established a commercial paper program (the “Commercial Paper Program”) under which we may from time to time issue unsecured commercial paper up to a total of $7.0 billion at any time, with individual maturities that may vary but will not exceed 397 days from the date of issue. There were no borrowings outstanding under the Commercial Paper Program as of June 30, 2018.

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We had no borrowings outstanding under the Credit Agreement and $489 million of borrowings outstanding under our Credit Facility as of June 30, 2018. See Item 1 of Part I, “Financial Statements — Note 5 — Debt” for additional information.

We recorded net tax provisions of $467 million and $74 million in Q22017 and Q22018, and $695 million and $361 million for the six months ended June 30, 2017 and 2018. The 2017 Tax Act includes a mandatory one-time tax on accumulated earnings of foreign subsidiaries, and as a result, all previously unremitted earnings for which no U.S. deferred tax liability had been accrued have now been subject to U.S. tax. Notwithstanding the U.S. taxation of these amounts, we intend to continue to invest most or all of these earnings, as well as our capital in these subsidiaries, indefinitely outside of the U.S. and do not expect to incur any significant, additional taxes related to such amounts.

We have tax benefits relating to excess stock-based compensation deductions and accelerated depreciation deductions that are being utilized to reduce our U.S. taxable income. The 2017 Tax Act extended through 2026 and enhanced the option to claim accelerated depreciation deductions on qualifying property. Cash taxes paid (net of refunds) were $447 million and $300 million for Q22017 and Q22018, and $693 million and $813 million for the six months ended June 30, 2017 and 2018. As of December 31, 2017, our federal net operating loss carryforward was approximately $226 million and we had approximately $855 million of federal tax credits potentially available to offset future tax liabilities. Our federal tax credits are primarily related to the U.S. federal research and development credit. As we utilize our federal net operating losses and tax credits we expect cash paid for taxes to increase. We endeavor to manage our global taxes on a cash basis, rather than on a financial reporting basis. In connection with the European Commission’s October 2017 decision against us on state aid, Luxembourg computed an initial recovery amount, consistent with the European Commission’s decision, of approximately €250 million, that we deposited into escrow in March 2018, subject to adjustment pending conclusion of all appeals.

Our liquidity is also affected by restricted cash balances that are pledged as collateral for real estate leases, amounts due to third-party sellers in certain jurisdictions, debt, and standby and trade letters of credit. To the extent we process payments for third-party sellers or offer certain types of stored value to our customers, some jurisdictions may restrict our use of those funds. These restrictions would result in the reclassification of a portion of our cash and cash equivalents from “Cash and cash equivalents” to restricted cash, which is classified within “Accounts receivable, net and other” on our consolidated balance sheets. As of December 31, 2017 and June 30, 2018, restricted cash, cash equivalents, and marketable securities were $1.3 billion and $716 million. See Item 1 of Part I, “Financial Statements — Note 3 — Commitments and Contingencies” for additional discussion of our principal contractual commitments, as well as our pledged assets. Additionally, purchase obligations and open purchase orders, consisting of inventory and significant non-inventory commitments, were $14.4 billion as of June 30, 2018. These purchase obligations and open purchase orders are generally cancellable in full or in part through the contractual provisions.

We believe that cash flows generated from operations and our cash, cash equivalents, and marketable securities balances, as well as our borrowing arrangements, will be sufficient to meet our anticipated operating cash needs for at least the next 12 months. However, any projections of future cash needs and cash flows are subject to substantial uncertainty. See Item 1A of Part II, “Risk Factors.” We continually evaluate opportunities to sell additional equity or debt securities, obtain credit facilities, obtain capital, finance, and operating lease arrangements, repurchase common stock, pay dividends, or repurchase, refinance, or otherwise restructure our debt for strategic reasons or to further strengthen our financial position.

The sale of additional equity or convertible debt securities would likely be dilutive to our shareholders. In addition, we will, from time to time, consider the acquisition of, or investment in, complementary businesses, products, services, capital infrastructure, and technologies, which might affect our liquidity requirements or cause us to secure additional financing, or issue additional equity or debt securities. There can be no assurance that additional credit lines or financing instruments will be available in amounts or on terms acceptable to us, if at all.

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Results of Operations

We have organized our operations into three segments: North America, International, and AWS. Our results reflect the operations of Whole Foods Market from the date of acquisition in August 2017. These segments reflect the way the Company evaluates its business performance and manages its operations. See Item 1 of Part I, “Financial Statements — Note 8 — Segment Information.”

Net Sales

Net sales include product and service sales. Product sales represent revenue from the sale of products and related shipping fees and digital media content where we record revenue gross. Service sales primarily represent third-party seller fees earned (including commissions) and related shipping fees, AWS sales, Amazon Prime membership fees, advertising services, and certain digital content subscriptions. Net sales information is as follows (in millions):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2017			2018			2017			2018
Net Sales:
North America	$	22,370		$	32,169		$	43,362		$	62,894
International	11,485			14,612			22,546			29,487
AWS	4,100			6,105			7,761			11,547
Consolidated	$	37,955		$	52,886		$	73,669		$	103,928
Year-over-year Percentage Growth:
North America	27		%	44		%	25		%	45		%
International	17			27			16			31
AWS	42			49			42			49
Consolidated	25			39			24			41
Year-over-year Percentage Growth, excluding the effect of foreign exchange rates:
North America	27		%	44		%	25		%	45		%
International	22			21			21			21
AWS	42			49			42			49
Consolidated	26			37			25			38
Net sales mix:
North America	59		%	61		%	59		%	61		%
International	30			28			31			28
AWS	11			11			10			11
Consolidated	100		%	100		%	100		%	100		%

Sales increased39% in Q22018 and 41% for the six months ended June 30, 2018, compared to the comparable prior year periods. Changes in foreign currency exchange rates impacted net sales by $760 million for Q22018, and by $2.3 billion for the six months ended June 30, 2018. For a discussion of the effect on sales growth of foreign exchange rates, see “Effect of Foreign Exchange Rates” below.

North America sales increased44% in Q22018 and 45% for the six months ended June 30, 2018, compared to the comparable prior year periods. The sales growth primarily reflects increased unit sales, including sales by third-party sellers, and the impact of the acquisition of Whole Foods Market. Increased unit sales were driven largely by our continued efforts to reduce prices for our customers, including from our shipping offers, increased in-stock inventory availability, and increased selection.

International sales increased27% in Q22018 and 31% for the six months ended June 30, 2018, compared to the comparable prior year periods. The sales growth primarily reflects increased unit sales, including sales by third-party sellers. Increased unit sales were driven largely by our continued efforts to reduce prices for our customers, including from our shipping offers, increased in-stock inventory availability, and increased selection. Changes in foreign currency exchange rates impacted International net sales by $727 million for Q22018, and by $2.2 billion for the six months ended June 30, 2018.

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AWS sales increased49% in Q22018 and for the six months ended June 30, 2018, compared to the comparable prior year periods. The sales growth primarily reflects increased customer usage, partially offset by pricing changes. Pricing changes were driven largely by our continued efforts to reduce prices for our customers.

Operating Income (Loss)

Operating income (loss) by segment is as follows (in millions):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2017			2018			2017			2018
Operating Income (Loss):
North America	$	436		$	1,835		$	1,032		$	2,984
International	(724		)	(494		)	(1,206		)	(1,116		)
AWS	916			1,642			1,806			3,043
Consolidated	$	628		$	2,983		$	1,632		$	4,911

Operating income increased from $628 million in Q22017 to $3.0 billion in Q22018, and increased from $1.6 billion for the six months ended June 30, 2017, to $4.9 billion for the six months ended June 30, 2018. We believe that operating income is a more meaningful measure than gross profit and gross margin due to the diversity of our product categories and services.

The increase in North America operating income in absolute dollars in Q22018 and for the six months ended June 30, 2018, compared to the comparable prior year periods, is primarily due to increased unit sales, including sales by third-party sellers, advertising sales, and slower growth in certain operating expenses, partially offset by costs to expand our fulfillment network.

The decrease in International operating loss in absolute dollars in Q22018 and for the six months ended June 30, 2018, compared to the comparable prior year periods, is primarily due to increased unit sales, including sales by third-party sellers, advertising sales, and slower growth in certain operating expenses, partially offset by costs to expand our fulfillment network. Changes in foreign exchange rates impacted operating loss by $86 million for Q22018, and by $156 million for the six months ended June 30, 2018.

The increase in AWS operating income in absolute dollars in Q22018 and for the six months ended June 30, 2018, compared to the comparable prior year periods, is primarily due to increased customer usage and cost structure productivity, partially offset by pricing changes and increased spending on technology infrastructure and payroll and related expenses, which was primarily driven by additional investments to support the business growth. Changes in foreign exchange rates impacted operating income by $(45) million for Q22018, and by $(134) million for the six months ended June 30, 2018.

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Operating Expenses

Information about operating expenses is as follows (in millions):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2017			2018			2017			2018
Operating Expenses:
Cost of sales	$	23,451		$	30,632		$	45,891		$	61,367
Fulfillment	5,158			7,932			9,855			15,724
Marketing	2,229			2,901			4,150			5,600
Technology and content	5,549			7,247			10,363			14,006
General and administrative	874			1,111			1,669			2,177
Other operating expense, net	66			80			109			143
Total operating expenses	$	37,327		$	49,903		$	72,037		$	99,017
Year-over-year Percentage Growth:
Cost of sales	22		%	31		%	21		%	34		%
Fulfillment	33			54			30			60
Marketing	44			30			39			35
Technology and content	43			31			40			35
General and administrative	51			27			55			30
Other operating expense, net	19			22			9			30
Percent of Net Sales:
Cost of sales	61.8		%	57.9		%	62.3		%	59.0		%
Fulfillment	13.6			15.0			13.4			15.1
Marketing	5.9			5.5			5.6			5.4
Technology and content	14.6			13.7			14.1			13.5
General and administrative	2.3			2.1			2.3			2.1
Other operating expense, net	0.2			0.2			0.1			0.1

Cost of Sales

Cost of sales primarily consists of the purchase price of consumer products, digital media content costs where we record revenue gross, including video and music, packaging supplies, sortation and delivery center and related equipment costs, and inbound and outbound shipping costs, including where we are the transportation service provider.

The increase in cost of sales in absolute dollars in Q22018 and for the six months ended June 30, 2018, compared to the comparable prior year periods, is primarily due to increased product and shipping costs resulting from increased sales.

Shipping costs to receive products from our suppliers are included in our inventory and recognized as cost of sales upon sale of products to our customers. Shipping costs, which include sortation and delivery center and transportation costs, were $4.6 billion and $6.0 billion in Q22017 and Q22018, and $9.0 billion and $12.1 billion for the six months ended June 30, 2017 and 2018. We expect our cost of shipping to continue to increase to the extent our customers accept and use our shipping offers at an increasing rate, we reduce shipping rates, we use more expensive shipping methods, and we offer additional services. We seek to mitigate costs of shipping over time in part through achieving higher sales volumes, optimizing our fulfillment network, negotiating better terms with our suppliers, and achieving better operating efficiencies. We believe that offering low prices to our customers is fundamental to our future success, and one way we offer lower prices is through shipping offers.

Costs to operate our AWS segment are primarily classified as “Technology and content” as we leverage a shared infrastructure that supports both our internal technology requirements and external sales to AWS customers.

Fulfillment

Fulfillment costs primarily consist of those costs incurred in operating and staffing our North America and International fulfillment centers, customer service centers, and physical stores and payment processing costs. While AWS payment processing and related transaction costs are included in fulfillment, AWS costs are primarily classified as “Technology and content.” Fulfillment costs as a percentage of net sales may vary due to several factors, such as payment processing and related transaction

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costs, our level of productivity and accuracy, changes in volume, size, and weight of units received and fulfilled, timing of fulfillment network and physical store expansion, the extent we utilize fulfillment services provided by third parties, mix of products and services sold, and our ability to affect customer service contacts per unit by implementing improvements in our operations and enhancements to our customer self-service features. Additionally, because payment processing and fulfillment costs associated with seller transactions are based on the gross purchase price of underlying transactions, and payment processing and related transaction and fulfillment costs are higher as a percentage of sales versus our retail sales, sales by our sellers have higher fulfillment costs as a percent of net sales.

The increase in fulfillment costs in absolute dollars in Q22018 and for the six months ended June 30, 2018, compared to the comparable prior year periods, is primarily due to variable costs corresponding with increased product and service sales volume and inventory levels, and costs from expanding our fulfillment network, which includes physical stores.

We seek to expand our fulfillment network to accommodate a greater selection and in-stock inventory levels and to meet anticipated shipment volumes from sales of our own products as well as sales by third parties for which we provide the fulfillment services. We regularly evaluate our facility requirements.

Marketing

We direct customers to our websites primarily through a number of targeted online marketing channels, such as our sponsored search, Associates program, social and online advertising, television advertising, and other initiatives. Our marketing costs are largely variable, based on growth in sales and changes in rates. To the extent there is increased or decreased competition for these traffic sources, or to the extent our mix of these channels shifts, we would expect to see a corresponding change in our marketing costs.

The increase in marketing costs in absolute dollars in Q22018 and for the six months ended June 30, 2018, compared to the comparable prior year periods, is primarily due to payroll and related expenses, as well as increased spending on online marketing channels.

While costs associated with Amazon Prime memberships and other shipping offers are not included in marketing expense, we view these offers as effective worldwide marketing tools, and intend to continue offering them indefinitely.

Technology and Content

Technology and content costs include payroll and related expenses for employees involved in the research and development of new and existing products and services, development, design, and maintenance of our websites, curation and display of products and services made available on our websites, and infrastructure costs. Infrastructure costs include servers, networking equipment, and data center related depreciation, rent, utilities, and other expenses necessary to support AWS, as well as these and other efforts. Collectively, these costs reflect the investments we make in order to offer a wide variety of products and services to our customers.

We seek to invest efficiently in numerous areas of technology and content so we may continue to enhance the customer experience and improve our process efficiency through rapid technology developments, while operating at an ever increasing scale. Our technology and content investment and capital spending projects often support a variety of product and service offerings due to geographic expansion and the cross-functionality of our systems and operations. We expect spending in technology and content to increase over time as we continue to add employees and technology infrastructure. These costs are allocated to segments based on usage. The increase in technology and content costs in absolute dollars in Q22018 and for the six months ended June 30, 2018, compared to the comparable prior year periods, is primarily due to increased payroll and related costs associated with technical teams responsible for expanding our existing products and services and initiatives to introduce new products and service offerings, and an increase in spending on technology infrastructure. See Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” of our 2017 Annual Report on Form 10-K for a discussion of how management views advances in technology and the importance of innovation.

During Q22017 and Q22018, we capitalized $111 million (including $20 million of stock-based compensation) and $75 million (including $17 million of stock-based compensation) of costs associated with internal-use software and website development. For the six months ended June 30, 2017 and 2018, we capitalized $206 million (including $41 million of stock-based compensation) and $148 million (including $30 million of stock-based compensation) of costs associated with internal-use software and website development. Amortization of previously capitalized amounts was $145 million and $102 million for Q22017 and Q22018, and $296 million and $216 million for the six months ended June 30, 2017 and 2018.

General and Administrative

The increase in general and administrative costs in absolute dollars in Q22018 and for the six months ended June 30, 2018, compared to the comparable prior year periods, is primarily due to increases in payroll and related expenses.

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Other Operating Expense, Net

Other operating expense, net was $66 million and $80 million for Q22017 and Q22018, and $109 million and $143 million for the six months ended June 30, 2017 and 2018, and was primarily related to the amortization of intangible assets.

Interest Income and Expense

Our interest income was $44 million and $94 million during Q22017 and Q22018, and $83 million and $173 million for the six months ended June 30, 2017 and 2018. We generally invest our excess cash in investment grade short- to intermediate-term fixed income securities and AAA-rated money market funds. Our interest income corresponds with the average balance of invested funds based on the prevailing rates, which vary depending on the geographies and currencies in which they are invested.

Interest expense was $143 million and $343 million during Q22017 and Q22018, and $282 million and $673 million for the six months ended June 30, 2017 and 2018. The increase is primarily due to increases in our capital and finance lease arrangements and long-term debt.

Other Income (Expense), Net

Other income (expense), net was $137 million and $(129) million during Q22017 and Q22018, and $185 million and $109 million for the six months ended June 30, 2017 and 2018. The primary component of other income (expense), net is related to foreign currency and equity warrant valuation.

Income Taxes

Our tax provision or benefit from income taxes 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.

Our quarterly tax provision, and our quarterly estimate of our annual effective tax rate, is subject to significant variation due to several factors, including variability in accurately predicting our pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, intercompany transactions, the applicability of special tax regimes, changes in how we do business, acquisitions (including integrations) and investments, audit-related developments, changes in our stock price, changes in our deferred tax assets and liabilities and their valuation, foreign currency gains (losses), changes in statutes, regulations, case law, and administrative practices, principles, and interpretations related to tax, accounting, and other areas, including European Union state aid rules, and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income or loss. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower.

The 2017 Tax Act was signed into law on December 22, 2017. The 2017 Tax Act significantly revised the U.S. corporate income tax by, among other things, lowering the statutory corporate tax rate from 35% to 21%, eliminating certain deductions, imposing a mandatory one-time tax on accumulated earnings of foreign subsidiaries, introducing new tax regimes, and changing how foreign earnings are subject to U.S. tax. The 2017 Tax Act also enhanced and extended through 2026 the option to claim accelerated depreciation deductions on qualified property. We have not completed our determination of the accounting implications of the 2017 Tax Act on our tax accruals. However, we have reasonably estimated the effects of the 2017 Tax Act and recorded provisional amounts in our financial statements as of December 31, 2017. We recorded a provisional tax benefit for the impact of the 2017 Tax Act of approximately $789 million. This amount was primarily comprised of the remeasurement of federal net deferred tax liabilities resulting from the permanent reduction in the U.S. statutory corporate tax rate to 21% from 35%, after taking into account the mandatory one-time tax on the accumulated earnings of our foreign subsidiaries. The amount of this one-time tax is not material. As we complete our analysis of the 2017 Tax Act, collect and prepare necessary data, and interpret any additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, we may make adjustments to the provisional amounts. Those adjustments may materially impact our provision for income taxes in the period in which the adjustments are made.

For 2018, we estimate that our effective tax rate will be favorably affected by the impact of excess tax benefits from stock-based compensation and the U.S. federal research and development credit and adversely affected by losses incurred in certain foreign jurisdictions for which we may not realize a tax benefit. Losses for which we may not realize a related tax benefit, primarily due to losses of foreign subsidiaries, reduce our pre-tax income without a corresponding reduction in our tax expense, and therefore increase our effective tax rate. We record valuation allowances against the deferred tax assets associated with losses for which we may not realize a related tax benefit.

Our income tax provision for the six months ended June 30, 2017 was $695 million, which included $197 million of net discrete tax benefits primarily attributable to excess tax benefits from stock-based compensation, partially offset by the estimated

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impact of audit-related developments. Our income tax provision for the six months ended June 30, 2018 was $361 million, which included $964 million of net discrete tax benefits primarily attributable to excess tax benefits from stock-based compensation.

Non-GAAP Financial Measures

Regulation G, Conditions for Use of Non-GAAP Financial Measures, and other SEC regulations define and prescribe the conditions for use of certain non-GAAP financial information. Our measures of free cash flows and the effect of foreign exchange rates on our consolidated statements of operations meet the definition of non-GAAP financial measures.

We provide multiple measures of free cash flows because we believe these measures provide additional perspective on the impact of acquiring property and equipment with cash and through capital and finance leases. As a result of the adoption of new accounting guidance, we retrospectively adjusted our consolidated statements of cash flows to add restricted cash to cash and cash equivalents. See Item 1 of Part I, “Financial Statements — Note 1 — Accounting Policies.”

Free Cash Flow

Free cash flow is cash flow from operations reduced by “Purchases of property and equipment, including internal-use software and website development, net of proceeds from property and equipment incentives,” which both are included in cash flow from investing activities. The following is a reconciliation of free cash flow to the most comparable GAAP cash flow measure, “Net cash provided by (used in) operating activities,” for the trailing twelve months ended June 30, 2017 and 2018 (in millions):

	Twelve Months Ended   June 30,
	2017			2018
Net cash provided by (used in) operating activities	$	17,802		$	21,793
Purchases of property and equipment, including internal-use software and website development, net of proceeds from property and equipment incentives	(8,207		)	(11,372		)
Free cash flow	$	9,595		$	10,421
Net cash provided by (used in) investing activities	$	(13,173	)	$	(23,684	)
Net cash provided by (used in) financing activities	$	(3,731	)	$	8,535

Free Cash Flow Less Lease Principal Repayments

Free cash flow less lease principal repayments is free cash flow reduced by “Principal repayments of capital lease obligations,” and “Principal repayments of finance lease obligations,” which are included in cash flow from financing activities. Free cash flow less lease principal repayments approximates the actual payments of cash for our capital and finance leases. The following is a reconciliation of free cash flow less lease principal repayments to the most comparable GAAP cash flow measure, “Net cash provided by (used in) operating activities,” for the trailing twelve months ended June 30, 2017 and 2018 (in millions):

	Twelve Months Ended   June 30,
	2017			2018
Net cash provided by (used in) operating activities	$	17,802		$	21,793
Purchases of property and equipment, including internal-use software and website development, net of proceeds from property and equipment incentives	(8,207		)	(11,372		)
Principal repayments of capital lease obligations	(4,003		)	(6,037		)
Principal repayments of finance lease obligations	(170		)	(244		)
Free cash flow less lease principal repayments	$	5,422		$	4,140
Net cash provided by (used in) investing activities	$	(13,173	)	$	(23,684	)
Net cash provided by (used in) financing activities	$	(3,731	)	$	8,535

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Free Cash Flow Less Finance Lease Principal Repayments and Assets Acquired Under Capital Leases

Free cash flow less finance lease principal repayments and assets acquired under capital leases is free cash flow reduced by “Principal repayments of finance lease obligations,” which is included in cash flow from financing activities, and property and equipment acquired under capital leases. In this measure, property and equipment acquired under capital leases is reflected as if these assets had been purchased with cash, which is not the case as these assets have been leased. The following is a reconciliation of free cash flow less finance lease principal repayments and assets acquired under capital leases to the most comparable GAAP cash flow measure, “Net cash provided by (used in) operating activities,” for the trailing twelve months ended June 30, 2017 and 2018 (in millions):

	Twelve Months Ended   June 30,
	2017			2018
Net cash provided by (used in) operating activities	$	17,802		$	21,793
Purchases of property and equipment, including internal-use software and website development, net of proceeds from property and equipment incentives	(8,207		)	(11,372		)
Property and equipment acquired under capital leases	(8,019		)	(9,631		)
Principal repayments of finance lease obligations	(170		)	(244		)
Free cash flow less finance lease principal repayments and assets acquired under capital leases	$	1,406		$	546
Net cash provided by (used in) investing activities	$	(13,173	)	$	(23,684	)
Net cash provided by (used in) financing activities	$	(3,731	)	$	8,535

All of these free cash flows measures have limitations as they omit certain components of the overall cash flow statement and do not represent the residual cash flow available for discretionary expenditures. For example, these measures of free cash flows do not incorporate the portion of payments representing principal reductions of debt or cash payments for business acquisitions. Additionally, our mix of property and equipment acquisitions with cash or other financing options may change over time. Therefore, we believe it is important to view free cash flows measures only as a complement to our entire consolidated statements of cash flows.

Effect of Foreign Exchange Rates

Information regarding the effect of foreign exchange rates, versus the U.S. Dollar, on our net sales, operating expenses, and operating income is provided to show reported period operating results had the foreign exchange rates remained the same as those in effect in the comparable prior year periods. The effect on our net sales, operating expenses, and operating income from changes in our foreign exchange rates versus the U.S. Dollar is as follows (in millions):

	Three Months Ended June 30,													Six Months Ended June 30,
	2017						2018							2017						2018
	As Reported		Exchange Rate Effect (1)		At Prior Year Rates (2)		As Reported		Exchange Rate Effect (1)			At Prior Year Rates (2)		As Reported		Exchange Rate Effect (1)		At Prior Year Rates (2)		As Reported		Exchange Rate Effect (1)			At Prior Year Rates (2)
Net sales	$	37,955	$	502	$	38,457	$	52,886	$	(760	)	$	52,126	$	73,669	$	994	$	74,663	$	103,928	$	(2,315	)	$	101,613
Operating expenses	37,327		464		37,791		49,903		(718		)	49,185		72,037		925		72,962		99,017		(2,302		)	96,715
Operating income	628		38		666		2,983		(42		)	2,941		1,632		69		1,701		4,911		(13		)	4,898

___________________

(1) Represents the change in reported amounts resulting from changes in foreign exchange rates from those in effect in the comparable prior year period for operating results.

(2) Represents the outcome that would have resulted had foreign exchange rates in the reported period been the same as those in effect in the comparable prior year period for operating results.

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Guidance

We provided guidance on July 26, 2018, in our earnings release furnished on Form 8-K as set forth below. These forward-looking statements reflect Amazon.com’s expectations as of July 26, 2018, and are subject to substantial uncertainty. Our results are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and customer spending, world events, the rate of growth of the Internet, online commerce, and cloud services, as well as those outlined in Item 1A of Part II, “Risk Factors.”

Third Quarter 2018 Guidance

• Net sales are expected to be between $54.0 billion and $57.5 billion, or to grow between 23% and 31% compared with third quarter 2017. This guidance anticipates an unfavorable impact of approximately 30 basis points from foreign exchange rates.

• Operating income is expected to be between $1.4 billion and $2.4 billion, compared with $347 million in third quarter 2017.

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

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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 investment grade short- to intermediate-term fixed income securities and AAA-rated money market funds. 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 Q22018, net sales from our International segment accounted for 28% of our consolidated revenues. Net sales and related expenses generated from our internationally-focused websites, and from www.amazon.ca and www.amazon.com.mx (which are included in our North America segment), are primarily denominated in the functional currencies of the corresponding websites and primarily include Euros, Japanese Yen, and British Pounds. The results of operations of, and certain of our intercompany balances associated with, our internationally-focused websites 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 Q22018increased by $727 million in comparison with Q22017.

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 June 30, 2018, of $7.9 billion, an assumed 5%, 10%, and 20% adverse change to foreign exchange would result in fair value declines of $395 million, $795 million, and $1.6 billion. All cash equivalents 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 June 30, 2018, an assumed 5%, 10%, and 20% adverse change to foreign exchange would result in losses of $240 million, $520 million, and $1.2 billion, 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 June 30, 2018, our recorded value in equity and equity warrant investments in public and private companies was $1.0 billion. Our equity and equity warrant investments in publicly traded companies represent $593 million of our investments as of June 30, 2018, 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.

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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.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See Item 1 of Part I, “Financial Statements — Note 3 — 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 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:

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• 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;

• 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 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, 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 of e-commerce and other services, physical, e-commerce, and omnichannel retail, electronic devices, and competition, and restrictive governmental actions (such as trade protection measures, including export duties and quotas and custom duties and tariffs), 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;

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• 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 e-commerce and other online and web services grow, competition will intensify, including through adoption of evolving business models such as omnichannel retail. 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 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 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 changes in its foreign investment rules 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 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.

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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 e-commerce 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. 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 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;

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• 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 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 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. The loss of any of our executive officers or other key employees could harm our business.

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We Could Be Harmed by Data Loss or Other Security Breaches

As a result of our services being web-based and the fact that 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’ 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 or potential liability for us, and otherwise harm our business. 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 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, 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.

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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, e-commerce, 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 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, and personal privacy apply to the Internet, e-commerce, digital content, and web services. Jurisdictions may regulate consumer-to-consumer online businesses, including certain aspects of our seller programs. Unfavorable regulations and laws 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.

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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

We are subject to income taxes in the U.S. (federal and state) and numerous foreign jurisdictions. Tax laws, regulations, and administrative practices in various jurisdictions may be subject to significant change, with or without notice, due to economic, political, and other conditions, and significant judgment is required in evaluating and estimating our provision and accruals for these taxes. There are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain. Our effective tax rates could be affected by numerous factors, such as 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, 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, changes in our deferred tax assets and liabilities and their valuation, and changes in the laws, regulations, administrative practices, principles, and interpretations related to 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 as the recently enacted U.S. tax reform legislation commonly referred to as the U.S. Tax Cuts and Jobs Act of 2017 (the “2017 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 in U.S. tax law, significant judgments to be made in interpretation of the provisions of the 2017 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 interpret or issue guidance on how provisions of the 2017 Tax Act will be applied or otherwise administered that 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, we may make adjustments to provisional amounts that we have recorded that may materially impact our provision for income taxes in the period in which the adjustments are made.

We are also currently subject to audit in various jurisdictions, and these jurisdictions may assess additional income tax liabilities against us. Developments in an audit, litigation, or the relevant laws, regulations, administrative practices, principles, and interpretations 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. Although we believe our tax estimates are reasonable, the final outcome of tax audits, investigations, and any related litigation 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.

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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 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 or compromised, 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, 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 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. 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 to prevent sellers on our sites or through other seller sites from selling unlawful goods, selling goods in an unlawful manner, or violating the proprietary rights of others, and could face civil or criminal liability for unlawful activities by our sellers.

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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 June 2018, 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 $368,500 for individuals who may have been acting for 16 Iranian embassies and diplomatic organizations located in countries other than Iran; consumer products valued at approximately $16,200 for individuals who may have been acting for six entities owned or controlled by the Iranian government; consumer products valued at approximately $900 for three individuals who are designated under Executive Order 13224; and consumer products valued at approximately $6,100 for individuals who may have been acting for three individuals and entities designated under Executive Order 13224 or Executive Order 13882, 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, 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.

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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).
10.1	Amended and Restated Credit Agreement, dated as of April 27, 2018, among Amazon.com, Inc., Bank of America, N.A., as administrative agent, and the other lenders party thereto (incorporated by reference to the Company’s Current Report on Form 8-K, filed April 27, 2018).
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 June 30, 2018, formatted in 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.

45

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: July 26, 2018

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Jeffrey P. Bezos, certify that:

1. I have reviewed this Form 10-Q of Amazon.com, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Jeffrey P. Bezos

Jeffrey P. Bezos

Chairman and Chief Executive Officer

(Principal Executive Officer)

Date: July 26, 2018

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Brian T. Olsavsky, certify that:

1. I have reviewed this Form 10-Q of Amazon.com, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Brian T. Olsavsky

Brian T. Olsavsky

Senior Vice President and

Chief Financial Officer

(Principal Financial Officer)

Date: July 26, 2018

EX-32.1

Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350

In connection with the Quarterly Report of Amazon.com, Inc. (the “Company”) on Form 10-Q for the three months ended June 30, 2018, as filed with the Securities and Exchange Commission (the “SEC”) on or about the date hereof (the “Report”), I, Jeffrey P. Bezos, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

/s/ Jeffrey P. Bezos

Jeffrey P. Bezos

Chairman and Chief Executive Officer

(Principal Executive Officer)

Date: July 26, 2018

EX-32.2

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Section 1350

In connection with the Quarterly Report of Amazon.com, Inc. (the “Company”) on Form 10-Q for the three months ended June 30, 2018, as filed with the Securities and Exchange Commission (the “SEC”) on or about the date hereof (the “Report”), I, Brian T. Olsavsky, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.

/s/ Brian T. Olsavsky

Brian T. Olsavsky

Senior Vice President and

Chief Financial Officer

(Principal Financial Officer)

Date: July 26, 2018

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Jul. 18, 2018
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Entity Registrant Name	AMAZON COM INC
Entity Central Index Key	0001018724
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		487,741,189

XML

Consolidated Statements of Cash Flows - USD ($) $ in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Statement of Cash Flows [Abstract]
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD	$ 17,616	$ 16,301	$ 21,856	$ 19,934	$ 13,851	$ 12,977
OPERATING ACTIVITIES:
Net income	2,534	197	4,163	921	6,275	1,922
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	3,630	2,633	7,301	5,068	13,711	9,448
Stock-based compensation	1,468	1,158	2,651	1,952	4,914	3,615
Other operating expense, net	85	60	141	102	240	164
Other expense (income), net	110	(120)	(75)	(160)	(207)	(162)
Deferred income taxes	(139)	376	3	354	(380)	(8)
Changes in operating assets and liabilities:
Inventories	(1,090)	(682)	1,130	265	(2,717)	(1,874)
Accounts receivable, net and other	(1,364)	(1,221)	(336)	(257)	(4,859)	(2,925)
Accounts payable	2,703	2,088	(7,513)	(4,777)	4,364	5,046
Accrued expenses and other	(205)	(252)	(2,430)	(1,657)	(491)	1,039
Unearned revenue	(283)	(387)	623	419	943	1,537
Net cash provided by (used in) operating activities	7,449	3,850	5,658	2,230	21,793	17,802
INVESTING ACTIVITIES:
Purchases of property and equipment, including internal-use software and website development	(3,243)	(3,113)	(6,341)	(5,261)	(13,035)	(9,763)
Proceeds from property and equipment incentives	294	612	665	899	1,663	1,556
Acquisitions, net of cash acquired, and other	(866)	(633)	(879)	(678)	(14,173)	(765)
Sales and maturities of marketable securities	1,660	2,070	4,337	3,980	10,034	6,530
Purchases of marketable securities	(537)	(4,210)	(1,007)	(5,564)	(8,173)	(10,731)
Net cash provided by (used in) investing activities	(2,692)	(5,274)	(3,225)	(6,624)	(23,684)	(13,173)
FINANCING ACTIVITIES:
Proceeds from long-term debt and other	96	49	221	70	16,380	612
Repayments of long-term debt and other	(149)	(48)	(351)	(88)	(1,564)	(170)
Principal repayments of capital lease obligations	(1,284)	(1,228)	(3,297)	(2,060)	(6,037)	(4,003)
Principal repayments of finance lease obligations	(57)	(47)	(129)	(85)	(244)	(170)
Net cash provided by (used in) financing activities	(1,394)	(1,274)	(3,556)	(2,163)	8,535	(3,731)
Foreign currency effect on cash, cash equivalents, and restricted cash	(443)	248	(197)	474	41	(24)
Net increase (decrease) in cash, cash equivalents, and restricted cash	2,920	(2,450)	(1,320)	(6,083)	6,685	874
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD	20,536	13,851	20,536	13,851	20,536	13,851
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest on long-term debt	168	146	450	150	628	295
Cash paid for interest on capital and finance lease obligations	125	62	254	123	449	234
Cash paid for income taxes, net of refunds	300	447	813	693	1,077	879
Property and equipment acquired under capital leases	2,335	2,724	4,605	4,612	9,631	8,019
Property and equipment acquired under build-to-suit leases	$ 795	$ 748	$ 1,536	$ 1,948	$ 3,128	$ 2,575

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Consolidated Statements of Operations - USD ($) shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Income Statement [Abstract]
Net product sales	$ 31,864	$ 24,745	$ 63,468	$ 48,479
Net service sales	21,022	13,210	40,460	25,190
Total net sales	52,886	37,955	103,928	73,669
Operating expenses:
Cost of sales	30,632	23,451	61,367	45,891
Fulfillment	7,932	5,158	15,724	9,855
Marketing	2,901	2,229	5,600	4,150
Technology and content	7,247	5,549	14,006	10,363
General and administrative	1,111	874	2,177	1,669
Other operating expense, net	80	66	143	109
Total operating expenses	49,903	37,327	99,017	72,037
Operating income	2,983	628	4,911	1,632
Interest income	94	44	173	83
Interest expense	(343)	(143)	(673)	(282)
Other income (expense), net	(129)	137	109	185
Total non-operating income (expense)	(378)	38	(391)	(14)
Income before income taxes	2,605	666	4,520	1,618
Provision for income taxes	(74)	(467)	(361)	(695)
Equity-method investment activity, net of tax	3	(2)	4	(2)
Net income	$ 2,534	$ 197	$ 4,163	$ 921
Basic earnings per share	$ 5.21	$ 0.41	$ 8.58	$ 1.93
Diluted earnings per share	$ 5.07	$ 0.40	$ 8.34	$ 1.87
Weighted-average shares used in computation of earnings per share:
Basic (in shares)	486	479	485	478
Diluted (in shares)	500	492	499	491

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Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Statement of Comprehensive Income [Abstract]
Net income	$ 2,534	$ 197	$ 4,163	$ 921
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax of $(2), $(1), $(15), and $17	(466)	194	(411)	381
Net change in unrealized gains (losses) on available-for-sale debt securities:
Unrealized gains (losses), net of tax of $3, $0, $2, and $9	1	(6)	(40)	(8)
Reclassification adjustment for losses (gains) included in “Other income (expense), net,” net of tax of $0, $0, $0, and $0	1	2	1	5
Net unrealized gains (losses) on available-for-sale debt securities	2	(4)	(39)	(3)
Total other comprehensive income (loss)	(464)	190	(450)	378
Comprehensive income	$ 2,070	$ 387	$ 3,713	$ 1,299

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Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Statement of Comprehensive Income [Abstract]
Foreign currency translation adjustments, tax	$ (1)	$ (2)	$ 17	$ (15)
Unrealized gains (losses), tax	0	3	9	2
Reclassification adjustment for losses (gains) included in “Other income (expense), net,” tax	$ 0	$ 0	$ 0	$ 0

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Consolidated Balance Sheets - USD ($) $ in Millions	Jun. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 19,823	$ 20,522
Marketable securities	7,227	10,464
Inventories	14,824	16,047
Accounts receivable, net and other	12,607	13,164
Total current assets	54,481	60,197
Property and equipment, net	54,768	48,866
Goodwill	13,944	13,350
Other assets	10,907	8,897
Total assets	134,100	131,310
Current liabilities:
Accounts payable	27,657	34,616
Accrued expenses and other	17,140	18,170
Unearned revenue	6,004	5,097
Total current liabilities	50,801	57,883
Long-term debt	24,638	24,743
Other long-term liabilities	23,666	20,975
Commitments and contingencies (Note 3)
Stockholders’ equity:
Preferred stock, $0.01 par value: Authorized shares - 500 Issued and outstanding shares - none	0	0
Common stock, $0.01 par value: Authorized shares - 5,000 Issued shares - 507 and 511 Outstanding shares - 484 and 487	5	5
Treasury stock, at cost	(1,837)	(1,837)
Additional paid-in capital	24,028	21,389
Accumulated other comprehensive loss	(934)	(484)
Retained earnings	13,733	8,636
Total stockholders’ equity	34,995	27,709
Total liabilities and stockholders’ equity	$ 134,100	$ 131,310

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Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Preferred stock, par value (in usd per share)	$ 0.01	$ 0.01
Preferred stock, authorized shares	500,000,000	500,000,000
Preferred stock, issued shares	0	0
Preferred stock, outstanding shares	0	0
Common stock, par value (in usd per share)	$ 0.01	$ 0.01
Common stock, authorized shares	5,000,000,000	5,000,000,000
Common stock, issued shares	511,000,000	507,000,000
Common stock, outstanding shares	487,000,000	484,000,000

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Accounting Policies

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Accounting Policies

ACCOUNTING POLICIES

Unaudited Interim Financial Information

We have prepared the accompanying consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These consolidated financial statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of our consolidated balance sheets, operating results, and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for 2018 due to seasonal and other factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with the rules and regulations of the SEC. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in Item 8 of Part II, “Financial Statements and Supplementary Data,” of our 2017 Annual Report on Form 10-K.

Prior Period Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation, including the addition of restricted cash to cash and cash equivalents on the consolidated statements of cash flows as a result of the adoption of new accounting guidance.

Principles of Consolidation

The consolidated financial statements include the accounts of Amazon.com, Inc., its wholly-owned subsidiaries, and those entities in which we have a variable interest and of which we are the primary beneficiary, including certain entities in India and China and that support our seller lending financing activities (collectively, the “Company”). Intercompany balances and transactions between consolidated entities are eliminated. The financial results of Whole Foods Market, Inc. (“Whole Foods Market”) have been included in our consolidated financial statements from the date of acquisition on August 28, 2017.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, income taxes, commitments and contingencies, valuation of acquired intangibles and goodwill, stock-based compensation forfeiture rates, vendor funding, and inventory valuation. Actual results could differ materially from those estimates.

Earnings per Share

Basic earnings per share is calculated using our weighted-average outstanding common shares. Diluted earnings per share is calculated using our weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method. In periods when we have a net loss, stock awards are excluded from our calculation of earnings per share as their inclusion would have an antidilutive effect.

The following table shows the calculation of diluted shares (in millions):

	Three Months Ended   June 30,		Six Months Ended   June 30,
	2017	2018	2017	2018
Shares used in computation of basic earnings per share	479	486	478	485
Total dilutive effect of outstanding stock awards	13	14	13	14
Shares used in computation of diluted earnings per share	492	500	491	499

Revenue

Revenue is measured based on the amount of consideration that we expect to receive, reduced by estimates for return allowances, promotional discounts, and rebates. Revenue also excludes any amounts collected on behalf of third parties, including sales and indirect taxes. In arrangements where we have multiple performance obligations, the transaction price is allocated to each performance obligation using the relative stand-alone selling price. We generally determine stand-alone selling prices based on the prices charged to customers or using expected cost plus a margin.

A description of our principal revenue generating activities is as follows:

Retail sales - We offer consumer products through our online and physical stores. Revenue is recognized when control of the goods is transferred to the customer, which generally occurs upon our delivery to the carrier or the customer.

Third-party seller services - We offer programs that enable sellers to sell their products on our websites and their own branded websites, and fulfill orders through us. We are not the seller of record in these transactions. The commissions and any related fulfillment and shipping fees we earn from these arrangements are recognized as the services are rendered.

Subscription services - Our subscription sales include fees associated with Amazon Prime memberships and access to content including audiobooks, e-books, digital video, digital music, and other non-AWS subscription services. Prime memberships provide our customers with access to an evolving suite of benefits that represent a single stand-ready obligation. Subscriptions are paid for at the time of or in advance of delivering the services. Revenue from such arrangements is recognized over the subscription period.

AWS - Our AWS sales arrangements include global sales of compute, storage, database, and other service offerings. Revenue is allocated to the services provided based on stand-alone selling prices and is recognized as the services are rendered. Sales commissions we pay in connection with contracts that exceed one year are capitalized and amortized over the contract term.

Other - Other revenue primarily includes sales of advertising services and is recognized as the services are rendered.

Return Allowances

Return allowances, which reduce revenue and cost of sales, are estimated using historical experience. Liabilities for return allowances are included in “Accrued expenses and other” and were $468 million and $355 million as of December 31, 2017 and June 30, 2018. Included in “Inventories” on our consolidated balance sheets are assets totaling $406 million and $287 million as of December 31, 2017 and June 30, 2018, for the rights to recover products from customers associated with our liabilities for return allowances.

Cost of Sales

Cost of sales primarily consists of the purchase price of consumer products, digital media content costs, including video and music, packaging supplies, sortation and delivery centers and related equipment costs, and inbound and outbound shipping costs, including where we are the transportation service provider. Shipping costs to receive products from our suppliers are included in our inventory, and recognized as cost of sales upon sale of products to our customers. Payment processing and related transaction costs, including those associated with seller transactions, are classified in “Fulfillment” on our consolidated statements of operations.

Vendor Agreements

We have agreements with our vendors to receive funds primarily for cooperative marketing efforts, promotions, incentives, and volume rebates. We generally consider these amounts received from vendors to be a reduction of the prices we pay for their goods, including property and equipment, or services, and are recorded as a reduction of the cost of inventory, cost of services, or cost of property and equipment. Volume rebates typically depend on reaching minimum purchase thresholds. We evaluate the likelihood of reaching purchase thresholds using past experience and current year forecasts. When volume rebates can be reasonably estimated, we record a portion of the rebate as we make progress towards the purchase threshold.

Accounts Receivable, Net and Other

Included in “Accounts receivable, net and other” on our consolidated balance sheets are amounts primarily related to customers, vendors, and sellers. As of December 31, 2017 and June 30, 2018, customer receivables, net, were $6.4 billion and $6.9 billion, vendor receivables, net, were $2.6 billion and $2.2 billion, and seller receivables, net, were $692 million and $640 million. Seller receivables are amounts due from sellers related to our seller lending program, which provides funding to sellers primarily to procure inventory.

We estimate losses on receivables based on known troubled accounts and historical experience of losses incurred. Receivables are considered impaired and written-off when it is probable that all contractual payments due will not be collected in accordance with the terms of the agreement. The allowance for doubtful accounts was $348 million and $403 million as of December 31, 2017 and June 30, 2018.

Unearned Revenue

Unearned revenue is recorded when payments are received or due in advance of performing our service obligations and is recognized over the service period. Unearned revenue primarily relates to prepayments of Amazon Prime memberships and AWS services. Our total unearned revenue as of December 31, 2017 was $6.1 billion, of which $3.9 billion was recognized as revenue during the six months ended June 30, 2018, including adjustments related to the new revenue recognition guidance. Included in “Other long-term liabilities” on our consolidated balance sheets was $1.0 billion and $1.2 billion of unearned revenue as of December 31, 2017 and June 30, 2018.

Additionally, we have performance obligations, primarily related to AWS, associated with commitments in customer contracts for future services that have not yet been recognized in our financial statements. For contracts with original terms that exceed one year, the amount of revenue not yet recognized was $16.0 billion as of June 30, 2018. The weighted average remaining life of our long-term contracts is 3.5 years. However, the timing of revenue recognition is largely driven by customer activity, some of which can extend beyond the original contractual term.

Accrued Expenses and Other

Included in “Accrued expenses and other” on our consolidated balance sheets are amounts primarily related to unredeemed gift cards, customer liabilities, leases and asset retirement obligations, current debt, acquired digital media content, and other operating expenses.

As of December 31, 2017 and June 30, 2018, our liabilities for unredeemed gift cards were $3.0 billion and $1.8 billion. We reduce the liability for a gift card when redeemed by a customer. The portion of gift cards that we do not expect to be redeemed is recognized based on customer usage patterns.

Accounting Pronouncements Recently Adopted

In May 2014, the FASB issued an Accounting Standards Update (“ASU”) amending revenue recognition guidance and requiring more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. We adopted this ASU on January 1, 2018 for all revenue contracts with our customers using the modified retrospective approach and increased retained earnings by approximately $650 million. The adjustment primarily relates to the unredeemed portion of our gift cards, which are now recognized over the expected customer usage period rather than waiting until gift cards expire or when the likelihood of redemption becomes remote. We changed the recognition and classification of Amazon Prime memberships, which are now accounted for as a single performance obligation and recognized ratably over the membership period as service sales. Previously, Prime memberships were considered to be arrangements with multiple deliverables and were allocated among product sales and service sales. Other changes relate primarily to the presentation of revenue. Certain advertising services are now classified as revenue rather than a reduction in cost of sales, and sales of apps, in-app content, and certain digital media content are presented on a net basis.

The impact of applying this ASU for the six months ended June 30, 2018 primarily resulted in a decrease in product sales and an increase in service sales driven by a reclassification of Prime membership fees of approximately $1.7 billion, which are now accounted for as a single performance obligation and recognized over the membership period. Service sales also increased by approximately $1.2 billion for the six months ended June 30, 2018 due to the reclassification of certain advertising services that were previously classified as a reduction of cost of sales.

In January 2016, the FASB issued an ASU that updates certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Under this ASU, certain equity investments are measured at fair value with changes recognized in net income. We adopted this ASU in Q1 2018 with no material impact to our consolidated financial statements.

In October 2016, the FASB issued an ASU amending the accounting for income taxes. The new guidance requires the recognition of the income tax consequences of an intercompany asset transfer, other than transfers of inventory, when the transfer occurs. For intercompany transfers of inventory, the income tax effects will continue to be deferred until the inventory has been sold to a third party. We adopted this ASU in Q1 2018 with an increase of approximately $250 million to retained earnings and deferred tax assets net of valuation allowances.

In November 2016, the FASB issued an ASU amending the presentation of restricted cash within the consolidated statements of cash flows. The new guidance requires that restricted cash be added to cash and cash equivalents on the consolidated statements of cash flows. We adopted this ASU in Q1 2018 on a retrospective basis with the following impacts to our consolidated statements of cash flows (in millions):

Three Months Ended June 30, 2017	Previously Reported			Adjustments			As Revised
Operating activities	$	3,829		$	21		$	3,850
Investing activities	(5,051		)	(223		)	(5,274		)
Financing activities	(1,263		)	(11		)	(1,274		)
Net change in cash, cash equivalents, and restricted cash	$	(2,485	)	$	(213	)	$	(2,698	)

Six Months Ended June 30, 2017	Previously Reported			Adjustments			As Revised
Operating activities	$	2,239		$	(9	)	$	2,230
Investing activities	(6,667		)	43			(6,624		)
Financing activities	(2,177		)	14			(2,163		)
Net change in cash, cash equivalents, and restricted cash	$	(6,605	)	$	48		$	(6,557	)

Twelve Months Ended June 30, 2017	Previously Reported			Adjustments			As Revised
Operating activities	$	17,885		$	(83	)	$	17,802
Investing activities	(13,410		)	237			(13,173		)
Financing activities	(3,769		)	38			(3,731		)
Net change in cash, cash equivalents, and restricted cash	$	706		$	192		$	898

Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued an ASU amending the accounting for leases. The new guidance requires the recognition of lease assets and liabilities for operating leases with terms of more than 12 months, in addition to those currently recorded, on our consolidated balance sheets. Presentation of leases within the consolidated statements of operations and consolidated statements of cash flows will be generally consistent with the current lease accounting guidance. The ASU is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. We plan to adopt this ASU beginning in Q1 2019. We are continuing to evaluate the impact and expect the ASU will have a material impact on our consolidated financial statements, primarily to the consolidated balance sheets and related disclosures.

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Cash, Cash Equivalents, and Marketable Securities

6 Months Ended

Jun. 30, 2018

Investments, Debt and Equity Securities [Abstract]

Cash, Cash Equivalents, and Marketable Securities

CASH, CASH EQUIVALENTS, RESTRICTED CASH, AND MARKETABLE SECURITIES

As of December 31, 2017 and June 30, 2018, our cash, cash equivalents, restricted cash, and marketable securities primarily consisted of cash, U.S. and foreign government and agency securities, AAA-rated money market funds, and other investment grade securities. Cash equivalents and marketable securities are recorded at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.

Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

We measure the fair value of money market funds and equity securities based on quoted prices in active markets for identical assets or liabilities. All other financial instruments were valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. We did not hold any cash, cash equivalents, restricted cash, or marketable securities categorized as Level 3 assets as of December 31, 2017 and June 30, 2018.

The following table summarizes, by major security type, our cash, cash equivalents, restricted cash, and marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in millions):

	December 31, 2017			June 30, 2018
	Total Estimated Fair Value			Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Total Estimated Fair Value
Cash	$	9,982		$	8,107	$	—	$	—		$	8,107
Level 1 securities:
Money market funds	11,343			10,094		—		—			10,094
Equity securities	53			25		83		—			108
Level 2 securities:
Foreign government and agency securities	620			389		—		—			389
U.S. government and agency securities	4,823			5,465		1		(25		)	5,441
Corporate debt securities	4,257			2,638		1		(18		)	2,621
Asset-backed securities	905			756		—		(8		)	748
Other fixed income securities	338			225		—		(2		)	223
Equity securities	—			29		6		—			35
	$	32,321		$	27,728	$	91	$	(53	)	$	27,766
Less: Restricted cash, cash equivalents, and marketable securities (1)	(1,335		)								(716		)
Total cash, cash equivalents, and marketable securities	$	30,986									$	27,050

___________________

(1) We are required to pledge or otherwise restrict a portion of our cash, cash equivalents, and marketable securities as collateral for real estate leases, amounts due to third-party sellers in certain jurisdictions, debt, and standby and trade letters of credit. We classify cash, cash equivalents, and marketable securities with use restrictions of less than twelve months as “Accounts receivable, net and other” and of twelve months or longer as non-current “Other assets” on our consolidated balance sheets. See “Note 3 — Commitments and Contingencies.”

The following table summarizes the remaining contractual maturities of our cash equivalents and marketable fixed-income securities as of June 30, 2018 (in millions):

	Amortized Cost		Estimated Fair Value
Due within one year	$	16,023	$	16,016
Due after one year through five years	2,895		2,864
Due after five years through ten years	216		212
Due after ten years	433		424
Total	$	19,567	$	19,516

Actual maturities may differ from the contractual maturities because borrowers may have certain prepayment conditions.

We also hold equity warrant assets giving us the right to acquire stock of other companies. As of December 31, 2017 and June 30, 2018, these warrants had a fair value of $441 million and $577 million, and are recorded within “Other assets” on our consolidated balance sheets. The related gain (loss) recorded in “Other income (expense), net” was $54 million and $40 million in Q2 2017 and Q2 2018, and $69 million and $86 million for the six months ended June 30, 2017 and 2018. These assets are primarily classified as Level 2 assets.

The following table provides a reconciliation of the amount of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets to the total of the same such amounts shown in the consolidated statements of cash flows (in millions):

	December 31, 2017		June 30, 2018
Cash and cash equivalents	$	20,522	$	19,823
Restricted cash included in accounts receivable, net and other	1,329		707
Restricted cash included in other assets	5		6
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	$	21,856	$	20,536

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

Commitments

We have entered into non-cancellable operating, capital, and finance leases for equipment and office, fulfillment, sortation, delivery, data center, physical store, and renewable energy facilities. Rental expense under operating lease agreements was $439 million and $815 million for Q2 2017 and Q2 2018, and $850 million and $1.6 billion for the six months ended June 30, 2017 and 2018.

The following summarizes our principal contractual commitments, excluding open orders for purchases that support normal operations and are generally cancellable, as of June 30, 2018 (in millions):

	Six Months Ended December 31,		Year Ended December 31,
	2018		2019		2020		2021		2022		Thereafter		Total
Debt principal and interest	$	480	$	2,162	$	2,086	$	1,833	$	2,049	$	31,769	$	40,379
Capital lease obligations, including interest (1)	3,503		6,191		4,022		1,212		520		673		16,121
Finance lease obligations, including interest (2)	246		512		523		532		542		4,326		6,681
Operating leases	1,503		2,727		2,609		2,286		2,221		12,325		23,671
Unconditional purchase obligations (3)	1,258		3,661		3,285		3,127		2,993		7,957		22,281
Other commitments (4) (5)	1,223		1,546		1,058		1,190		647		7,521		13,185
Total commitments	$	8,213	$	16,799	$	13,583	$	10,180	$	8,972	$	64,571	$	122,318

___________________

(1) Excluding interest, current capital lease obligations of $5.8 billion and $6.6 billion are recorded within “Accrued expenses and other” as of December 31, 2017 and June 30, 2018, and $8.4 billion and $9.0 billion are recorded within “Other long-term liabilities” as of December 31, 2017 and June 30, 2018.

(2) Excluding interest, current finance lease obligations of $282 million and $320 million are recorded within “Accrued expenses and other” as of December 31, 2017 and June 30, 2018, and $4.7 billion and $5.2 billion are recorded within “Other long-term liabilities” as of December 31, 2017 and June 30, 2018.

(3) Includes unconditional purchase obligations related to certain products offered in our Whole Foods Market stores and long-term agreements to acquire and license digital media content that are not reflected on the consolidated balance sheets. For those digital media content agreements with variable terms, we do not estimate the total obligation beyond any minimum quantities and/or pricing as of the reporting date. Purchase obligations associated with renewal provisions solely at the option of the content provider are included to the extent such commitments are fixed or a minimum amount is specified.

(4) 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 and digital media content liabilities associated with long-term digital media content assets with initial terms greater than one year.

(5) Excludes approximately $3.3 billion of accrued tax contingencies for which we cannot make a reasonably reliable estimate of the amount and period of payment, if any.

Pledged Assets

As of December 31, 2017 and June 30, 2018, we have pledged or otherwise restricted $1.4 billion and $803 million of our cash, cash equivalents, and marketable securities, and certain property and equipment as collateral for real estate leases, amounts due to third-party sellers in certain jurisdictions, debt, and standby and trade letters of credit.

Other Contingencies

In 2016, we determined that 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 or other United States sanctions and export control laws. The consumer products included books, music, other media, apparel, home and kitchen, health and beauty, jewelry, office, consumer electronics, software, lawn and patio, grocery, and automotive products. Our review is ongoing and we have voluntarily reported these orders to the United States Treasury Department’s Office of Foreign Assets Control and the United States Department of Commerce’s Bureau of Industry and Security. We intend to cooperate fully with OFAC and BIS with respect to their review, which may result in the imposition of penalties. For additional information, see Item 5 of Part II, “Other Information — Disclosure Pursuant to Section 13(r) of the Exchange Act.”

We are subject to claims related to various indirect taxes (such as sales, value added, consumption, service, and similar taxes), including in jurisdictions in which we already collect and remit such taxes. If the relevant taxing authorities were successfully to pursue these claims, we could be subject to significant additional tax liabilities. For example, in June 2017, the State of South Carolina issued an assessment for uncollected sales and use taxes for the period from January 2016 to March 2016, including interest and penalties. South Carolina is alleging that we should have collected sales and use taxes on transactions by our third-party sellers. We believe the assessment is without merit. If South Carolina or other states were successfully to seek additional adjustments of a similar nature, we could be subject to significant additional tax liabilities. We intend to defend ourselves vigorously in this matter.

Legal Proceedings

The Company is involved from time to time in claims, proceedings, and litigation, including the matters described in Item 8 of Part II, “Financial Statements and Supplementary Data — Note 7 — Commitments and Contingencies — Legal Proceedings” of our 2017 Annual Report on Form 10-K and in Item 1 of Part I, “Financial Statements — Note 3 — Commitments and Contingencies — Legal Proceedings” of our Quarterly Report on Form 10-Q for the period ended March 31, 2018 as supplemented by the following:

In March 2014, Kaavo, Inc. filed a complaint against Amazon.com, Inc. and Amazon Web Services, Inc. for patent infringement in the United States District Court for the District of Delaware. The complaint alleges, among other things, that Amazon Web Services’ Elastic Beanstalk and CloudFormation infringe U.S. Patent No. 8,271,974, entitled “Cloud Computing Lifecycle Management For N-Tier Applications.” The complaint seeks injunctive relief, an unspecified amount of damages, costs, and interest. In July 2015, Kaavo Inc. filed another complaint against Amazon.com, Inc. and Amazon Web Services, Inc. in the United States District Court for the District of Delaware. The 2015 complaint alleges, among other things, that CloudFormation infringes U.S. Patent No. 9,043,751, entitled “Methods And Devices For Managing A Cloud Computing Environment.” The 2015 complaint seeks injunctive relief, an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, and interest. In September 2017, the 2015 case was stayed pending resolution of a review petition we filed with the United States Patent and Trademark Office. In June 2018, the court granted our motion for summary judgment in the 2014 case. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in these matters.

In May 2018, Rensselaer Polytechnic Institute and CF Dynamic Advances LLC filed a complaint against Amazon.com, Inc. in the United States District Court for the Northern District of New York. The complaint alleges, among other things, that “Alexa Voice Software and Alexa enabled devices” infringe U.S. Patent No. 7,177,798, entitled “Natural Language Interface Using Constrained Intermediate Dictionary of Results.” The complaint seeks an injunction, an unspecified amount of damages, enhanced damages, an ongoing royalty, pre- and post-judgment interest, attorneys’ fees, and costs. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.

In June 2018, VoIP-Pal.com, Inc. filed a complaint against Amazon Technologies, Inc. and Amazon.com, Inc. in the United States District Court for the District of Nevada. The complaint alleges, among other things, that the Alexa calling and messaging system, the Alexa app, and Echo, Tap, and Fire devices with Alexa support infringe U.S. Patent Nos. 9,537,762; 9,813,330; 9,826,002; and 9,948,549, all entitled “Producing Routing Messages For Voice Over IP Communications.” The complaint seeks an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, and interest. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.

The outcomes of our legal proceedings and other contingencies are inherently unpredictable, subject to significant uncertainties, and could be material to our operating results and cash flows for a particular period. In addition, for the matters disclosed above that do not include an estimate of the amount of loss or range of losses, such an estimate is not possible or is immaterial, and we may be unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies.

See also “Note 7 — Income Taxes.”

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Acquisitions, Goodwill, and Acquired Intangible Assets

6 Months Ended

Jun. 30, 2018

Business Combinations [Abstract]

Acquisitions, Goodwill, and Acquired Intangible Assets

ACQUISITIONS, GOODWILL, AND ACQUIRED INTANGIBLE ASSETS

2018 Acquisition Activity

On April 12, 2018, we acquired Ring Inc. (“Ring”) for cash consideration of approximately $853 million, net of cash acquired, to expand our product and service offerings. During the six months ended June 30, 2018, we also acquired certain other companies for an aggregate purchase price of $39 million. The primary reason for our other 2018 acquisitions was to acquire technologies and know-how to enable Amazon to serve customers more effectively.

Acquisition-related costs were expensed as incurred and were not significant. Due to the limited amount of time since the Ring acquisition, the valuation of certain assets and liabilities is preliminary and subject to change. The aggregate purchase price of Ring and the other 2018 acquisitions was allocated as follows (in millions):

Purchase Price
Cash paid, net of cash acquired	$	865
Indemnification holdback	27
	$	892
Allocation
Goodwill	$	607
Intangible assets (1):
Marketing-related	141
Technology-based	165
Customer-related	140
	446
Property and equipment	3
Deferred tax assets	106
Other assets acquired	254
Long-term debt	(97		)
Deferred tax liabilities	(106		)
Other liabilities assumed	(321		)
	$	892

___________________

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

We determined the estimated fair value of identifiable intangible assets acquired primarily by using the income approach. These assets are included within “Other assets” on our consolidated balance sheets and are being amortized to operating expenses on a straight-line basis over their estimated useful lives.

Pro forma results of operations have not been presented because the effects of these acquisitions, individually and in the aggregate, were not material to our consolidated results of operations.

Goodwill

The goodwill of the acquired companies is primarily related to expected improvements in technology performance and functionality, as well as sales growth from future product and service offerings and new customers, together with certain intangible assets that do not qualify for separate recognition. The goodwill of acquired companies is generally not deductible for tax purposes. The following summarizes our goodwill activity in the first six months of 2018 by segment (in millions):

	North America			International			AWS			Consolidated
Goodwill - December 31, 2017	$	11,165		$	1,108		$	1,077		$	13,350
New acquisitions (1)	409			183			15			607
Other adjustments (2)	(3		)	(3		)	(7		)	(13		)
Goodwill - June 30, 2018	$	11,571		$	1,288		$	1,085		$	13,944

 ___________________

(1) Primarily includes the acquisition of Ring in the North America and International segments.

(2) Primarily includes changes in foreign exchange rates.

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Long-Term Debt

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Long-Term Debt

DEBT

As of June 30, 2018, we had $24.3 billion of unsecured senior notes outstanding (the “Notes”). As of December 31, 2017 and June 30, 2018, the net unamortized discount and debt issuance costs on the Notes was $99 million and $101 million. We also have other long-term debt with a carrying amount, including the current portion and borrowings under our credit facility, of $692 million and $520 million as of December 31, 2017 and June 30, 2018. The face value of our total long-term debt obligations is as follows (in millions):

	December 31, 2017			June 30, 2018
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	592			489
Other long-term debt	100			31
Total debt	24,942			24,770
Less current portion of long-term debt	(100		)	(31		)
Face value of long-term debt	$	24,842		$	24,739

_____________________________

(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%.

Interest on the Notes issued in 2012 is payable semi-annually in arrears in May and November. Interest on the Notes issued in 2014 is payable semi-annually in arrears in June and December. Interest on the Notes issued in 2017 is payable semi-annually in arrears in February and August. Interest on the 2025 Notes is payable semi-annually in arrears in June and December. We may redeem the Notes at any time in whole, or from time to time, in part at specified redemption prices. We are not subject to any financial covenants under the Notes. The proceeds from the November 2012 and the December 2014 Notes were used for general corporate purposes. The proceeds from the August 2017 Notes were used to fund the consideration for the acquisition of Whole Foods Market, to repay notes due in 2017, and for general corporate purposes. The estimated fair value of the Notes was approximately $25.7 billion and $24.2 billion as of December 31, 2017 and June 30, 2018, which is based on quoted prices for our debt as of those dates.

In October 2016, we entered into a $500 million secured revolving credit facility with a lender that is secured by certain seller receivables, which we subsequently increased to $600 million and may from time to time increase in the future subject to lender approval (the “Credit Facility”). The Credit Facility is available for a term of three years, bears interest at the London interbank offered rate (“LIBOR”) plus 1.65%, and has a commitment fee of 0.50% on the undrawn portion. There were $592 million and $489 million of borrowings outstanding under the Credit Facility as of December 31, 2017 and June 30, 2018, with weighted-average interest rates of 2.7% and 2.9% as of December 31, 2017 and June 30, 2018. As of December 31, 2017 and June 30, 2018, we have pledged $686 million and $576 million of our cash and seller receivables as collateral for debt related to our Credit Facility. The estimated fair value of the Credit Facility, which is based on Level 2 inputs, approximated its carrying value as of December 31, 2017 and June 30, 2018.

The other debt, including the current portion, had a weighted-average interest rate of 5.8% and 4.3% as of December 31, 2017 and June 30, 2018. We used the net proceeds from the issuance of this debt primarily to fund certain business operations. The estimated fair value of the other long-term debt, which is based on Level 2 inputs, approximated its carrying value as of December 31, 2017 and June 30, 2018.

In April 2018, we established a commercial paper program (the “Commercial Paper Program”) under which we may from time to time issue unsecured commercial paper up to a total of $7.0 billion at any time, with individual maturities that may vary but will not exceed 397 days from the date of issue. There were no borrowings outstanding under the Commercial Paper Program as of June 30, 2018.

In April 2018, in connection with our Commercial Paper Program, we amended and restated our unsecured revolving credit facility (the “Credit Agreement”) with a syndicate of lenders to increase our borrowing capacity thereunder to $7.0 billion. As amended and restated, the Credit Agreement has a term of three years, but it may be extended for up to three additional one-year terms if approved by the lenders. The interest rate applicable to outstanding balances under the amended and restated Credit Agreement is LIBOR plus 0.50%, with a commitment fee of 0.04% on the undrawn portion of the credit facility. There were no borrowings outstanding under the Credit Agreement as of December 31, 2017 and June 30, 2018.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stockholders' Equity

STOCKHOLDERS’ EQUITY

Stock Repurchase Activity

In February 2016, the Board of Directors authorized a program to repurchase up to $5.0 billion of our common stock, with no fixed expiration. There were no repurchases of common stock during the six months ended June 30, 2017 or 2018.

Stock Award Activity

Common shares outstanding plus shares underlying outstanding stock awards totaled 504 million and 506 million as of December 31, 2017 and June 30, 2018. These totals include all vested and unvested stock awards outstanding, including those awards we estimate will be forfeited. Stock-based compensation expense is as follows (in millions):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2017		2018		2017		2018
Cost of sales	$	12	$	19	$	21	$	34
Fulfillment	261		320		425		564
Marketing	133		190		228		351
Technology and content	633		788		1,073		1,419
General and administrative	119		151		205		284
Total stock-based compensation expense	$	1,158	$	1,468	$	1,952	$	2,652

The following table summarizes our restricted stock unit activity for the six months ended June 30, 2018 (in millions):

	Number of Units		Weighted-Average Grant-Date Fair Value
Outstanding as of December 31, 2017	20.1		$	725
Units granted	3.7		1,437
Units vested	(3.6	)	552
Units forfeited	(1.2	)	808
Outstanding as of June 30, 2018	19.0		$	891

Scheduled vesting for outstanding restricted stock units as of June 30, 2018, is as follows (in millions):

	Six Months Ended December 31,	Year Ended December 31,
	2018	2019	2020	2021	2022	Thereafter	Total
Scheduled vesting—restricted stock units	3.5	7.1	5.6	2.1	0.4	0.3	19.0

As of June 30, 2018, there was $7.6 billion of net unrecognized compensation cost related to unvested stock-based compensation arrangements. This compensation is recognized on an accelerated basis with approximately half of the compensation expected to be expensed in the next twelve months, and has a weighted-average recognition period of 1.1 years. The estimated forfeiture rate as of December 31, 2017 and June 30, 2018 was 28% and 27%. Changes in our estimates and assumptions relating to forfeitures may cause us to realize material changes in stock-based compensation expense in the future.

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Income Taxes

6 Months Ended

Jun. 30, 2018

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

Our tax provision or benefit from income taxes 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.

Our quarterly tax provision, and our quarterly estimate of our annual effective tax rate, is subject to significant variation due to several factors, including variability in accurately predicting our pre-tax and taxable income and loss and the mix of jurisdictions to which they relate, intercompany transactions, the applicability of special tax regimes, changes in how we do business, acquisitions (including integrations) and investments, audit-related developments, changes in our stock price, changes in our deferred tax assets and liabilities and their valuation, foreign currency gains (losses), changes in statutes, regulations, case law, and administrative practices, principles, and interpretations related to tax, accounting, and other areas, including European Union state aid rules, and relative changes of expenses or losses for which tax benefits are not recognized. Additionally, our effective tax rate can be more or less volatile based on the amount of pre-tax income or loss. For example, the impact of discrete items and non-deductible expenses on our effective tax rate is greater when our pre-tax income is lower.

The 2017 Tax Act was signed into law on December 22, 2017. The 2017 Tax Act significantly revised the U.S. corporate income tax by, among other things, lowering the statutory corporate tax rate from 35% to 21%, eliminating certain deductions, imposing a mandatory one-time tax on accumulated earnings of foreign subsidiaries, introducing new tax regimes, and changing how foreign earnings are subject to U.S. tax. The 2017 Tax Act also enhanced and extended through 2026 the option to claim accelerated depreciation deductions on qualified property. We have not completed our determination of the accounting implications of the 2017 Tax Act on our tax accruals. However, we reasonably estimated the effects of the 2017 Tax Act and recorded provisional amounts in our financial statements as of December 31, 2017. We recorded a provisional tax benefit for the impact of the 2017 Tax Act of approximately $789 million. This amount was primarily comprised of the remeasurement of federal net deferred tax liabilities resulting from the permanent reduction in the U.S. statutory corporate tax rate to 21% from 35%, after taking into account the mandatory one-time tax on the accumulated earnings of our foreign subsidiaries. The amount of this one-time tax is not material. As we complete our analysis of the 2017 Tax Act, collect and prepare necessary data, and interpret any additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, we may make adjustments to the provisional amounts. Those adjustments may materially impact our provision for income taxes in the period in which the adjustments are made.

For 2018, we estimate that our effective tax rate will be favorably affected by the impact of excess tax benefits from stock-based compensation and the U.S. federal research and development credit and adversely affected by losses incurred in certain foreign jurisdictions for which we may not realize a tax benefit. Losses for which we may not realize a related tax benefit, primarily due to losses of foreign subsidiaries, reduce our pre-tax income without a corresponding reduction in our tax expense, and therefore increase our effective tax rate. We record valuation allowances against the deferred tax assets associated with losses for which we may not realize a related tax benefit.

Our income tax provision for the six months ended June 30, 2017 was $695 million, which included $197 million of net discrete tax benefits primarily attributable to excess tax benefits from stock-based compensation, partially offset by the estimated impact of audit-related developments. Our income tax provision for the six months ended June 30, 2018 was $361 million, which included $964 million of net discrete tax benefits primarily attributable to excess tax benefits from stock-based compensation.

Cash paid for income taxes, net of refunds was $447 million and $300 million in Q2 2017 and Q2 2018, and $693 million and $813 million for the six months ended June 30, 2017 and 2018.

As of December 31, 2017 and June 30, 2018, tax contingencies were approximately $2.3 billion and $3.3 billion. We expect the total amount of tax contingencies will grow in 2018. In addition, changes in state, federal, and foreign tax laws may increase our tax contingencies. The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued. It is reasonably possible that within the next 12 months we will receive additional assessments by various tax authorities or possibly reach resolution of income tax examinations in one or more jurisdictions. These assessments or settlements could result in changes to our contingencies related to positions on tax filings on prior years’ tax filings.

We are under examination, or may be subject to examination, by the Internal Revenue Service (“IRS”) for the calendar year 2005 and thereafter. These examinations may lead to ordinary course adjustments or proposed adjustments to our taxes or our net operating losses with respect to years under examination as well as subsequent periods. As previously disclosed, we have received Notices of Proposed Adjustment (“NOPAs”) from the IRS for transactions undertaken in the 2005 and 2006 calendar years relating to transfer pricing with our foreign subsidiaries. The IRS is seeking to increase our U.S. taxable income by an amount that would result in additional federal tax of approximately $1.5 billion, subject to interest. On March 23, 2017, the U.S. Tax Court issued its decision regarding the issues raised in the IRS NOPAs. The Tax Court rejected the approach from the IRS NOPAs in determining transfer pricing adjustments in 2005 and 2006 for the transactions undertaken with our foreign subsidiaries and adopted, with adjustments, our suggested approach. In September 2017, the IRS appealed the decision to the U.S. Court of Appeals for the Ninth Circuit. We will continue to defend ourselves vigorously in this matter. If the Tax Court decision were reversed on appeal or if the IRS were to successfully assert transfer pricing adjustments of a similar nature to the NOPAs for transactions in subsequent years, we could be subject to significant additional tax liabilities.

In October 2014, the European Commission opened a formal investigation to examine whether decisions by the tax authorities in Luxembourg with regard to the corporate income tax paid by certain of our subsidiaries comply with European Union rules on state aid. On October 4, 2017, the European Commission announced its decision that determinations by the tax authorities in Luxembourg did not comply with European Union rules on state aid. Based on that decision the European Commission announced an estimated recovery amount of approximately €250 million, plus interest, for the period May 2006 through June 2014, and ordered Luxembourg tax authorities to calculate the actual amount of additional taxes subject to recovery. Luxembourg computed an initial recovery amount, consistent with the European Commission’s decision, that we deposited into escrow in March 2018, subject to adjustment pending conclusion of all appeals. In December 2017, Luxembourg appealed the European Commission’s decision. In May 2018, we appealed. We believe the European Commission’s decision to be without merit and will continue to defend ourselves vigorously in this matter. We are also subject to taxation in various states and other foreign jurisdictions including Canada, China, Germany, India, Japan, Luxembourg, and the United Kingdom. We are under, or may be subject to, audit or examination and additional assessments by the relevant authorities in respect of these particular jurisdictions primarily for 2008 and thereafter.

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Segment Information

6 Months Ended

Jun. 30, 2018

Segment Reporting [Abstract]

Segment Information

SEGMENT INFORMATION

We have organized our operations into three segments: North America, International, and AWS. We allocate to segment results the operating expenses “Fulfillment,” “Marketing,” “Technology and content,” and “General and administrative” based on usage, which is generally reflected in the segment in which the costs are incurred. The majority of technology infrastructure costs are allocated to the AWS segment based on usage. The majority of the remaining non-infrastructure technology costs are incurred in the U.S. and are allocated to our North America segment. The results of Whole Foods Market are included in our North America and International segments based on physical location. There are no internal revenue transactions between our reportable segments. These segments reflect the way our chief operating decision maker evaluates the Company’s business performance and manages its operations.

North America

The North America segment primarily consists of amounts earned from retail sales of consumer products (including from sellers) and subscriptions through North America-focused websites and physical stores. This segment includes export sales from these websites.

International

The International segment primarily consists of amounts earned from retail sales of consumer products (including from sellers) and subscriptions through internationally-focused websites. This segment includes export sales from these internationally-focused websites (including export sales from these sites to customers in the U.S., Mexico, and Canada), but excludes export sales from our North America-focused websites.

AWS

The AWS segment consists of amounts earned from global sales of compute, storage, database, and other service offerings for start-ups, enterprises, government agencies, and academic institutions.

Information on reportable segments and reconciliation to consolidated net income is as follows (in millions):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2017			2018			2017			2018
North America
Net sales	$	22,370		$	32,169		$	43,362		$	62,894
Operating expenses	21,934			30,334			42,330			59,910
Operating income	$	436		$	1,835		$	1,032		$	2,984
International
Net sales	$	11,485		$	14,612		$	22,546		$	29,487
Operating expenses	12,209			15,106			23,752			30,603
Operating income (loss)	$	(724	)	$	(494	)	$	(1,206	)	$	(1,116	)
AWS
Net sales	$	4,100		$	6,105		$	7,761		$	11,547
Operating expenses	3,184			4,463			5,955			8,504
Operating income	$	916		$	1,642		$	1,806		$	3,043
Consolidated
Net sales	$	37,955		$	52,886		$	73,669		$	103,928
Operating expenses	37,327			49,903			72,037			99,017
Operating income	628			2,983			1,632			4,911
Total non-operating income (expense)	38			(378		)	(14		)	(391		)
Provision for income taxes	(467		)	(74		)	(695		)	(361		)
Equity-method investment activity, net of tax	(2		)	3			(2		)	4
Net income	$	197		$	2,534		$	921		$	4,163

Net sales by groups of similar products and services, which also have similar economic characteristics, is as follows (in millions):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2017		2018		2017		2018
Net Sales:
Online stores (1)	$	23,754	$	27,165	$	46,580	$	54,105
Physical stores (2)	—		4,312		—		8,575
Third-party seller services (3)	6,991		9,702		13,429		18,966
Subscription services (4)	2,165		3,408		4,104		6,510
AWS	4,100		6,105		7,761		11,547
Other (5)	945		2,194		1,795		4,225
Consolidated	$	37,955	$	52,886	$	73,669	$	103,928

____________________________

(1) Includes product sales and digital media content where we record revenue gross. We leverage our retail infrastructure to offer a wide selection of consumable and durable goods that includes media products available in both a physical and digital format, such as books, music, videos, games, and software. These product sales include digital products sold on a transactional basis. Digital product subscriptions that provide unlimited viewing or usage rights are included in Subscription services.

(2) Includes product sales where our customers physically select items in a store.

(3) Includes commissions and any related fulfillment and shipping fees, and other third-party seller services.

(4) Includes annual and monthly fees associated with Amazon Prime membership, as well as audiobook, e-book, digital video, digital music, and other non-AWS subscription services.

(5) Primarily includes sales of advertising services, as well as sales related to our other service offerings.

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Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Unaudited Interim Financial Information

Unaudited Interim Financial Information

We have prepared the accompanying consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These consolidated financial statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of our consolidated balance sheets, operating results, and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for 2018 due to seasonal and other factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with the rules and regulations of the SEC. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in Item 8 of Part II, “Financial Statements and Supplementary Data,” of our 2017 Annual Report on Form 10-K.

Prior Period Reclassifications

Prior Period Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation, including the addition of restricted cash to cash and cash equivalents on the consolidated statements of cash flows as a result of the adoption of new accounting guidance.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of Amazon.com, Inc., its wholly-owned subsidiaries, and those entities in which we have a variable interest and of which we are the primary beneficiary, including certain entities in India and China and that support our seller lending financing activities (collectively, the “Company”). Intercompany balances and transactions between consolidated entities are eliminated. The financial results of Whole Foods Market, Inc. (“Whole Foods Market”) have been included in our consolidated financial statements from the date of acquisition on August 28, 2017.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes. Estimates are used for, but not limited to, income taxes, commitments and contingencies, valuation of acquired intangibles and goodwill, stock-based compensation forfeiture rates, vendor funding, and inventory valuation. Actual results could differ materially from those estimates.

Earnings per Share

Earnings per Share

Basic earnings per share is calculated using our weighted-average outstanding common shares. Diluted earnings per share is calculated using our weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method. In periods when we have a net loss, stock awards are excluded from our calculation of earnings per share as their inclusion would have an antidilutive effect.

Revenue Recognition, Policy [Policy Text Block]

Revenue

Revenue is measured based on the amount of consideration that we expect to receive, reduced by estimates for return allowances, promotional discounts, and rebates. Revenue also excludes any amounts collected on behalf of third parties, including sales and indirect taxes. In arrangements where we have multiple performance obligations, the transaction price is allocated to each performance obligation using the relative stand-alone selling price. We generally determine stand-alone selling prices based on the prices charged to customers or using expected cost plus a margin.

A description of our principal revenue generating activities is as follows:

Retail sales - We offer consumer products through our online and physical stores. Revenue is recognized when control of the goods is transferred to the customer, which generally occurs upon our delivery to the carrier or the customer.

Third-party seller services - We offer programs that enable sellers to sell their products on our websites and their own branded websites, and fulfill orders through us. We are not the seller of record in these transactions. The commissions and any related fulfillment and shipping fees we earn from these arrangements are recognized as the services are rendered.

Subscription services - Our subscription sales include fees associated with Amazon Prime memberships and access to content including audiobooks, e-books, digital video, digital music, and other non-AWS subscription services. Prime memberships provide our customers with access to an evolving suite of benefits that represent a single stand-ready obligation. Subscriptions are paid for at the time of or in advance of delivering the services. Revenue from such arrangements is recognized over the subscription period.

AWS - Our AWS sales arrangements include global sales of compute, storage, database, and other service offerings. Revenue is allocated to the services provided based on stand-alone selling prices and is recognized as the services are rendered. Sales commissions we pay in connection with contracts that exceed one year are capitalized and amortized over the contract term.

Other - Other revenue primarily includes sales of advertising services and is recognized as the services are rendered.

Revenue Recognition, Allowances [Policy Text Block]

Return Allowances

Return allowances, which reduce revenue and cost of sales, are estimated using historical experience. Liabilities for return allowances are included in “Accrued expenses and other” and were $468 million and $355 million as of December 31, 2017 and June 30, 2018. Included in “Inventories” on our consolidated balance sheets are assets totaling $406 million and $287 million as of December 31, 2017 and June 30, 2018, for the rights to recover products from customers associated with our liabilities for return allowances.

Cost of Sales, Policy [Policy Text Block]

Cost of Sales

Cost of sales primarily consists of the purchase price of consumer products, digital media content costs, including video and music, packaging supplies, sortation and delivery centers and related equipment costs, and inbound and outbound shipping costs, including where we are the transportation service provider. Shipping costs to receive products from our suppliers are included in our inventory, and recognized as cost of sales upon sale of products to our customers. Payment processing and related transaction costs, including those associated with seller transactions, are classified in “Fulfillment” on our consolidated statements of operations.

Cost of Sales, Vendor Allowances, Policy [Policy Text Block]

Vendor Agreements

We have agreements with our vendors to receive funds primarily for cooperative marketing efforts, promotions, incentives, and volume rebates. We generally consider these amounts received from vendors to be a reduction of the prices we pay for their goods, including property and equipment, or services, and are recorded as a reduction of the cost of inventory, cost of services, or cost of property and equipment. Volume rebates typically depend on reaching minimum purchase thresholds. We evaluate the likelihood of reaching purchase thresholds using past experience and current year forecasts. When volume rebates can be reasonably estimated, we record a portion of the rebate as we make progress towards the purchase threshold.

Receivables, Policy [Policy Text Block]

Accounts Receivable, Net and Other

Included in “Accounts receivable, net and other” on our consolidated balance sheets are amounts primarily related to customers, vendors, and sellers. As of December 31, 2017 and June 30, 2018, customer receivables, net, were $6.4 billion and $6.9 billion, vendor receivables, net, were $2.6 billion and $2.2 billion, and seller receivables, net, were $692 million and $640 million. Seller receivables are amounts due from sellers related to our seller lending program, which provides funding to sellers primarily to procure inventory.

We estimate losses on receivables based on known troubled accounts and historical experience of losses incurred. Receivables are considered impaired and written-off when it is probable that all contractual payments due will not be collected in accordance with the terms of the agreement.

Revenue Recognition, Deferred Revenue [Policy Text Block]

Unearned Revenue

Unearned revenue is recorded when payments are received or due in advance of performing our service obligations and is recognized over the service period. Unearned revenue primarily relates to prepayments of Amazon Prime memberships and AWS services. Our total unearned revenue as of December 31, 2017 was $6.1 billion, of which $3.9 billion was recognized as revenue during the six months ended June 30, 2018, including adjustments related to the new revenue recognition guidance. Included in “Other long-term liabilities” on our consolidated balance sheets was $1.0 billion and $1.2 billion of unearned revenue as of December 31, 2017 and June 30, 2018.

Additionally, we have performance obligations, primarily related to AWS, associated with commitments in customer contracts for future services that have not yet been recognized in our financial statements. For contracts with original terms that exceed one year, the amount of revenue not yet recognized was $16.0 billion as of June 30, 2018. The weighted average remaining life of our long-term contracts is 3.5 years. However, the timing of revenue recognition is largely driven by customer activity, some of which can extend beyond the original contractual term.

Accrued Expenses And Other, Policy [Policy Text Block]

Accrued Expenses and Other

Included in “Accrued expenses and other” on our consolidated balance sheets are amounts primarily related to unredeemed gift cards, customer liabilities, leases and asset retirement obligations, current debt, acquired digital media content, and other operating expenses.

As of December 31, 2017 and June 30, 2018, our liabilities for unredeemed gift cards were $3.0 billion and $1.8 billion. We reduce the liability for a gift card when redeemed by a customer. The portion of gift cards that we do not expect to be redeemed is recognized based on customer usage patterns.

Accounting Pronouncements Recently Adopted and Accounting Pronouncements Not Yet Adopted

Accounting Pronouncements Recently Adopted

In May 2014, the FASB issued an Accounting Standards Update (“ASU”) amending revenue recognition guidance and requiring more detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. We adopted this ASU on January 1, 2018 for all revenue contracts with our customers using the modified retrospective approach and increased retained earnings by approximately $650 million. The adjustment primarily relates to the unredeemed portion of our gift cards, which are now recognized over the expected customer usage period rather than waiting until gift cards expire or when the likelihood of redemption becomes remote. We changed the recognition and classification of Amazon Prime memberships, which are now accounted for as a single performance obligation and recognized ratably over the membership period as service sales. Previously, Prime memberships were considered to be arrangements with multiple deliverables and were allocated among product sales and service sales. Other changes relate primarily to the presentation of revenue. Certain advertising services are now classified as revenue rather than a reduction in cost of sales, and sales of apps, in-app content, and certain digital media content are presented on a net basis.

The impact of applying this ASU for the six months ended June 30, 2018 primarily resulted in a decrease in product sales and an increase in service sales driven by a reclassification of Prime membership fees of approximately $1.7 billion, which are now accounted for as a single performance obligation and recognized over the membership period. Service sales also increased by approximately $1.2 billion for the six months ended June 30, 2018 due to the reclassification of certain advertising services that were previously classified as a reduction of cost of sales.

In January 2016, the FASB issued an ASU that updates certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Under this ASU, certain equity investments are measured at fair value with changes recognized in net income. We adopted this ASU in Q1 2018 with no material impact to our consolidated financial statements.

In October 2016, the FASB issued an ASU amending the accounting for income taxes. The new guidance requires the recognition of the income tax consequences of an intercompany asset transfer, other than transfers of inventory, when the transfer occurs. For intercompany transfers of inventory, the income tax effects will continue to be deferred until the inventory has been sold to a third party. We adopted this ASU in Q1 2018 with an increase of approximately $250 million to retained earnings and deferred tax assets net of valuation allowances.

In November 2016, the FASB issued an ASU amending the presentation of restricted cash within the consolidated statements of cash flows. The new guidance requires that restricted cash be added to cash and cash equivalents on the consolidated statements of cash flows. We adopted this ASU in Q1 2018 on a retrospective basis with the following impacts to our consolidated statements of cash flows (in millions):

Three Months Ended June 30, 2017	Previously Reported			Adjustments			As Revised
Operating activities	$	3,829		$	21		$	3,850
Investing activities	(5,051		)	(223		)	(5,274		)
Financing activities	(1,263		)	(11		)	(1,274		)
Net change in cash, cash equivalents, and restricted cash	$	(2,485	)	$	(213	)	$	(2,698	)

Six Months Ended June 30, 2017	Previously Reported			Adjustments			As Revised
Operating activities	$	2,239		$	(9	)	$	2,230
Investing activities	(6,667		)	43			(6,624		)
Financing activities	(2,177		)	14			(2,163		)
Net change in cash, cash equivalents, and restricted cash	$	(6,605	)	$	48		$	(6,557	)

Twelve Months Ended June 30, 2017	Previously Reported			Adjustments			As Revised
Operating activities	$	17,885		$	(83	)	$	17,802
Investing activities	(13,410		)	237			(13,173		)
Financing activities	(3,769		)	38			(3,731		)
Net change in cash, cash equivalents, and restricted cash	$	706		$	192		$	898

Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued an ASU amending the accounting for leases. The new guidance requires the recognition of lease assets and liabilities for operating leases with terms of more than 12 months, in addition to those currently recorded, on our consolidated balance sheets. Presentation of leases within the consolidated statements of operations and consolidated statements of cash flows will be generally consistent with the current lease accounting guidance. The ASU is effective for reporting periods beginning after December 15, 2018, with early adoption permitted. We plan to adopt this ASU beginning in Q1 2019. We are continuing to evaluate the impact and expect the ASU will have a material impact on our consolidated financial statements, primarily to the consolidated balance sheets and related disclosures.

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Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Calculation of Diluted Shares

The following table shows the calculation of diluted shares (in millions):

	Three Months Ended   June 30,		Six Months Ended   June 30,
	2017	2018	2017	2018
Shares used in computation of basic earnings per share	479	486	478	485
Total dilutive effect of outstanding stock awards	13	14	13	14
Shares used in computation of diluted earnings per share	492	500	491	499

Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]

We adopted this ASU in Q1 2018 on a retrospective basis with the following impacts to our consolidated statements of cash flows (in millions):

Three Months Ended June 30, 2017	Previously Reported			Adjustments			As Revised
Operating activities	$	3,829		$	21		$	3,850
Investing activities	(5,051		)	(223		)	(5,274		)
Financing activities	(1,263		)	(11		)	(1,274		)
Net change in cash, cash equivalents, and restricted cash	$	(2,485	)	$	(213	)	$	(2,698	)

Six Months Ended June 30, 2017	Previously Reported			Adjustments			As Revised
Operating activities	$	2,239		$	(9	)	$	2,230
Investing activities	(6,667		)	43			(6,624		)
Financing activities	(2,177		)	14			(2,163		)
Net change in cash, cash equivalents, and restricted cash	$	(6,605	)	$	48		$	(6,557	)

Twelve Months Ended June 30, 2017	Previously Reported			Adjustments			As Revised
Operating activities	$	17,885		$	(83	)	$	17,802
Investing activities	(13,410		)	237			(13,173		)
Financing activities	(3,769		)	38			(3,731		)
Net change in cash, cash equivalents, and restricted cash	$	706		$	192		$	898

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Cash, Cash Equivalents, and Marketable Securities (Tables)

6 Months Ended

Jun. 30, 2018

Investments, Debt and Equity Securities [Abstract]

Fair Value by Major Security Type

The following table summarizes, by major security type, our cash, cash equivalents, restricted cash, and marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in millions):

	December 31, 2017			June 30, 2018
	Total Estimated Fair Value			Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Total Estimated Fair Value
Cash	$	9,982		$	8,107	$	—	$	—		$	8,107
Level 1 securities:
Money market funds	11,343			10,094		—		—			10,094
Equity securities	53			25		83		—			108
Level 2 securities:
Foreign government and agency securities	620			389		—		—			389
U.S. government and agency securities	4,823			5,465		1		(25		)	5,441
Corporate debt securities	4,257			2,638		1		(18		)	2,621
Asset-backed securities	905			756		—		(8		)	748
Other fixed income securities	338			225		—		(2		)	223
Equity securities	—			29		6		—			35
	$	32,321		$	27,728	$	91	$	(53	)	$	27,766
Less: Restricted cash, cash equivalents, and marketable securities (1)	(1,335		)								(716		)
Total cash, cash equivalents, and marketable securities	$	30,986									$	27,050

___________________

(1) We are required to pledge or otherwise restrict a portion of our cash, cash equivalents, and marketable securities as collateral for real estate leases, amounts due to third-party sellers in certain jurisdictions, debt, and standby and trade letters of credit. We classify cash, cash equivalents, and marketable securities with use restrictions of less than twelve months as “Accounts receivable, net and other” and of twelve months or longer as non-current “Other assets” on our consolidated balance sheets. See “Note 3 — Commitments and Contingencies.”

Investments Classified by Contractual Maturity Date

The following table summarizes the remaining contractual maturities of our cash equivalents and marketable fixed-income securities as of June 30, 2018 (in millions):

	Amortized Cost		Estimated Fair Value
Due within one year	$	16,023	$	16,016
Due after one year through five years	2,895		2,864
Due after five years through ten years	216		212
Due after ten years	433		424
Total	$	19,567	$	19,516

Actual maturities may differ from the contractual maturities because borrowers may have certain prepayment conditions.

Reconciliation of cash, cash equivalents, and restricted cash [Table Text Block]

The following table provides a reconciliation of the amount of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets to the total of the same such amounts shown in the consolidated statements of cash flows (in millions):

	December 31, 2017		June 30, 2018
Cash and cash equivalents	$	20,522	$	19,823
Restricted cash included in accounts receivable, net and other	1,329		707
Restricted cash included in other assets	5		6
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	$	21,856	$	20,536

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Principal Contractual Commitments, Excluding Open Orders for Purchases

The following summarizes our principal contractual commitments, excluding open orders for purchases that support normal operations and are generally cancellable, as of June 30, 2018 (in millions):

	Six Months Ended December 31,		Year Ended December 31,
	2018		2019		2020		2021		2022		Thereafter		Total
Debt principal and interest	$	480	$	2,162	$	2,086	$	1,833	$	2,049	$	31,769	$	40,379
Capital lease obligations, including interest (1)	3,503		6,191		4,022		1,212		520		673		16,121
Finance lease obligations, including interest (2)	246		512		523		532		542		4,326		6,681
Operating leases	1,503		2,727		2,609		2,286		2,221		12,325		23,671
Unconditional purchase obligations (3)	1,258		3,661		3,285		3,127		2,993		7,957		22,281
Other commitments (4) (5)	1,223		1,546		1,058		1,190		647		7,521		13,185
Total commitments	$	8,213	$	16,799	$	13,583	$	10,180	$	8,972	$	64,571	$	122,318

___________________

(1) Excluding interest, current capital lease obligations of $5.8 billion and $6.6 billion are recorded within “Accrued expenses and other” as of December 31, 2017 and June 30, 2018, and $8.4 billion and $9.0 billion are recorded within “Other long-term liabilities” as of December 31, 2017 and June 30, 2018.

(2) Excluding interest, current finance lease obligations of $282 million and $320 million are recorded within “Accrued expenses and other” as of December 31, 2017 and June 30, 2018, and $4.7 billion and $5.2 billion are recorded within “Other long-term liabilities” as of December 31, 2017 and June 30, 2018.

(3) Includes unconditional purchase obligations related to certain products offered in our Whole Foods Market stores and long-term agreements to acquire and license digital media content that are not reflected on the consolidated balance sheets. For those digital media content agreements with variable terms, we do not estimate the total obligation beyond any minimum quantities and/or pricing as of the reporting date. Purchase obligations associated with renewal provisions solely at the option of the content provider are included to the extent such commitments are fixed or a minimum amount is specified.

(4) 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 and digital media content liabilities associated with long-term digital media content assets with initial terms greater than one year.

(5) Excludes approximately $3.3 billion of accrued tax contingencies for which we cannot make a reasonably reliable estimate of the amount and period of payment, if any.

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Acquisitions, Goodwill, and Acquired Intangible Assets Acquisitions, Goodwill, and Acquired Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2018

Business Acquisition [Line Items]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

The aggregate purchase price of Ring and the other 2018 acquisitions was allocated as follows (in millions):

Purchase Price
Cash paid, net of cash acquired	$	865
Indemnification holdback	27
	$	892
Allocation
Goodwill	$	607
Intangible assets (1):
Marketing-related	141
Technology-based	165
Customer-related	140
	446
Property and equipment	3
Deferred tax assets	106
Other assets acquired	254
Long-term debt	(97		)
Deferred tax liabilities	(106		)
Other liabilities assumed	(321		)
	$	892

___________________

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

Schedule of Goodwill [Table Text Block]

The following summarizes our goodwill activity in the first six months of 2018 by segment (in millions):

	North America			International			AWS			Consolidated
Goodwill - December 31, 2017	$	11,165		$	1,108		$	1,077		$	13,350
New acquisitions (1)	409			183			15			607
Other adjustments (2)	(3		)	(3		)	(7		)	(13		)
Goodwill - June 30, 2018	$	11,571		$	1,288		$	1,085		$	13,944

 ___________________

(1) Primarily includes the acquisition of Ring in the North America and International segments.

(2) Primarily includes changes in foreign exchange rates.

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Long-Term Debt (Tables)

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Long-Term Debt Obligations

The face value of our total long-term debt obligations is as follows (in millions):

	December 31, 2017			June 30, 2018
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	592			489
Other long-term debt	100			31
Total debt	24,942			24,770
Less current portion of long-term debt	(100		)	(31		)
Face value of long-term debt	$	24,842		$	24,739

_____________________________

(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%.

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation Expense

Stock-based compensation expense is as follows (in millions):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2017		2018		2017		2018
Cost of sales	$	12	$	19	$	21	$	34
Fulfillment	261		320		425		564
Marketing	133		190		228		351
Technology and content	633		788		1,073		1,419
General and administrative	119		151		205		284
Total stock-based compensation expense	$	1,158	$	1,468	$	1,952	$	2,652

Nonvested Restricted Stock Units Activity

The following table summarizes our restricted stock unit activity for the six months ended June 30, 2018 (in millions):

	Number of Units		Weighted-Average Grant-Date Fair Value
Outstanding as of December 31, 2017	20.1		$	725
Units granted	3.7		1,437
Units vested	(3.6	)	552
Units forfeited	(1.2	)	808
Outstanding as of June 30, 2018	19.0		$	891

Nonvested Share Activity

Scheduled vesting for outstanding restricted stock units as of June 30, 2018, is as follows (in millions):

	Six Months Ended December 31,	Year Ended December 31,
	2018	2019	2020	2021	2022	Thereafter	Total
Scheduled vesting—restricted stock units	3.5	7.1	5.6	2.1	0.4	0.3	19.0

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Segment Information (Tables)

6 Months Ended

Jun. 30, 2018

Segment Reporting [Abstract]

Information on Reportable Segments and Reconciliation to Consolidated Net Income

Information on reportable segments and reconciliation to consolidated net income is as follows (in millions):

	Three Months Ended   June 30,						Six Months Ended   June 30,
	2017			2018			2017			2018
North America
Net sales	$	22,370		$	32,169		$	43,362		$	62,894
Operating expenses	21,934			30,334			42,330			59,910
Operating income	$	436		$	1,835		$	1,032		$	2,984
International
Net sales	$	11,485		$	14,612		$	22,546		$	29,487
Operating expenses	12,209			15,106			23,752			30,603
Operating income (loss)	$	(724	)	$	(494	)	$	(1,206	)	$	(1,116	)
AWS
Net sales	$	4,100		$	6,105		$	7,761		$	11,547
Operating expenses	3,184			4,463			5,955			8,504
Operating income	$	916		$	1,642		$	1,806		$	3,043
Consolidated
Net sales	$	37,955		$	52,886		$	73,669		$	103,928
Operating expenses	37,327			49,903			72,037			99,017
Operating income	628			2,983			1,632			4,911
Total non-operating income (expense)	38			(378		)	(14		)	(391		)
Provision for income taxes	(467		)	(74		)	(695		)	(361		)
Equity-method investment activity, net of tax	(2		)	3			(2		)	4
Net income	$	197		$	2,534		$	921		$	4,163

Disaggregation of Revenue

Net sales by groups of similar products and services, which also have similar economic characteristics, is as follows (in millions):

	Three Months Ended   June 30,				Six Months Ended   June 30,
	2017		2018		2017		2018
Net Sales:
Online stores (1)	$	23,754	$	27,165	$	46,580	$	54,105
Physical stores (2)	—		4,312		—		8,575
Third-party seller services (3)	6,991		9,702		13,429		18,966
Subscription services (4)	2,165		3,408		4,104		6,510
AWS	4,100		6,105		7,761		11,547
Other (5)	945		2,194		1,795		4,225
Consolidated	$	37,955	$	52,886	$	73,669	$	103,928

____________________________

(1) Includes product sales and digital media content where we record revenue gross. We leverage our retail infrastructure to offer a wide selection of consumable and durable goods that includes media products available in both a physical and digital format, such as books, music, videos, games, and software. These product sales include digital products sold on a transactional basis. Digital product subscriptions that provide unlimited viewing or usage rights are included in Subscription services.

(2) Includes product sales where our customers physically select items in a store.

(3) Includes commissions and any related fulfillment and shipping fees, and other third-party seller services.

(4) Includes annual and monthly fees associated with Amazon Prime membership, as well as audiobook, e-book, digital video, digital music, and other non-AWS subscription services.

(5) Primarily includes sales of advertising services, as well as sales related to our other service offerings.

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Accounting Policies - Calculation of Diluted Shares (Details) - shares shares in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Accounting Policies [Abstract]
Shares used in computation of basic earnings per share	486	479	485	478
Total dilutive effect of outstanding stock awards	14	13	14	13
Shares used in computation of diluted earnings per share	500	492	499	491

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Accounting Policies - Return Allowances (Details) - USD ($) $ in Millions	Jun. 30, 2018	Dec. 31, 2017
Accounting Policies [Abstract]
Contract with Customer, Refund Liability	$ 355	$ 468
Contract with Customer, Right to Recover Product	$ 287	$ 406

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Accounting Policies - Accounts Receivable, Net and Other (Details) - USD ($) $ in Millions	Jun. 30, 2018	Dec. 31, 2017
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, net and other	$ 12,607	$ 13,164
Allowance for Doubtful Accounts Receivable, Current	403	348
Customer Receivables, net
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, net and other	6,900	6,400
Vendor Receivables, net
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, net and other	2,200	2,600
Seller Receivables, net
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable, net and other	$ 640	$ 692

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Accounting Policies - Unearned Revenue (Details) - USD ($) $ in Billions	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Accounting Policies [Abstract]
Unearned revenue		$ 6.1
Unearned revenue, revenue recognized from beginning balance	$ 3.9
Unearned revenue, noncurrent	1.2	$ 1.0
Remaining performance obligation, contracts exceeding one year	$ 16.0
Remaining performance obligation, expected timing of satisfaction, weighted average remaining life	3 years 6 months

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Accounting Policies - Accrued Expenses and Other (Details) - USD ($) $ in Billions	Jun. 30, 2018	Dec. 31, 2017
Accounting Policies [Abstract]
Unredeemed gift certificates	$ 1.8	$ 3.0

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Accounting Policies - Revenue, Initial Application Period Cumulative Effect Transition (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Net service sales	$ 21,022	$ 13,210	$ 40,460	$ 25,190
Net product sales	31,864	24,745	63,468	48,479
Cost of sales	$ 30,632	$ 23,451	61,367	$ 45,891
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Subscription Services [Member]
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Net service sales			1,700
Net product sales			(1,700)
Difference between Revenue Guidance in Effect before and after Topic 606 [Member] | Other Services [Member]
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Net service sales			1,200
Cost of sales			$ 1,200

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Accounting Policies - Accounting Pronouncements Recently Adopted (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Mar. 31, 2018	Jan. 01, 2018
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net Cash Provided by (Used in) Operating Activities	$ 7,449	$ 3,850	$ 5,658	$ 2,230	$ 21,793	$ 17,802
Net Cash Provided by (Used in) Investing Activities	(2,692)	(5,274)	(3,225)	(6,624)	(23,684)	(13,173)
Net Cash Provided by (Used in) Financing Activities	$ (1,394)	(1,274)	$ (3,556)	(2,163)	$ 8,535	(3,731)
Net change in cash, cash equivalents, and restricted cash		(2,698)		(6,557)		898
Accounting Standards Update 2014-09 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
New Accounting Pronouncement or Change in Accounting Principle, Cumulative Effect of Change on Equity or Net Assets								$ 650
Accounting Standards Update 2016-16 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
New Accounting Pronouncement or Change in Accounting Principle, Cumulative Effect of Change on Equity or Net Assets							$ 250
Accounting Standards Update 2016-18 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net Cash Provided by (Used in) Operating Activities		21		(9)		(83)
Net Cash Provided by (Used in) Investing Activities		(223)		43		237
Net Cash Provided by (Used in) Financing Activities		(11)		14		38
Net change in cash, cash equivalents, and restricted cash		(213)		48		192
Scenario, Previously Reported [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Net Cash Provided by (Used in) Operating Activities		3,829		2,239		17,885
Net Cash Provided by (Used in) Investing Activities		(5,051)		(6,667)		(13,410)
Net Cash Provided by (Used in) Financing Activities		(1,263)		(2,177)		(3,769)
Net change in cash, cash equivalents, and restricted cash		$ (2,485)		$ (6,605)		$ 706

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Cash, Cash Equivalents, and Marketable Securities - Fair Values on Recurring Basis (Details) - USD ($) $ in Millions	Jun. 30, 2018	Dec. 31, 2017
Total Estimated Fair Value
Cash equivalents and marketable securities	$ 19,516
Cost or Amortized Cost
Cash equivalents and marketable securities	19,567
Recurring
Schedule of Investments [Line Items]
Cash	8,107	$ 9,982
Total Estimated Fair Value
Cash, cash equivalents and short-term investments	27,766	32,321
Less: Restricted cash, cash equivalents, and marketable securities	(716)	(1,335)
Total cash, cash equivalents, and marketable securities	27,050	30,986
Cost or Amortized Cost
Cash, cash equivalents and short-term investments	27,728
Gross Unrealized Gains
Short-term investments	91
Gross Unrealized Losses
Short-term investments	(53)
Recurring | Level 1 securities
Total Estimated Fair Value
Equity securities	108	53
Cost or Amortized Cost
Equity securities	25
Gross Unrealized Gains
Equity securities	83
Gross Unrealized Losses
Equity securities	0
Recurring | Level 1 securities | Money market funds
Schedule of Investments [Line Items]
Money market funds	10,094	11,343
Recurring | Level 2 securities
Total Estimated Fair Value
Equity securities	35	0
Cost or Amortized Cost
Equity securities	29
Gross Unrealized Gains
Equity securities	6
Gross Unrealized Losses
Equity securities	0
Recurring | Level 2 securities | Foreign government and agency securities
Total Estimated Fair Value
Cash equivalents and marketable securities	389	620
Cost or Amortized Cost
Cash equivalents and marketable securities	389
Gross Unrealized Gains
Cash equivalents and marketable securities	0
Gross Unrealized Losses
Cash equivalents and marketable securities	0
Recurring | Level 2 securities | U.S. government and agency securities
Total Estimated Fair Value
Cash equivalents and marketable securities	5,441	4,823
Cost or Amortized Cost
Cash equivalents and marketable securities	5,465
Gross Unrealized Gains
Cash equivalents and marketable securities	1
Gross Unrealized Losses
Cash equivalents and marketable securities	(25)
Recurring | Level 2 securities | Corporate debt securities
Total Estimated Fair Value
Cash equivalents and marketable securities	2,621	4,257
Cost or Amortized Cost
Cash equivalents and marketable securities	2,638
Gross Unrealized Gains
Cash equivalents and marketable securities	1
Gross Unrealized Losses
Cash equivalents and marketable securities	(18)
Recurring | Level 2 securities | Asset-backed securities
Total Estimated Fair Value
Cash equivalents and marketable securities	748	905
Cost or Amortized Cost
Cash equivalents and marketable securities	756
Gross Unrealized Gains
Cash equivalents and marketable securities	0
Gross Unrealized Losses
Cash equivalents and marketable securities	(8)
Recurring | Level 2 securities | Other fixed income securities
Total Estimated Fair Value
Cash equivalents and marketable securities	223	$ 338
Cost or Amortized Cost
Cash equivalents and marketable securities	225
Gross Unrealized Gains
Cash equivalents and marketable securities	0
Gross Unrealized Losses
Cash equivalents and marketable securities	$ (2)

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Cash, Cash Equivalents, and Marketable Securities - Contractual Maturities (Details) $ in Millions	Jun. 30, 2018 USD ($)
Amortized Cost
Due within one year	$ 16,023
Due after one year through five years	2,895
Due after five years through ten years	216
Due after ten years	433
Cash equivalents and marketable securities	19,567
Estimated Fair Value
Due within one year	16,016
Due after one year through five years	2,864
Due after five years through ten years	212
Due after ten years	424
Cash equivalents and marketable securities	$ 19,516

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Cash, Cash Equivalents, and Marketable Securities - Additional Information (Details) - Warrant - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Investments, Warrant Assets
Gain (loss) on warrant assets	$ 40	$ 54	$ 86	$ 69
Level 2 assets
Investments, Warrant Assets
Fair value of warrant assets	$ 577		$ 577		$ 441

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Cash, Cash Equivalents, and Marketable Securities - Reconciliation to Cash Flow (Details) - USD ($) $ in Millions	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Jun. 30, 2016
Reconciliation to Cash Flow [Abstract]
Cash and cash equivalents	$ 19,823		$ 20,522
Restricted cash included in accounts receivable, net and other	707		1,329
Restricted cash included in other assets	6		5
Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows	$ 20,536	$ 17,616	$ 21,856	$ 13,851	$ 16,301	$ 19,934	$ 12,977

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Commitments and Contingencies - Commitments (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Commitments and Contingencies Disclosure [Abstract]
Rental expense under operating lease agreements	$ 815	$ 439	$ 1,600	$ 850

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Commitments and Contingencies - Principal Contractual Commitments Excluding Open Orders (Details) - USD ($) $ in Millions	Jun. 30, 2018	Dec. 31, 2017
Debt principal and interest
Six Months Ended December 31, 2018	$ 480
Year Ended December 31, 2019	2,162
Year Ended December 31, 2020	2,086
Year Ended December 31, 2021	1,833
Year Ended December 31, 2022	2,049
Thereafter	31,769
Total	40,379
Capital lease obligations, including interest
Six Months Ended December 31, 2018	3,503
Year Ended December 31, 2019	6,191
Year Ended December 31, 2020	4,022
Year Ended December 31, 2021	1,212
Year Ended December 31, 2022	520
Thereafter	673
Total	16,121
Current capital lease obligations	6,600	$ 5,800
Noncurrent capital lease obligations	9,000	8,400
Finance lease obligations, including interest
Six Months Ended December 31, 2018	246
Year Ended December 31, 2019	512
Year Ended December 31, 2020	523
Year Ended December 31, 2021	532
Year Ended December 31, 2022	542
Thereafter	4,326
Total	6,681
Current finance lease obligations	320	282
Noncurrent finance lease obligations	5,200	4,700
Operating leases
Six Months Ended December 31, 2018	1,503
Year Ended December 31, 2019	2,727
Year Ended December 31, 2020	2,609
Year Ended December 31, 2021	2,286
Year Ended December 31, 2022	2,221
Thereafter	12,325
Total	23,671
Unconditional purchase obligations
Six Months Ended December 31, 2018	1,258
Year Ended December 31, 2019	3,661
Year Ended December 31, 2020	3,285
Year Ended December 31, 2021	3,127
Year Ended December 31, 2022	2,993
Thereafter	7,957
Total	22,281
Other commitments
Six Months Ended December 31, 2018	1,223
Year Ended December 31, 2019	1,546
Year Ended December 31, 2020	1,058
Year Ended December 31, 2021	1,190
Year Ended December 31, 2022	647
Thereafter	7,521
Total	13,185
Accrued tax contingencies	3,300	$ 2,300
Total commitments
Six Months Ended December 31, 2018	8,213
Year Ended December 31, 2019	16,799
Year Ended December 31, 2020	13,583
Year Ended December 31, 2021	10,180
Year Ended December 31, 2022	8,972
Thereafter	64,571
Total	$ 122,318

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Commitments and Contingencies - Pledged Assets (Details) - USD ($) $ in Millions	Jun. 30, 2018	Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]
Pledged assets	$ 803	$ 1,400

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Acquisitions, Goodwill, and Acquired Intangible Assets - Additional Information (Details) - USD ($) $ in Millions		3 Months Ended		6 Months Ended		12 Months Ended
	Apr. 12, 2018	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Business Acquisition [Line Items]
Payments to Acquire Businesses, Net of Cash Acquired		$ 866	$ 633	$ 879	$ 678	$ 14,173	$ 765
Ring, Inc [Member]
Business Acquisition [Line Items]
Payments to Acquire Businesses, Net of Cash Acquired	$ 853
Other 2018 Acquisitions [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred				$ 39

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Acquisitions, Goodwill, and Acquired Intangible Assets - Allocation of Aggregate Purchase Price of Acquisitions (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Business Acquisition [Line Items]
Payments to Acquire Businesses, Net of Cash Acquired	$ 866	$ 633	$ 879	$ 678	$ 14,173	$ 765
Goodwill	13,944		13,944		13,944		$ 13,350
Two Thousand Eighteen Acquisitions [Member]
Business Acquisition [Line Items]
Payments to Acquire Businesses, Net of Cash Acquired			865
Business Combination, Consideration Transferred, Liabilities Incurred			27
Aggregate purchase price			892
Goodwill	607		607		607
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles	446		446		446
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Property, Plant, and Equipment	3		3		3
Business Combination Recognized Identifiable Assets Acquired and Liabilities Assumed, Deferred Tax Assets	106		106		106
Business Combination, Recognized Identifiable Assets Acquired And Liabilities Assumed, Other Assets	254		254		254
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Noncurrent Liabilities, Long-term Debt	97		97		97
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Deferred Tax Liabilities	106		106		106
Business Combination, Recognized Identifiable Assets Acquired And Liabilities Assumed, Liabilities, Other	321		321		321
Allocated purchase price	892		$ 892		892
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life			6 years
Marketing-Related Intangible Assets [Member] | Two Thousand Eighteen Acquisitions [Member]
Business Acquisition [Line Items]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles	141		$ 141		141
Technology-Based Intangible Assets [Member] | Two Thousand Eighteen Acquisitions [Member]
Business Acquisition [Line Items]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles	165		165		165
Customer-Related Intangible Assets [Member] | Two Thousand Eighteen Acquisitions [Member]
Business Acquisition [Line Items]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles	$ 140		$ 140		$ 140
Minimum [Member] | Two Thousand Eighteen Acquisitions [Member]
Business Acquisition [Line Items]
Finite-Lived Intangible Asset, Useful Life			2 years
Maximum [Member] | Two Thousand Eighteen Acquisitions [Member]
Business Acquisition [Line Items]
Finite-Lived Intangible Asset, Useful Life			7 years

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Acquisitions, Goodwill, and Acquired Intangible Assets - Summary of Goodwill Activity by Segment (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Goodwill [Line Items]
Goodwill	$ 13,944	$ 13,350
Goodwill, Acquired During Period	607
Goodwill, Translation and Purchase Accounting Adjustments	(13)
North America
Goodwill [Line Items]
Goodwill	11,571	11,165
Goodwill, Acquired During Period	409
Goodwill, Translation and Purchase Accounting Adjustments	(3)
International
Goodwill [Line Items]
Goodwill	1,288	1,108
Goodwill, Acquired During Period	183
Goodwill, Translation and Purchase Accounting Adjustments	(3)
AWS
Goodwill [Line Items]
Goodwill	1,085	$ 1,077
Goodwill, Acquired During Period	15
Goodwill, Translation and Purchase Accounting Adjustments	$ (7)

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Debt - Additional Information (Details) - USD ($)	1 Months Ended
	Apr. 30, 2018	Oct. 31, 2016	Jun. 30, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Borrowings outstanding			$ 24,770,000,000	$ 24,942,000,000
Face value of long-term debt			24,739,000,000	24,842,000,000
Commercial Paper
Debt Instrument [Line Items]
Credit term	397 days
Commercial Paper			0
Commercial Paper, Maximum Borrowing Capacity	$ 7,000,000,000
Senior Notes
Debt Instrument [Line Items]
Debt Instrument, Unamortized Discount (Premium), Net			101,000,000	99,000,000
Borrowings outstanding			24,300,000,000
Estimated fair value of notes			24,200,000,000	25,700,000,000
Senior Notes | 5.200% Notes due on December 3, 2025 (4)
Debt Instrument [Line Items]
Borrowings outstanding			1,000,000,000	1,000,000,000
Credit Facility | Revolving Credit Facility
Debt Instrument [Line Items]
Borrowings outstanding			489,000,000	592,000,000
Credit Facility | Revolving Credit Facility | October 2016 Revolving Credit Facility
Debt Instrument [Line Items]
Revolving credit maximum borrowing capacity		$ 500,000,000	600,000,000
Credit term		3 years
Commitment fee percentage		0.50%
Borrowings outstanding			$ 489,000,000	$ 592,000,000
Weighted average interest rate			2.90%	2.70%
Collateral amount			$ 576,000,000	$ 686,000,000
Credit Facility | Revolving Credit Facility | October 2016 Revolving Credit Facility | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)		1.65%
Credit Facility | Revolving Credit Facility | April 2018 Revolving Credit Facility
Debt Instrument [Line Items]
Revolving credit maximum borrowing capacity	$ 7,000,000,000
Credit term	3 years
Commitment fee percentage	0.04%
Borrowings outstanding			0	0
Credit Facility | Revolving Credit Facility | April 2018 Revolving Credit Facility | LIBOR
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)	0.50%
Amazon.com, Inc. | 5.200% Notes due on December 3, 2025 (4)
Debt Instrument [Line Items]
Borrowings outstanding				872,000,000
Whole Foods Market, Inc. | 5.200% Notes due on December 3, 2025 (4)
Debt Instrument [Line Items]
Borrowings outstanding				128,000,000
Line of Credit and Other Long-term Debt
Debt Instrument [Line Items]
Borrowings outstanding			520,000,000	692,000,000
Other Long-term Debt
Debt Instrument [Line Items]
Borrowings outstanding			$ 31,000,000	$ 100,000,000
Weighted average interest rate			4.30%	5.80%

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Debt - Long-Term Debt Obligations (Details) - USD ($)	Jun. 30, 2018	Apr. 30, 2018	Dec. 31, 2017	Oct. 31, 2016
Debt Instrument [Line Items]
Total debt	$ 24,770,000,000		$ 24,942,000,000
Less current portion of long-term debt	(31,000,000)		(100,000,000)
Face value of long-term debt	24,739,000,000		24,842,000,000
Senior Notes
Debt Instrument [Line Items]
Total debt	$ 24,300,000,000
Senior Notes | 2.600% Notes due on December 5, 2019 (2)
Debt Instrument [Line Items]
Stated interest rate	2.60%
Total debt	$ 1,000,000,000		1,000,000,000
Effective interest rates	2.73%
Senior Notes | 1.900% Notes due on August 21, 2020 (3)
Debt Instrument [Line Items]
Stated interest rate	1.90%
Total debt	$ 1,000,000,000		1,000,000,000
Effective interest rates	2.16%
Senior Notes | 3.300% Notes due on December 5, 2021 (2)
Debt Instrument [Line Items]
Stated interest rate	3.30%
Total debt	$ 1,000,000,000		1,000,000,000
Effective interest rates	3.43%
Senior Notes | 2.500% Notes due on November 29, 2022 (1)
Debt Instrument [Line Items]
Stated interest rate	2.50%
Total debt	$ 1,250,000,000		1,250,000,000
Effective interest rates	2.66%
Senior Notes | 2.400% Notes due on February 22, 2023 (3)
Debt Instrument [Line Items]
Stated interest rate	2.40%
Total debt	$ 1,000,000,000		1,000,000,000
Effective interest rates	2.56%
Senior Notes | 2.800% Notes due on August 22, 2024 (3)
Debt Instrument [Line Items]
Stated interest rate	2.80%
Total debt	$ 2,000,000,000		2,000,000,000
Effective interest rates	2.95%
Senior Notes | 3.800% Notes due on December 5, 2024 (2)
Debt Instrument [Line Items]
Stated interest rate	3.80%
Total debt	$ 1,250,000,000		1,250,000,000
Effective interest rates	3.90%
Senior Notes | 5.200% Notes due on December 3, 2025 (4)
Debt Instrument [Line Items]
Stated interest rate	5.20%
Total debt	$ 1,000,000,000		1,000,000,000
Effective interest rates	3.02%
Senior Notes | 3.150% Notes due on August 22, 2027 (3)
Debt Instrument [Line Items]
Stated interest rate	3.15%
Total debt	$ 3,500,000,000		3,500,000,000
Effective interest rates	3.25%
Senior Notes | 4.800% Notes due on December 5, 2034 (2)
Debt Instrument [Line Items]
Stated interest rate	4.80%
Total debt	$ 1,250,000,000		1,250,000,000
Effective interest rates	4.92%
Senior Notes | 3.875% Notes due on August 22, 2037 (3)
Debt Instrument [Line Items]
Stated interest rate	3.875%
Total debt	$ 2,750,000,000		2,750,000,000
Effective interest rates	3.94%
Senior Notes | 4.950% Notes due on December 5, 2044 (2)
Debt Instrument [Line Items]
Stated interest rate	4.95%
Total debt	$ 1,500,000,000		1,500,000,000
Effective interest rates	5.11%
Senior Notes | 4.050% Notes due on August 22, 2047 (3)
Debt Instrument [Line Items]
Stated interest rate	4.05%
Total debt	$ 3,500,000,000		3,500,000,000
Effective interest rates	4.13%
Senior Notes | 4.250% Notes due on August 22, 2057 (3)
Debt Instrument [Line Items]
Stated interest rate	4.25%
Total debt	$ 2,250,000,000		2,250,000,000
Effective interest rates	4.33%
Credit Facility | Revolving Credit Facility
Debt Instrument [Line Items]
Total debt	$ 489,000,000		592,000,000
Credit Facility | October 2016 Revolving Credit Facility | Revolving Credit Facility
Debt Instrument [Line Items]
Revolving credit maximum borrowing capacity	600,000,000			$ 500,000,000
Credit Facility | April 2018 Revolving Credit Facility | Revolving Credit Facility
Debt Instrument [Line Items]
Revolving credit maximum borrowing capacity		$ 7,000,000,000
Other long-term debt
Debt Instrument [Line Items]
Total debt	$ 31,000,000		$ 100,000,000

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Stockholders' Equity - Additional Information (Details) - USD ($) shares in Millions	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017	Feb. 29, 2016
Class of Stock [Line Items]
Common shares outstanding plus underlying outstanding stock awards	506		504
Net unrecognized compensation cost related to unvested stock-based compensation arrangements	$ 7,600,000,000
Compensation cost expected to be expensed in next twelve months, percentage	50.00%
Net unrecognized compensation cost related to unvested stock-based compensation arrangements, weighted average recognition period (in years)	1 year 1 month
Estimated forfeiture rate	27.00%		28.00%
February 2016 Program
Class of Stock [Line Items]
Stock repurchase, authorized amount				$ 5,000,000,000
Stock Repurchased During Period, Value	$ 0	$ 0

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Stockholders' Equity - Stock-based Compensation Expense (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 1,468	$ 1,158	$ 2,652	$ 1,952
Cost of sales
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	19	12	34	21
Fulfillment
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	320	261	564	425
Marketing
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	190	133	351	228
Technology and content
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	788	633	1,419	1,073
General and administrative
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 151	$ 119	$ 284	$ 205

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Stockholders' Equity - Restricted Stock Unit Activity (Details) - Restricted Stock Units shares in Millions, $ in Millions	6 Months Ended
	Jun. 30, 2018 USD ($) shares
Number of Units
Beginning balance (in shares) | shares	20.1
Units granted (in shares) | shares	3.7
Units vested (in shares) | shares	(3.6)
Units forfeited (in shares) | shares	(1.2)
Ending balance (in shares) | shares	19.0
Weighted-Average Grant-Date Fair Value
Beginning balance | $	$ 725
Units granted | $	1,437
Units vested | $	552
Units forfeited | $	808
Ending balance | $	$ 891

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Stockholders' Equity - Scheduled Vesting for Outstanding Restricted Stock Units (Details) - Restricted Stock Units - shares shares in Millions	Jun. 30, 2018	Dec. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Six Months Ended December 31, 2018	3.5
Year Ended December 31, 2019	7.1
Year Ended December 31, 2020	5.6
Year Ended December 31, 2021	2.1
Year Ended December 31, 2022	0.4
Thereafter	0.3
Total	19.0	20.1

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- Income Taxes (Details) € in Millions, $ in Millions		3 Months Ended			6 Months Ended		12 Months Ended
	Oct. 04, 2017 EUR (€)	Jun. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)
Income Tax Disclosure [Abstract]
Provision for income taxes		$ 74		$ 467	$ 361	$ 695
Discrete tax benefits					964	197
Cash taxes paid, net of refunds		300		$ 447	813	$ 693	$ 1,077	$ 879
Tax contingencies		$ 3,300	$ 2,300		3,300		$ 3,300
Income Tax Examination [Line Items]
Provisional tax benefit for impact of the Act			$ 789
Internal Revenue Service (IRS) | Domestic Tax Authority [Member]
Income Tax Examination [Line Items]
Tax examination, estimate of additional tax expense					$ 1,500
Luxembourg Tax Administration [Member] | Foreign Tax Authority [Member]
Income Tax Examination [Line Items]
Tax examination, estimate of additional tax expense | €	€ 250

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Segment Information - Reportable Segments and Reconciliation to Consolidated Net Income (Details) $ in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($) segment	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)
Segment Reporting [Abstract]
Number of operating segments | segment			3
Segment Reporting Disclosure [Line Items]
Net sales	$ 52,886	$ 37,955	$ 103,928	$ 73,669
Operating expenses	49,903	37,327	99,017	72,037
Operating income (loss)	2,983	628	4,911	1,632
Total non-operating income (expense)	(378)	38	(391)	(14)
Provision for income taxes	(74)	(467)	(361)	(695)
Equity-method investment activity, net of tax	3	(2)	4	(2)
Net income	2,534	197	4,163	921	$ 6,275	$ 1,922
North America
Segment Reporting Disclosure [Line Items]
Net sales	32,169	22,370	62,894	43,362
Operating expenses	30,334	21,934	59,910	42,330
Operating income (loss)	1,835	436	2,984	1,032
International
Segment Reporting Disclosure [Line Items]
Net sales	14,612	11,485	29,487	22,546
Operating expenses	15,106	12,209	30,603	23,752
Operating income (loss)	(494)	(724)	(1,116)	(1,206)
AWS
Segment Reporting Disclosure [Line Items]
Net sales	6,105	4,100	11,547	7,761
Operating expenses	4,463	3,184	8,504	5,955
Operating income (loss)	$ 1,642	$ 916	$ 3,043	$ 1,806

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Segment Information - Disaggregation of Revenue (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Disaggregation of Revenue [Line Items]
Net sales	$ 52,886	$ 37,955	$ 103,928	$ 73,669
Online stores (1)
Disaggregation of Revenue [Line Items]
Net sales	27,165	23,754	54,105	46,580
Physical stores (2)
Disaggregation of Revenue [Line Items]
Net sales	4,312		8,575
Third-party seller services (3)
Disaggregation of Revenue [Line Items]
Net sales	9,702	6,991	18,966	13,429
Subscription services (4)
Disaggregation of Revenue [Line Items]
Net sales	3,408	2,165	6,510	4,104
AWS
Disaggregation of Revenue [Line Items]
Net sales	6,105	4,100	11,547	7,761
Other (5)
Disaggregation of Revenue [Line Items]
Net sales	$ 2,194	$ 945	$ 4,225	$ 1,795