Exhibit 99.1

AMAZON.COM ANNOUNCES 45% FREE CASH FLOW GROWTH AND 26% SALES GROWTH,

FUELED BY LOW PRICES AND FREE SHIPPING; RAISES FINANCIAL GUIDANCE

SEATTLE—(BUSINESS WIRE)—July 22, 2004—Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its second quarter ended June 30, 2004.

Operating cash flow was $410 million for the trailing twelve months, compared with $285 million for the trailing twelve months ended June 30, 2003. Free cash flow grew 45% to $354 million for the trailing twelve months, compared with $245 million for the trailing twelve months ended June 30, 2003.

Common shares outstanding plus shares underlying stock-based awards outstanding totaled 434 million at June 30, 2004, compared with 433 million a year ago.

Net sales were $1.39 billion in the second quarter, compared with $1.10 billion in second quarter 2003, an increase of 26%. Net sales, excluding the $47 million benefit from changes in foreign exchange rates, grew 22% compared with second quarter 2003.

Operating income was $86 million in the second quarter, compared with $42 million in second quarter 2003. Consolidated segment operating income grew 50% to $101 million in the second quarter, compared with $67 million in second quarter 2003. Consolidated segment operating income, excluding the $4 million benefit from changes in foreign exchange rates, grew 44% compared with second quarter 2003.

Net income was $76 million in the second quarter, or $0.18 per diluted share, compared with a net loss of $43 million, or $(0.11) per share, in second quarter 2003. Pro forma net income in the second quarter grew 77% to $75 million, or $0.18 per diluted share, compared with $42 million, or $0.10 per diluted share, in second quarter 2003.

“Worldwide adoption of our everyday free shipping reached another record high point this quarter,” said Jeff Bezos, founder and CEO of Amazon.com. “While free shipping is expensive for the Company, it saves our customers tens of millions of dollars each quarter, and we plan to keep it in place indefinitely.”

Amazon.com continues to offer Free Super Saving Shipping on orders over $25 at www.amazon.com and also has free shipping offers at its U.K., German, French, Japanese and Canadian sites. Amazon.com offers 30% off books over $15 and continues to lower prices every day across its product offerings, ranging from electronics to jewelry to sports and outdoors items to tools.

See “Financial Measures” for additional information.

Highlights

• North America segment sales, representing the Company’s U.S. and Canadian sites, grew 13% to $792 million and segment operating income grew 21% to $66 million, compared with second quarter 2003.

• International segment sales, representing the Company’s U.K., German, French and Japanese sites, grew 50% to $595 million. Net sales, excluding the benefit from changes in foreign exchange rates, grew 38% compared with second quarter 2003. International segment operating income grew to $35 million, compared with $13 million in second quarter 2003.

• International segment sales on a trailing-twelve-month basis were $2.51 billion, representing 42% of worldwide net sales.

• Electronics & Other General Merchandise sales were $1.36 billion for the trailing twelve months, representing 23% of worldwide net sales.

• Inventory turns for the trailing twelve months were 18, down from 20 a year ago, as the Company continues to expand selection and availability.

• The Company introduced two new stores in the U.S., offering more than 20,000 Beauty products and over 30,000 Musical Instrument items.

Financial Guidance

The following forward-looking statements reflect Amazon.com’s expectations as of July 22, 2004. Results may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and consumer spending, world events, the emerging nature and rate of growth of the Internet and online commerce, and the various factors detailed below.

Third Quarter 2004 Guidance

• Third quarter net sales are expected to be between $1.425 billion and $1.525 billion, or grow between 26% and 34%, compared with third quarter 2003.

• Consolidated segment operating income is expected to be between $80 million and $100 million, or grow between 9% and 36%, compared with third quarter 2003.

• Operating income is expected to be between $50 million and $70 million, assuming, among other things, that the Company does not record any further revisions to its restructuring-related estimates and that the closing price of Amazon.com common stock on September 30, 2004, is identical to the closing price of $54.40 on June 30, 2004.

Full Year 2004 Expectations

• Net sales are expected to be between $6.625 billion and $6.925 billion.

• Consolidated segment operating income is expected to be between $475 million and $535 million.

• Operating income is expected to be between $400 million and $460 million, assuming, among other things, that the Company does not record any further revisions to its restructuring-related estimates and that the closing price of Amazon.com common stock on December 31, 2004, is identical to the closing price of $54.40 on June 30, 2004.

A conference call will be Webcast live today at 2 p.m. PT/5 p.m. ET, and will be available at least through September 30, 2004, at www.amazon.com/ir. This call will contain forward-looking statements and other material information regarding the Company’s financial and operating results.

These forward-looking statements are inherently difficult to predict. Actual results could differ materially for a variety of reasons, including, in addition to the factors discussed above, the amount that Amazon.com invests in new business opportunities and the timing of those investments; the mix of products sold to customers; the mix of net sales derived from products as compared with services; competition; risks of inventory management; the degree to which the Company enters into, maintains and develops commercial agreements and strategic transactions; seasonality; international growth and expansion; and risks of fulfillment throughput and productivity. Other risks and uncertainties include, among others, risk of future losses, significant amount of indebtedness, potential fluctuations in operating results, management of potential growth, system interruptions, consumer trends, fulfillment center optimization, limited operating history, government regulation and taxation, fraud, and new business areas. More information about factors that potentially could affect Amazon.com’s financial results is included in Amazon.com’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2003, and all subsequent filings.

Financial Measures

The following measures are defined by the Securities and Exchange Commission as non-GAAP financial measures.

Free Cash Flow

Operating cash flow is net cash provided by (used in) operating activities, including cash outflows for interest and excluding proceeds from the exercise of stock-based employee awards. Free cash flow is operating cash flow less cash outflows for purchases of fixed assets, including internal-use software and website development. A tabular reconciliation of differences from the comparable GAAP measure—operating cash flow—is included in the attached “Supplemental Financial Information and Business Metrics.”

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Consolidated Segment Operating Income

Consolidated segment operating income is the sum of segment operating income of our individual segments and excludes the following line items on the Company’s statements of operations:

• Stock-based compensation, and

• Other operating expense (income).

A tabular reconciliation of differences from the comparable GAAP measure—operating income—is included in the attached “Pro Forma Statements of Operations.”

Pro Forma Net Income

Pro forma net income excludes the following line items on the Company’s statements of operations:

• Stock-based compensation,

• Other operating expense (income), and

• Remeasurements and other.

A tabular reconciliation of differences from the comparable GAAP measure—net income (loss)—is included in the attached “Pro Forma Statements of Operations.”

For additional information regarding these non-GAAP financial measures, see Exhibit 99.2 to our Form 8-K filed contemporaneously with the issuance of this release.

About Amazon.com

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

Amazon.com operates six websites: www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.fr, www.amazon.co.jp and www.amazon.ca.

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AMAZON.COM, INC.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,						Twelve Months Ended June 30,
	2003			2004			2003			2004			2003			2004
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	$	495,773		$	768,587		$	738,254		$	1,102,273		$	270,438		$	641,728
OPERATING ACTIVITIES:
Net income (loss)		(43,314	)		76,480			(53,435	)		187,616			(85,864	)		276,333
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation of fixed assets, including internal-use software and website development, and other amortization		19,003			18,129			38,753			35,810			79,117			72,615
Stock-based compensation		24,453			21,692			51,776			28,799			86,624			64,774
Other operating expense (income)		913			(7,150	)		1,825			(7,692	)		7,420			(6,765	)
Losses (gains) on sales of marketable securities, net		(5,272	)		77			(9,252	)		(1,010	)		(14,139	)		(1,356	)
Remeasurements and other		60,216			(16,302	)		82,450			(36,662	)		122,042			10,985
Non-cash interest expense and other		3,532			1,113			11,409			2,262			26,470			3,771
Changes in operating assets and liabilities:
Inventories		(2,479	)		(4,716	)		28,146			8,454			(44,251	)		(96,478	)
Accounts receivable, net and other current assets		5,914			(3,272	)		33,147			7,026			16,949			(25,816	)
Accounts payable		45,486			22,612			(181,119	)		(233,382	)		131,127			115,469
Accrued expenses and other current liabilities		(7,138	)		6,861			(94,203	)		(66,908	)		(11,362	)		1,555
Additions to unearned revenue		25,752			27,495			48,720			50,762			94,720			103,683
Amortization of previously unearned revenue		(29,998	)		(25,058	)		(57,903	)		(49,125	)		(125,115	)		(102,962	)
Interest payable		28,956			25,075			(26,072	)		(33,602	)		1,191			(5,680	)
Net cash provided by (used in) operating activities		126,024			143,036			(125,758	)		(107,652	)		284,929			410,128
INVESTING ACTIVITIES:
Sales and maturities of marketable securities and other investments		350,068			42,556			559,023			612,324			762,401			866,485
Purchases of marketable securities		(109,259	)		(250,702	)		(342,314	)		(755,381	)		(544,020	)		(948,709	)
Purchases of fixed assets, including internal-use software and website development		(7,141	)		(14,143	)		(13,535	)		(23,656	)		(40,404	)		(56,084	)
Proceeds from sale of subsidiary and other		—			—			—			—			—			5,072
Net cash provided by (used in) investing activities		233,668			(222,289	)		203,174			(166,713	)		177,977			(133,236	)
FINANCING ACTIVITIES:
Proceeds from exercises of stock options and other		53,042			20,077			91,597			34,891			163,011			106,616
Repayments of long-term debt, capital lease obligations, and other		(280,918	)		(645	)		(284,139	)		(156,292	)		(290,939	)		(367,461	)
Net cash provided by (used in) financing activities		(227,876	)		19,432			(192,542	)		(121,401	)		(127,928	)		(260,845	)
Foreign-currency effect on cash and cash equivalents		14,139			(7,616	)		18,600			(5,357	)		36,312			43,375
Net increase (decrease) in cash and cash equivalents		145,955			(67,437	)		(96,526	)		(401,123	)		371,290			59,422
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	641,728		$	701,150		$	641,728		$	701,150		$	641,728		$	701,150
SUPPLEMENTAL CASH FLOW INFORMATION:
Fixed assets acquired under capital leases and other financing arrangements	$	415		$	31		$	1,076		$	523		$	1,964		$	2,124
Cash paid for interest		2,601			45			86,816			86,068			117,356			119,199
Cash paid for income taxes		307			561			609			1,008			1,291			2,224

Note: The attached “Financial and Operational Highlights” are an integral part of the press release financial statements.

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AMAZON.COM, INC.

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2003			2004			2003			2004
Net sales	$	1,099,912		$	1,387,341		$	2,183,471		$	2,917,690
Cost of sales		825,984			1,046,295			1,638,961			2,215,810
Gross profit		273,928			341,046			544,510			701,880
Operating expenses:
Fulfillment		107,455			122,717			211,160			250,422
Marketing		25,326			31,839			53,553			65,475
Technology and content		52,135			58,475			102,223			113,551
General and administrative		21,823			27,199			42,925			54,616
Stock-based compensation (1)		24,453			21,692			51,776			28,799
Other operating expense (income)		913			(7,150	)		1,825			(7,692	)
Total operating expenses		232,105			254,772			463,462			505,171
Income from operations		41,823			86,274			81,048			196,709
Interest income		5,761			5,311			12,301			10,866
Interest expense		(34,367	)		(26,055	)		(70,878	)		(53,786	)
Other income (expense), net		3,685			(5,352	)		6,544			(2,835	)
Remeasurements and other		(60,216	)		16,302			(82,450	)		36,662
Total non-operating expense, net		(85,137	)		(9,794	)		(134,483	)		(9,093	)
Net income (loss)	$	(43,314	)	$	76,480		$	(53,435	)	$	187,616
Basic earnings (loss) per share	$	(0.11	)	$	0.19		$	(0.14	)	$	0.46
Diluted earnings (loss) per share	$	(0.11	)	$	0.18		$	(0.14	)	$	0.44
Weighted average shares used in computation of earnings (loss) per share:
Basic		393,876			405,268			391,223			404,399
Diluted		393,876			424,678			391,223			424,592
(1) Components of stock-based compensation:
Fulfillment	$	4,862		$	3,287		$	11,847		$	4,293
Marketing		1,606			2,095			2,585			2,703
Technology and content		13,578			12,834			27,794			16,133
General and administrative		4,407			3,476			9,550			5,670
	$	24,453		$	21,692		$	51,776		$	28,799

Note: The attached “Financial and Operational Highlights” are an integral part of the press release financial statements.

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AMAZON.COM, INC.

Pro Forma Statements of Operations

(in thousands, except per share data)

(unaudited)

	Three Months Ended June 30, 2003									Three Months Ended June 30, 2004
	As Reported (1)			Adjustments			Pro Forma			As Reported (1)			Adjustments			Pro Forma
Net sales	$	1,099,912		$	—		$	1,099,912		$	1,387,341		$	—		$	1,387,341
Cost of sales		825,984			—			825,984			1,046,295			—			1,046,295
Gross profit		273,928			—			273,928			341,046			—			341,046
Operating expenses:
Fulfillment		107,455			—			107,455			122,717			—			122,717
Marketing		25,326			—			25,326			31,839			—			31,839
Technology and content		52,135			—			52,135			58,475			—			58,475
General and administrative		21,823			—			21,823			27,199			—			27,199
Stock-based compensation		24,453			(24,453	)		—			21,692			(21,692	)		—
Other operating expense (income)		913			(913	)		—			(7,150	)		7,150			—
Total operating expenses		232,105			(25,366	)		206,739			254,772			(14,542	)		240,230
Income from operations		41,823			25,366			67,189	(2)		86,274			14,542			100,816	(2)
Interest income		5,761			—			5,761			5,311			—			5,311
Interest expense		(34,367	)		—			(34,367	)		(26,055	)		—			(26,055	)
Other income (expense), net		3,685			—			3,685			(5,352	)		—			(5,352	)
Remeasurements and other		(60,216	)		60,216			—			16,302			(16,302	)		—
Total non-operating expense, net		(85,137	)		60,216			(24,921	)		(9,794	)		(16,302	)		(26,096	)
Net income (loss)	$	(43,314	)	$	85,582		$	42,268		$	76,480		$	(1,760	)	$	74,720
Basic earnings (loss) per share	$	(0.11	)	$	0.22		$	0.11		$	0.19		$	(0.01	)	$	0.18
Diluted earnings (loss) per share	$	(0.11	)	$	0.21		$	0.10		$	0.18		$	—		$	0.18
Weighted average shares used in computation of earnings (loss) per share:
Basic		393,876						393,876			405,268						405,268
Diluted		393,876						418,138			424,678						424,678
Net cash provided by operating activities							$	126,024								$	143,036
Purchases of fixed assets, including internal-use software and website development								(7,141	)								(14,143	)
Free cash flow							$	118,883								$	128,893
Net cash provided by (used in) investing activities							$	233,668								$	(222,289	)
Net cash provided by (used in) financing activities							$	(227,876	)							$	19,432

(1) In accordance with accounting principles generally accepted in the United States.

(2) Consolidated segment operating income.

Note: The attached “Financial and Operational Highlights” are an integral part of the press release financial statements.

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AMAZON.COM, INC.

Pro Forma Statements of Operations

(in thousands, except per share data)

(unaudited)

	Six Months Ended June 30, 2003									Six Months Ended June 30, 2004
	As Reported (1)			Adjustments			Pro Forma			As Reported (1)			Adjustments			Pro Forma
Net sales	$	2,183,471		$	—		$	2,183,471		$	2,917,690		$	—		$	2,917,690
Cost of sales		1,638,961			—			1,638,961			2,215,810			—			2,215,810
Gross profit		544,510			—			544,510			701,880			—			701,880
Operating expenses:
Fulfillment		211,160			—			211,160			250,422			—			250,422
Marketing		53,553			—			53,553			65,475			—			65,475
Technology and content		102,223			—			102,223			113,551			—			113,551
General and administrative		42,925			—			42,925			54,616			—			54,616
Stock-based compensation		51,776			(51,776	)		—			28,799			(28,799	)		—
Other operating expense (income)		1,825			(1,825	)		—			(7,692	)		7,692			—
Total operating expenses		463,462			(53,601	)		409,861			505,171			(21,107	)		484,064
Income from operations		81,048			53,601			134,649	(2)		196,709			21,107			217,816	(2)
Interest income		12,301			—			12,301			10,866			—			10,866
Interest expense		(70,878	)		—			(70,878	)		(53,786	)		—			(53,786	)
Other income (expense), net		6,544			—			6,544			(2,835	)		—			(2,835	)
Remeasurements and other		(82,450	)		82,450			—			36,662			(36,662	)		—
Total non-operating expense, net		(134,483	)		82,450			(52,033	)		(9,093	)		(36,662	)		(45,755	)
Net income (loss)	$	(53,435	)	$	136,051		$	82,616		$	187,616		$	(15,555	)	$	172,061
Basic earnings (loss) per share	$	(0.14	)	$	0.35		$	0.21		$	0.46		$	(0.03	)	$	0.43
Diluted earnings (loss) per share	$	(0.14	)	$	0.34		$	0.20		$	0.44		$	(0.03	)	$	0.41
Weighted average shares used in computation of earnings (loss) per share:
Basic		391,223						391,223			404,399						404,399
Diluted		391,223						414,965			424,592						424,592
Net cash used in operating activities							$	(125,758	)							$	(107,652	)
Purchases of fixed assets, including internal-use software and website development								(13,535	)								(23,656	)
Free cash flow							$	(139,293	)							$	(131,308	)
Net cash provided by (used in) investing activities							$	203,174								$	(166,713	)
Net cash used in financing activities							$	(192,542	)							$	(121,401	)

(1) In accordance with accounting principles generally accepted in the United States.

(2) Consolidated segment operating income.

Note: The attached “Financial and Operational Highlights” are an integral part of the press release financial statements.

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AMAZON.COM, INC.

Segment Information

(in thousands)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2003			2004			2003			2004
North America
Net sales	$	702,523		$	792,132		$	1,407,235		$	1,638,973
Cost of sales		512,466			572,420			1,030,346			1,193,386
Gross profit		190,057			219,712			376,889			445,587
Direct segment operating expenses		135,459			153,791			270,630			304,157
Segment operating income		54,598			65,921			106,259			141,430
International
Net sales		397,389			595,209			776,236			1,278,717
Cost of sales		313,518			473,875			608,615			1,022,424
Gross profit		83,871			121,334			167,621			256,293
Direct segment operating expenses		71,280			86,439			139,231			179,907
Segment operating income		12,591			34,895			28,390			76,386
Consolidated
Net sales		1,099,912			1,387,341			2,183,471			2,917,690
Cost of sales		825,984			1,046,295			1,638,961			2,215,810
Gross profit		273,928			341,046			544,510			701,880
Direct segment operating expenses		206,739			240,230			409,861			484,064
Segment operating income		67,189			100,816			134,649			217,816
Stock-based compensation		24,453			21,692			51,776			28,799
Other operating expense (income)		913			(7,150	)		1,825			(7,692	)
Income from operations		41,823			86,274			81,048			196,709
Total non-operating expense, net		(85,137	)		(9,794	)		(134,483	)		(9,093	)
Net income (loss)	$	(43,314	)	$	76,480		$	(53,435	)	$	187,616
Segment Highlights:
Y/Y net sales growth:
North America		20	%		13	%		17	%		16	%
International		81			50			74			65
Consolidated		37			26			32			34
Y/Y gross profit growth:
North America		12	%		16	%		10	%		18	%
International		75			45			72			53
Consolidated		26			25			23			29
Y/Y segment operating income growth:
North America		53	%		21	%		49	%		33	%
International		N/A			177			N/A			169
Consolidated		158			50			166			62
Net sales mix:
North America		64	%		57	%		64	%		56	%
International		36			43			36			44

Note: The attached “Financial and Operational Highlights” are an integral part of the press release financial statements.

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AMAZON.COM, INC.

Supplemental Net Sales Information

(in thousands)

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2003			2004			2003			2004
North America
Media	$	499,051		$	541,807		$	1,016,310		$	1,140,489
Electronics and other general merchandise		177,439			225,805			345,584			450,238
Other		26,033			24,520			45,341			48,246
		702,523			792,132			1,407,235			1,638,973
International
Media		366,034			495,526			721,746			1,071,586
Electronics and other general merchandise		31,089			98,947			53,952			205,948
Other		266			736			538			1,183
		397,389			595,209			776,236			1,278,717
Consolidated
Media		865,085			1,037,333			1,738,056			2,212,075
Electronics and other general merchandise		208,528			324,752			399,536			656,186
Other		26,299			25,256			45,879			49,429
	$	1,099,912		$	1,387,341		$	2,183,471		$	2,917,690
Y/Y Net Sales Growth:
North America:
Media		14	%		9	%		12	%		12	%
Electronics and other general merchandise		36			27			34			30
Other		53			(6	)		15			6
International:
Media		75	%		35	%		71	%		48	%
Electronics and other general merchandise		221			218			156			282
Other		(49	)		177			(47	)		120
Consolidated:
Media		33	%		20	%		30	%		27	%
Electronics and other general merchandise		49			56			43			64
Other		50			(4	)		14			8
Consolidated Net Sales Mix:
Media		79	%		75	%		80	%		76	%
Electronics and other general merchandise		19			23			18			22
Other		2			2			2			2

Note: The attached “Financial and Operational Highlights” are an integral part of the press release financial statements.

9 of 17

AMAZON.COM, INC.

Consolidated Balance Sheets

(in thousands, except per share data)

(unaudited)

	June 30, 2003			December 31, 2003			June 30, 2004
ASSETS
Current assets:
Cash and cash equivalents	$	641,728		$	1,102,273		$	701,150
Marketable securities		347,044			292,550			450,201
Cash, cash equivalents, and marketable securities		988,772			1,394,823			1,151,351
Inventories		178,107			293,917			284,194
Accounts receivable, net and other current assets		84,375			132,069			125,647
Total current assets		1,251,254			1,820,809			1,561,192
Fixed assets, net		221,674			224,285			215,871
Goodwill		70,811			69,121			69,121
Other assets		53,115			47,818			41,926
Total assets	$	1,596,854		$	2,162,033		$	1,888,110
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	445,098		$	819,811		$	585,124
Accrued expenses and other current liabilities		232,231			317,730			249,843
Unearned revenue		38,733			37,844			39,487
Interest payable		45,179			73,100			39,498
Current portion of long-term debt and other		8,143			4,216			2,402
Total current liabilities		769,384			1,252,701			916,354
Long-term debt and other		2,074,306			1,945,439			1,762,614
Commitments and contingencies
Stockholders’ deficit:
Preferred stock, $0.01 par value:
Authorized shares — 500,000 Issued and outstanding shares — none		—			—			—
Common stock, $0.01 par value:
Authorized shares — 5,000,000 Issued and outstanding shares — 396,730, 403,354, and 406,711		3,967			4,034			4,067
Additional paid-in capital		1,790,835			1,899,398			1,964,342
Deferred stock-based compensation		(4,201	)		(2,850	)		(1,872	)
Accumulated other comprehensive income		25,708			37,739			29,417
Accumulated deficit		(3,063,145	)		(2,974,428	)		(2,786,812	)
Total stockholders’ deficit		(1,246,836	)		(1,036,107	)		(790,858	)
Total liabilities and stockholders’ deficit	$	1,596,854		$	2,162,033		$	1,888,110

Note: The attached “Financial and Operational Highlights” are an integral part of the press release financial statements.

10 of 17

AMAZON.COM, INC.

Supplemental Financial Information and Business Metrics

(in millions, except per share data)

(unaudited)

	Q2 2003			Q3 2003			Q4 2003			Q1 2004			Q2 2004			Y/Y % Change
Cash Flows and Shares
Operating cash flow — trailing twelve months (TTM)	$	285		$	284		$	392		$	393		$	410		44	%
Purchases of fixed assets (including internal-use software and website development) — TTM	$	40		$	44		$	46		$	49		$	56		39	%
Free cash flow (operating cash flow less purchases of fixed assets) — TTM	$	245		$	239		$	346		$	344		$	354		45	%
Common shares and stock-based awards outstanding		433			433			433			432			434		0	%
Common shares outstanding		397			400			403			405			407		3	%
Stock-based awards outstanding		36			33			29			27			27		(25	)%
Stock-based awards outstanding — % of common shares outstanding		9.2	%		8.1	%		7.3	%		6.8	%		6.7	%	N/A
Results of Operations
Worldwide (WW) net sales	$	1,100		$	1,134		$	1,946		$	1,530		$	1,387		26	%
WW net sales — Y/Y growth, excluding the effect of foreign exchange rates		29.7	%		29.8	%		29.4	%		33.2	%		21.9	%	N/A
WW net sales — TTM	$	4,463		$	4,747		$	5,264		$	5,710		$	5,998		34	%
WW net sales shipped outside the U.S. — TTM % of net sales		39.1	%		40.5	%		43.4	%		45.7	%		44.5	%	N/A
Gross profit	$	274		$	286		$	427		$	361		$	341		25	%
Gross margin — % of WW net sales		24.9	%		25.2	%		21.9	%		23.6	%		24.6	%	N/A
Gross profit — TTM	$	1,096		$	1,165		$	1,257		$	1,347		$	1,415		29	%
Gross margin — TTM % of WW net sales		24.6	%		24.6	%		23.9	%		23.6	%		23.6	%	N/A
Fulfillment costs — % of WW net sales		9.8	%		9.4	%		8.2	%		8.3	%		8.8	%	N/A
Fulfillment costs — TTM % of WW net sales		9.6	%		9.4	%		9.1	%		8.8	%		8.6	%	N/A
Consolidated direct segment operating expenses	$	207		$	212		$	274		$	244		$	240		16	%
Consolidated direct segment operating expenses — TTM	$	832		$	855		$	896		$	937		$	970		17	%
Consolidated segment operating income	$	67		$	74		$	153		$	117		$	101		50	%
Consolidated segment operating margin — % of WW net sales		6.1	%		6.5	%		7.9	%		7.6	%		7.3	%	N/A
Consolidated segment operating income — TTM	$	264		$	310		$	361		$	411		$	444		68	%
Consolidated segment operating margin — TTM % of WW net sales		5.9	%		6.5	%		6.9	%		7.2	%		7.4	%	N/A
GAAP operating income	$	42		$	52		$	138		$	110		$	86		106	%
GAAP operating margin — % of WW net sales		3.8	%		4.6	%		7.1	%		7.2	%		6.2	%	N/A
GAAP operating income — TTM	$	142		$	204		$	271		$	342		$	386		172	%
GAAP operating margin — TTM % of WW net sales		3.2	%		4.3	%		5.1	%		6.0	%		6.4	%	N/A
Pro forma net income	$	42		$	48		$	125		$	97		$	75		77	%
Diluted pro forma net income per share	$	0.10		$	0.11		$	0.29		$	0.23		$	0.18		80	%
Pro forma net income — TTM	$	158		$	206		$	256		$	313		$	345		118	%
GAAP net income (loss)	$	(43	)	$	16		$	73		$	111		$	76		N/A
GAAP net income (loss) per share	$	(0.11	)	$	0.04		$	0.17		$	0.26		$	0.18		N/A
GAAP net income (loss) — TTM	$	(86	)	$	(35	)	$	35		$	157		$	276		N/A
North America segment:
Net sales	$	703		$	709		$	1,142		$	847		$	792		13	%
Net sales — TTM	$	2,961		$	3,083		$	3,258		$	3,401		$	3,490		18	%
Gross profit	$	190		$	201		$	289		$	226		$	220		16	%
Gross margin — % of North American net sales		27.1	%		28.4	%		25.3	%		26.7	%		27.7	%	N/A
Gross profit — TTM	$	774		$	821		$	867		$	906		$	935		21	%
Gross margin — TTM % of North America net sales		26.2	%		26.6	%		26.6	%		26.6	%		26.8	%	N/A
Operating income	$	55		$	63		$	114		$	76		$	66		21	%
Operating margin — % of North America net sales		7.8	%		8.8	%		10.0	%		8.9	%		8.3	%	N/A
Operating income — TTM	$	215		$	251		$	283		$	307		$	318		48	%
Operating margin — TTM % of North America net sales		7.3	%		8.1	%		8.7	%		9.0	%		9.1	%	N/A

Note: The attached “Financial and Operational Highlights” are an integral part of this Supplemental Financial Information and Business Metrics

11 of 17

AMAZON.COM, INC.

Supplemental Financial Information and Business Metrics

(in millions, except inventory turnover, accounts payable days, and employee data)

(unaudited)

	Q2 2003			Q3 2003			Q4 2003			Q1 2004			Q2 2004			Y/Y % Change
International segment:
Net sales	$	397		$	425		$	804		$	684		$	595		50	%
Net sales — Y/Y growth, excluding the effect of foreign exchange rates		56.9	%		50.4	%		53.6	%		57.9	%		38.1	%	N/A
Net sales — TTM	$	1,502		$	1,663		$	2,005		$	2,310		$	2,508		67	%
Gross profit	$	84		$	85		$	138		$	135		$	121		45	%
Gross margin — % of International net sales		21.1	%		19.9	%		17.2	%		19.8	%		20.4	%	N/A
Gross profit — TTM	$	322		$	345		$	391		$	442		$	479		49	%
Gross margin — TTM % of International net sales		21.4	%		20.7	%		19.5	%		19.1	%		19.1	%	N/A
Operating income	$	13		$	11		$	39		$	41		$	35		177	%
Operating margin — % of International net sales		3.2	%		2.6	%		4.8	%		6.1	%		5.9	%	N/A
Operating income — TTM	$	49		$	59		$	78		$	104		$	126		156	%
Operating margin — TTM % of International net sales		3.3	%		3.6	%		3.9	%		4.5	%		5.0	%	N/A
Supplemental Worldwide Net Sales:
Media	$	865		$	877		$	1,434		$	1,175		$	1,037		20	%
Media — TTM	$	3,503		$	3,695		$	4,049		$	4,351		$	4,523		29	%
Electronics and other general merchandise	$	209		$	230		$	473		$	331		$	325		56	%
Electronics and other general merchandise — TTM	$	868		$	951		$	1,103		$	1,244		$	1,360		57	%
Other	$	26		$	27		$	39		$	24		$	25		(4	)%
Other — TTM	$	93		$	101		$	112		$	116		$	115		24	%
Supplemental North America Segment Net Sales:
Media	$	499		$	502		$	751		$	599		$	542		9	%
Media — TTM	$	2,101		$	2,167		$	2,269		$	2,351		$	2,394		14	%
Electronics and other general merchandise	$	177		$	180		$	353		$	224		$	226		27	%
Electronics and other general merchandise — TTM	$	769		$	816		$	879		$	935		$	983		28	%
Other	$	26		$	27		$	38		$	24		$	25		(6	)%
Other — TTM	$	91		$	100		$	110		$	115		$	113		24	%
Supplemental International Segment Net Sales:
Media	$	366		$	375		$	683		$	576		$	496		35	%
Media — TTM	$	1,402		$	1,527		$	1,779		$	2,000		$	2,129		52	%
Electronics and other general merchandise	$	31		$	50		$	121		$	107		$	99		218	%
Electronics and other general merchandise — TTM	$	99		$	135		$	225		$	309		$	377		281	%
Other	$	0		$	0		$	0		$	0		$	1		177	%
Other — TTM	$	1		$	1		$	1		$	1		$	2		26	%
Balance Sheet
Cash and marketable securities	$	989		$	1,065		$	1,395		$	998		$	1,151		16	%
Inventory, net — ending	$	178		$	242		$	294		$	282		$	284		60	%
Inventory — average inventory % of TTM net sales		3.7	%		4.0	%		4.1	%		4.1	%		4.3	%	N/A
Inventory turnover, average — TTM		20.2			18.9			18.4			18.7			17.9		(12	)%
Fixed assets, net	$	222		$	221		$	224		$	217		$	216		(3	)%
Accounts payable days — ending		49			54			50			44			51		4	%
Other
Employees (full-time and part-time; excludes contractors & temporary personnel)		7,600			7,900			7,800			8,100			8,200		8	%

Note: The attached “Financial and Operational Highlights” are an integral part of this Supplemental Financial Information and Business Metrics

12 of 17

AMAZON.COM, INC.

Financial and Operational Highlights

(unaudited)

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

Net Sales

• In the second quarter 2003 we sold over 1.4 million units worldwide of Harry Potter and the Order of the Phoenix.

• Shipping revenue, which excludes amounts earned from third-party sellers, was $84 million, up 5% from $80 million.

Cost of Sales

• Cost of sales consists of the purchase price of consumer products sold by us, inbound and outbound shipping charges to us, packaging supplies, and certain costs associated with our service revenues.

• Outbound shipping-related costs totaled $119 million, up from $106 million. Net shipping cost was $34 million, up from a net cost of $26 million, resulting primarily from our free shipping offers. We view free shipping as an effective marketing tool and intend to continue offering it indefinitely.

Direct Segment Operating Expenses

• Second quarter direct segment operating expenses as a percentage of net sales:

	2004		2003
Fulfillment	8.8	%	9.8	%
Marketing	2.3	%	2.3	%
Technology and content	4.2	%	4.7	%
General and administrative	2.0	%	2.0	%

• Depreciation was $18 million in second quarter 2004 and $70 million over the trailing twelve months.

Fulfillment

• Fulfillment costs represent those costs incurred in operating and staffing our fulfillment and customer service centers, credit card fees, and bad debt costs, including costs associated with our guarantee for certain third-party seller transactions. Fulfillment costs also include amounts paid to third parties, who assist us in fulfillment and customer service operations.

• Costs incurred in operating and staffing our fulfillment and customer service centers on behalf of other businesses, such as Toysrus.com and Target, are classified as cost of sales rather than fulfillment.

• Credit card fees associated with third-party seller transactions are based on the gross purchase price of underlying transactions, and therefore represent a larger percentage of our recorded commission revenue than credit card fees on our retail sales. Accordingly, this negatively affects fulfillment costs as a percentage of net sales.

• We announced the opening of a new European fulfillment center in Scotland, which is scheduled to begin operations in the second half of 2004. The center is approximately 300,000 square feet and over time will employ approximately 300 associates.

Technology and content

• Our spending in technology and content has increased as we are adding computer scientists and software engineers to continue to improve our process efficiency and enhance the customer experience on our websites. We expect absolute dollars spent in technology and content to increase over time.

General and administrative

• The increase in general and administrative expense is primarily due to increases in legal fees. We expect general and administrative costs to increase in absolute dollars over time.

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Stock-Based Compensation

• Stock-based compensation consisted of $9 million expense for stock awards under variable accounting and $13 million for stock awards under fixed accounting plus matching stock contributions under our 401(k) program. Payroll tax expense resulting from exercises of stock-based awards is not classified in “Stock-based compensation”.

• We granted 2 million stock awards, primarily restricted stock units, during the quarter at a per share weighted average fair value of $47.

• Stock-based awards generally fully vest over service periods of between three and six years.

• At June 30, 2004, there were 28 million stock awards outstanding, consisting of 21 million stock options with a $13 weighted average exercise price, 6 million restricted stock units and 0.5 million shares of restricted stock (included in common stock outstanding).

• Since October 2002, we have awarded restricted stock units as our primary form of stock-based compensation. Restricted stock units, under fixed accounting, are generally measured at fair value on the date of grant based on the number of shares granted and the quoted price of our common stock. Such value is recognized as an expense on an accelerated basis over the corresponding service period. To the extent that restricted stock units are forfeited prior to vesting, the corresponding previously recognized expense is reversed as an offset to stock-based compensation.

• At June 30, 2004, 1 million outstanding stock awards, primarily options, were subject to variable accounting. Stock option grants after December 31, 2002, are subject to variable accounting treatment. Variable accounting treatment results in expense or contra-expense recognition using the cumulative expense method, calculated based on the quoted price of our common stock and vesting schedules of underlying awards. For example, since the closing price of our common stock on June 30, 2004 ($54.40), was greater than the closing price on March 31, 2004 ($43.28), we recorded an expense associated with variable accounting treatment for the second quarter of 2004.

Other Operating Expense (Income)

• Included in “Other operating expense (income)” are restructuring-related expenses and amortization of other intangibles.

• Our first quarter 2001 operational restructuring plan is complete; however, we may periodically adjust our restructuring-related estimates, such as lease obligations, in the future if necessary.

• During the second quarter we determined that some of the office space previously vacated as part of our 2001 restructuring, which we had been unable to sublease due to poor real estate market conditions, was necessary for our future needs. This resulted in a gain of $7 million for the second quarter. Future lease payments for this office space will be expensed over the lease period and classified to the corresponding operating expense categories on the consolidated statements of operations.

• We estimate, based on currently available information, the remaining net cash outflows associated with restructuring-related leases and other commitments will be $2 million in 2004, and $17 million thereafter. Amounts due within twelve months are included within “Accrued expenses and other current liabilities” and the remaining amounts within “Long-term debt and other” on our balance sheet. These amounts are net of anticipated sublease income of $25 million (we have signed sublease agreements for $14 million).

• Cash payments resulting from our 2001 operational restructuring were $1 million, compared with $4 million in second quarter 2003.

• We plan to streamline our organizational structure in France and reduce our operating costs. We anticipate the costs associated with these efforts will be approximately $5 million; however, the reorganization is subject to regulatory review, which may impact the severance terms. We anticipate the number of employees affected and severance terms will be finalized in third quarter 2004 and corresponding costs will be recorded at that time and classified in “Other operating expense (income)”.

Other Income (Expense), Net

• Other expense in second quarter 2004 was primarily miscellaneous foreign, state and other income taxes.

Remeasurements and Other

• Remeasurements includes foreign-currency gains on remeasurement of 6.875% PEACS from Euros to U.S. Dollars of $8 million, compared with a loss of $38 million in second quarter 2003.

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• Other includes a $7 million loss from remeasurement of intercompany balances, which are to be repaid amongst subsidiaries.

• Other also includes a gain of $14 million related to the sale of an equity investment, classified within “Investing Activities” on our statement of cash flows.

Income Taxes

• At June 30, 2004, we had net operating loss carryforwards (NOLs) of approximately $2.8 billion, primarily related to U.S. federal taxes. Utilization of NOLs, which begin to expire at various times starting in 2010, may be subject to certain limitations. Approximately $1.8 billion of our NOLs relate to tax deductible stock-based compensation in excess of amounts recognized for financial reporting purposes-to the extent that any of this amount is realized for tax purposes but not financial reporting purposes, the resulting tax benefits will be credited to stockholders’ equity rather than results of operations.

Net Income (Loss)

• We do not believe that our reported net income for the second quarter 2004 should be viewed, on its own, as a material positive event or should be considered predictive of future results. For example, we are unable to forecast the effect on our future reported results of certain items, including the effect that fluctuations in foreign currency rates will have on the remeasurement of our 6.875% PEACS and intercompany balances. Additionally, we are unable to forecast the effect on stock-based compensation of changes in the quoted price of our common stock due to variable accounting treatment. The remeasurement of our 6.875% PEACS represented significant gains during the quarter and may result in significant charges or gains in future periods.

Foreign Exchange

• As our financial reporting currency is the U.S. Dollar, our total sales, profit, and operating and free cash flow have benefited significantly the past eight quarters from weakness in the U.S. Dollar in comparison to the currencies of our international websites. We believe it is important to evaluate our growth rates after the effect of currency changes.

• The effect of changes in exchange rates in the second quarter is as follows (in millions):

	2004			2003
Effect of exchange rate on:
Net Sales	$	47		$	55
Gross Profit		10			12
Operating Income		4			3
Net Interest Expense & Other		(1	)		(2	)
Remeasurements & Other (1)		3			(35	)
Net Income (Loss)		6			(34	)
Earnings Per Share	$	0.02		$	(0.09	)

(1) Includes foreign-currency gains (losses) on remeasurement of 6.875% PEACS and intercompany balances, and realized currency-related gains associated with sales of Euro-denominated investments held by a U.S. functional-currency subsidiary.

These amounts represent the impact on reported results that is due to year-over-year changes in exchange rates. Absent year-over-year changes in exchange rates, reported amounts would have been lower (higher) by these amounts.

Cash Flows and Balance Sheet

• Operating cash flows and free cash flows can be volatile and are sensitive to many factors, including changes in working capital. Working capital at any specific point in time is subject to many variables, including world events, seasonality, the timing of expense payments, discounts offered by vendors, vendor payment terms and fluctuations in foreign exchange rates. For example, in second quarter 2003 we purchased and received customer payment for over 1.4 million units of Harry Potter and the Order of the Phoenix, for which payment was generally not due to our vendors until after the second quarter of 2003.

• Our cash, cash equivalents and marketable securities of $1.15 billion, at fair value, primarily consist of cash, commercial paper and short-term securities, U.S. Treasury notes and bonds, certificates of deposit, and asset-backed and agency securities. Included is amounts held in foreign currencies of $645 million, primarily in Euros and British Pounds.

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• We have pledged $80 million of our marketable securities as collateral for property leases and other contractual obligations, compared with $87 million as of December 31, 2003.

• “Other assets” includes, among other things, deferred issuance costs on long-term debt, intangibles and other equity investments.

• “Unearned revenue” is recorded when payments are received from third parties in advance of our providing the associated service.

• “Accrued expenses and other current liabilities” includes, among other things, liabilities for gift certificates, marketing activities, and workforce costs, including accrued payroll, vacation, and other benefits.

• “Long-term debt and other” primarily includes the following (in millions):

	Principal at Maturity			Interest Rate		Principal Due Date
Convertible Subordinated Notes	$	900	(1) (2)	4.750	%	February 2009
PEACS		841	(3)	6.875	%	February 2010
	$	1,741	(4)

(1)    Convertible at the holders’ option into our common stock at $78.0275 per share. We have the right to redeem the Convertible Subordinated Notes, in whole or in part, at a redemption price of 102.375% of the principal, which decreases every Februaryby 47.5 basis points until maturity, plus any accrued and unpaid interest.

(2)    During the previous twelve-month period we redeemed an aggregate principal amount of $350 million: $150 million in February 2004 and $200 million in November 2003.

(3)    €690 million principal amount, convertible at the holders’ option into our common stock at €84.883 per share ($103.50 per share based on the exchange rate as of June 30, 2004). We have the right to redeem the PEACS, in whole or in part, by paying the principal amount, plus any accrued and unpaid interest. We do not hedge any portion of the PEACS. The U.S. Dollar equivalent principal, interest and conversion price fluctuates based on the Euro/U.S. Dollar exchange ratio.

(4)    The “if converted” number of shares associated with each of our convertible debt instruments (approximately 20 million total shares) are excluded from diluted shares as their effect is anti-dilutive.

Certain Definitions and Other

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

• The North America segment consists of amounts earned from retail sales of consumer products (including from third-party sellers) through www.amazon.com and www.amazon.ca; from North America focused Syndicated Stores, such as www.cdnow.com; from our mail-order tool catalog; and from non-retail activities such as North America focused Merchant.com, marketing and promotional agreements.

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

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

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• Operating cycle is number of days of sales in inventory plus number of days of sales in accounts receivable minus accounts payable days. Inventory turnover is the quotient of annualized cost of sales to average inventory. Accounts payable days is calculated as the quotient of accounts payable to cost of sales, multiplied by the number of days in the period.

• References to customers mean customer accounts, which are unique e-mail addresses, established either when a customer’s initial order is shipped or when a customer orders from certain third-party sellers on our websites. Customer accounts include customers of Amazon Marketplace, Auctions and zShops, and our Merchants@ and Syndicated Stores Programs, but exclude Merchant.com Program customers, Amazon.com Payments customers, our catalog customers and the customers of select companies with whom we have a technology alliance or marketing and promotional relationship. A customer is considered active upon placing an order.

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

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

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