UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________

FORM 10-K

____________________________________

(Mark One)



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

For the fiscal year ended December 31, ~~2019~~2020



☐			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~~ 98109-5210

(~~206~~) (206) 266-1000

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

Securities registered pursuant to Section 12(b) of the Act:



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

Securities registered pursuant to Section 12(g) of the Act:

None

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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the 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

☒

Accelerated filer

☐

Non-accelerated filer

☐

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

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

Aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2019 $ 786,284,080,955
Number of shares of common stock outstanding as of January 22, 2020 497,810,444


Aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2020	$	1,174,367,787,295
Number of shares of common stock outstanding as of January 20, 2021	503,564,743

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DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this Report, to the extent not set forth herein, is incorporated herein by reference from the registrant’s definitive proxy statement relating to the Annual Meeting of Shareholders to be held in ~~2020,~~2021, which definitive proxy statement shall be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this Report relates.

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AMAZON.COM, INC.

FORM 10-K

For the Fiscal Year Ended December 31, ~~2019~~2020

INDEX


					Page
PART I
Item 1.			Business		3
Item 1A.			Risk Factors		6
Item 1B.			Unresolved Staff Comments		15
Item 2.			Properties		16
Item 3.			Legal Proceedings		16
Item 4.			Mine Safety Disclosures		16

PART II						~~Page~~
~~PART I~~
Item 1.5.	~~Business~~			3
~~Item 1A.~~	~~Risk Factors~~	6
~~Item 1B.~~	~~Unresolved Staff Comments~~	15
~~Item 2.~~	~~Properties~~	16
~~Item 3.~~	~~Legal Proceedings~~	16
~~Item 4.~~	~~Mine Safety Disclosures~~	16

~~PART II~~
~~Item 5.~~	Market for the Registrant’s Common Stock, Related Shareholder Matters, and Issuer Purchases of Equity Securities	17
Item 6.			Selected Consolidated Financial Data		18
Item 7.			Management’s Discussion and Analysis of Financial Condition and Results of Operations		19
Item 7A.			Quantitative and Qualitative Disclosures About Market Risk		3233
Item 8.			Financial Statements and Supplementary Data		3435
Item 9.			Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		7169
Item 9A.			Controls and Procedures		7169
Item 9B.			Other Information		7371

PART III
Item 10.			Directors, Executive Officers, and Corporate Governance		7371
Item 11.			Executive Compensation		7371
Item 12.			Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		7371
Item 13.			Certain Relationships and Related Transactions, and Director Independence		7371
Item 14.			Principal Accountant Fees and Services		7371

PART IV
Item 15.			Exhibits, Financial Statement Schedules		7472
Item 16.			Form 10-K Summary		7473
Signatures					7674

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AMAZON.COM, INC.

PART I



Item 1.			Business

This Annual Report on Form 10-K and the documents incorporated herein by reference contain forward-looking statements based on expectations, estimates, and projections as of the date of this filing. Actual results may differ materially from those expressed in forward-looking statements. See Item 1A of Part I — “Risk Factors.”

Amazon.com, Inc. ~~was incorporated in 1994 in the state of Washington and reincorporated in 1996 in the state of Delaware. Our~~’s principal corporate offices are located in Seattle, Washington. We completed our initial public offering in May 1997 and our common stock is listed on the Nasdaq Global Select Market under the symbol “AMZN.”

As used herein, “Amazon.com,” “we,” “our,” and similar terms include Amazon.com, Inc. and its subsidiaries, unless the context indicates otherwise.

General

We seek to be Earth’s most customer-centric company. We are guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking. In each of our segments, we serve our primary customer sets, consisting of consumers, sellers, developers, enterprises, and content creators. In addition, we provide services, such as advertising to sellers, vendors, publishers, authors, and ~~authors,~~others, through programs such as sponsored ads, display, and video advertising.

We have organized our operations into three segments: North America, International, and Amazon Web Services (“AWS”). These segments reflect the way the Company evaluates its business performance and manages its operations. Information on our net sales is contained in Item 8 of Part II, “Financial Statements and Supplementary Data — Note 10 — Segment Information.” ~~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.~~

Consumers

We serve consumers through our online and physical stores and focus on selection, price, and convenience. We design our stores to enable hundreds of millions of unique products to be sold by us and by third parties across dozens of product categories. Customers access our offerings through our websites, mobile apps, Alexa, devices, streaming, and physically visiting our stores. We also manufacture and sell electronic devices, including Kindle, Fire tablet, Fire TV, Echo, Ring, and other devices, and we develop and produce media content. We seek to offer our customers low prices, fast and free delivery, easy-to-use functionality, and timely customer service. In addition, we offer Amazon Prime, a membership program that includes unlimited free shipping on over 100 million items, access to unlimited streaming of tens of thousands of movies and TV episodes, including Amazon Original content, and other benefits.

We fulfill customer orders in a number of ways, including through: North America and International fulfillment ~~and delivery~~ networks that we operate; co-sourced and outsourced arrangements in certain countries; digital delivery; and through our physical stores. We operate customer service centers globally, which are supplemented by co-sourced arrangements. See Item 2 of Part I, “Properties.”

Sellers

We offer programs that enable sellers to grow their businesses, sell their products in our stores, and fulfill orders through us. We are not the seller of record in these transactions. We earn fixed fees, a percentage of sales, per-unit activity fees, interest, or some combination thereof, for our seller programs.

Developers and Enterprises

We serve developers and enterprises of all sizes, including start-ups, government agencies, and academic institutions, through ~~our~~ AWS, ~~segment,~~ which offers a broad set of ~~global~~on-demand technology services, including compute, storage, database, analytics, and machine learning, and other ~~service offerings.~~

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services.

Content Creators

We serve authors and independent publishers with Kindle Direct Publishing, an online service that lets independent authors and publishers choose a royalty option and make their books available in the Kindle Store, along with Amazon’s own publishing arm, Amazon Publishing. We also offer programs that allow authors, musicians, filmmakers, skill and app developers, and others to publish and sell content.

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Competition

Our businesses encompass a large variety of product types, service offerings, and delivery channels. The worldwide marketplace in which we compete is evolving rapidly and intensely competitive, and we face a broad array of competitors from many different industry sectors around the world. Our current and potential competitors include: (1) physical, e-commerce, and omnichannel retailers, publishers, vendors, distributors, manufacturers, and producers of the products we offer and sell to consumers and businesses; (2) publishers, producers, and distributors of physical, digital, and interactive media of all types and all distribution channels; (3) web search engines, comparison shopping websites, social networks, web portals, and other online and app-based means of discovering, using, or acquiring goods and services, either directly or in collaboration with other retailers; (4) companies that provide e-commerce services, including website development and hosting, omnichannel sales, inventory and supply chain management, advertising, fulfillment, customer service, and payment processing; (5) companies that provide fulfillment and logistics services for themselves or for third parties, whether online or offline; (6) companies that provide information technology services or products, including on-premises or cloud-based infrastructure and other services; (7) companies that design, manufacture, market, or sell consumer electronics, telecommunication, and electronic devices; ~~and~~ (8) companies that sell grocery products online and in physical ~~stores.~~stores; and (9) companies that provide advertising services, whether in digital or other formats. We believe that the principal competitive factors in our retail businesses include selection, price, and convenience, including fast and reliable fulfillment. Additional competitive factors for our seller and enterprise services include the quality, speed, and reliability of our services and tools, as well as customers’ ability and willingness to change business practices. Some of our current and potential competitors have greater resources, longer histories, more customers, greater brand recognition, and greater control over inputs critical to our various businesses. They may secure better terms from suppliers, adopt more aggressive pricing, pursue restrictive distribution agreements that restrict our access to supply, direct consumers to their own offerings instead of ours, lock-in potential customers with restrictive terms, and devote more resources to technology, infrastructure, fulfillment, and marketing. The Internet facilitates competitive entry and comparison shopping, which enhances the ability of new, smaller, or lesser-known businesses to compete against us. Each of our businesses is also subject to rapid change and the development of new business models and the entry of new and well-funded competitors. Other companies also may enter into business combinations or alliances that strengthen their competitive positions.

Intellectual Property

We regard our trademarks, service marks, copyrights, patents, domain names, trade dress, trade secrets, proprietary technologies, 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, partners, and others to protect our proprietary rights. We have registered, or applied for the registration of, a number of U.S. and international domain names, trademarks, service marks, and copyrights. Additionally, we have filed U.S. and international patent applications covering certain of our proprietary technology. ~~We have licensed in the past, and expect that we may license in the future, certain of our proprietary rights to third parties.~~

Seasonality

Our business is affected by seasonality, which historically has resulted in higher sales volume during our fourth quarter, which ends December 31. ~~We recognized 34%, 31%, and 31%~~

Human Capital

Our employees are critical to our mission of ~~our annual revenue during the fourth quarter~~being Earth’s most customer-centric company. As of ~~2017,~~ ~~2018, and 2019. Fourth quarter 2017 results include revenue attributable to Whole Foods Market, which~~December 31, 2020, we ~~acquired on August 28, 2017.~~

~~Employees~~

We employed approximately ~~798,000~~1,298,000 full-time and part-time ~~employees as of~~ ~~December 31, 2019. However, employment levels fluctuate due to seasonal factors affecting our business.~~employees. Additionally, we utilize independent contractors and temporary personnel to supplement our workforce. We have works councils, statutory employee representation obligations, and union agreements in certain countries outside the United States and at certain of our studio operations within the United States. We consider our employee relations to be good. Competition for qualified personnel has historically been intense, particularly for software engineers, computer scientists, and other technical staff.

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We focus on investment and innovation, inclusion and diversity, safety, and engagement to hire and develop the best talent. We rely on numerous and evolving initiatives to implement these objectives and invent mechanisms for talent development, including industry-leading pay and benefits, skills training programs such as Amazon Career Choice and the Amazon Technical Academy, mentorship and support resources, and programs that advance engagement, communication, and feedback.

Available Information

Our investor relations website is amazon.com/ir and we encourage investors to use it as a way of easily finding information about us. We promptly make available on this website, free of charge, the reports that we file or furnish with the Securities and Exchange Commission (“SEC”), corporate governance information (including our Code of Business Conduct and Ethics), and select press releases.

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Executive Officers and Directors

The following tables set forth certain information regarding our Executive Officers and Directors as of January ~~22, 2020:~~20, 2021:

Information About Our Executive Officers

Name

Age

Position

Jeffrey P. Bezos

5657

President, Chief Executive Officer, and Chairman of the Board

~~Jeffrey M. Blackburn~~David H. Clark

5048

~~Senior Vice President, Business Development~~CEO, Worldwide Consumer

Andrew R. Jassy

5253

CEO Amazon Web Services

Brian T. Olsavsky

5657

Senior Vice President and Chief Financial Officer

Shelley L. Reynolds

5556

Vice President, Worldwide Controller, and Principal Accounting Officer

~~Jeffrey A. Wilke~~

~~CEO Worldwide Consumer~~

David A. Zapolsky

5657

Senior Vice President, General Counsel, and Secretary

Jeffrey P. Bezos. Mr. Bezos has been Chairman of the Board of Amazon.com since founding it in 1994 and Chief Executive Officer since May 1996. Mr. Bezos served as President of the Company from founding until June 1999 and again from October 2000 to the present.

~~Jeffrey M. Blackburn.~~David H. Clark. Mr. ~~Blackburn~~Clark has served as CEO Worldwide Consumer since January 2021, and Senior Vice President, ~~Business Development, since April 2006.~~Worldwide Operations, from May 2014 until January 2021.

Andrew R. Jassy. Mr. Jassy has served as CEO Amazon Web Services since April 2016, and Senior Vice President, Amazon Web Services, from April 2006 until April 2016.

Brian T. Olsavsky. Mr. Olsavsky has served as Senior Vice President and Chief Financial Officer since June 2015, Vice President, Finance for the Global Consumer Business from December 2011 to June 2015, and numerous financial leadership roles across Amazon with global responsibility since April 2002.

Shelley L. Reynolds. Ms. Reynolds has served as Vice President, Worldwide Controller, and Principal Accounting Officer since April 2007.

~~Jeffrey A. Wilke.~~ Mr. Wilke has served as CEO Worldwide Consumer since April 2016, Senior Vice President, Consumer Business, from February 2012 until April 2016, and as Senior Vice President, North America Retail, from January 2007 until February 2012.

David A. Zapolsky. Mr. Zapolsky has served as Senior Vice President, General Counsel, and Secretary since May 2014, Vice President, General Counsel, and Secretary from September 2012 to May 2014, and as Vice President and Associate General Counsel for Litigation and Regulatory matters from April 2002 until September 2012.

Board of Directors

Name

Age

Position

Jeffrey P. Bezos

5657

President, Chief Executive Officer, and Chairman of the Board

Keith B. Alexander

Co-CEO, President, and Chair of IronNet Cybersecurity, Inc.

Rosalind G. Brewer

5758

Group President, Americas and Chief Operating Officer, Starbucks Corporation

Jamie S. Gorelick

6970

Partner, Wilmer Cutler Pickering Hale and Dorr LLP

Daniel P. Huttenlocher

6162

Dean, MIT Schwarzman College of Computing

Judith A. McGrath

6768

~~Senior Advisor, Astronauts Wanted * No experience necessary~~Former Chair and CEO, MTV Networks

Indra K. Nooyi

6465

Former Chief Executive Officer, PepsiCo, Inc.

Jonathan J. Rubinstein

6364

Former co-CEO, Bridgewater Associates, LP

Thomas O. Ryder

7576

Retired, Former ~~Chairman,~~Chair, Reader’s Digest Association, Inc.

Patricia Q. Stonesifer

6364

Former President and Chief Executive Officer, Martha’s Table

Wendell P. Weeks

6061

Chief Executive Officer, Corning Incorporated

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Item 1A.			Risk Factors

Please carefully consider the following discussion of significant factors, events, and uncertainties that make an investment in our securities risky. The events and consequences discussed in these risk factors could, in circumstances we may or may not be able to accurately predict, recognize, or control, have a material adverse effect on our business, growth, reputation, prospects, financial condition, operating results (including components of our financial results), cash flows, liquidity, and stock price. These risk factors do not identify all risks that we face; our operations could also be affected by factors, events, or uncertainties that are not presently known to us or that we currently do not consider to present significant risks to our operations. In addition to the effects of the COVID-19 pandemic and resulting global disruptions on our business and operations discussed in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in the risk factors below, additional or unforeseen effects from the COVID-19 pandemic and the global economic climate ~~amplifies~~may give rise to or amplify many of ~~these risks.~~the risks discussed below.

Business and Industry Risks

We Face Intense Competition

Our businesses are rapidly evolving and intensely competitive, and we have many competitors across geographies, including cross-border competition, and in different industries, including physical, e-commerce, and omnichannel retail, e-commerce services, web and infrastructure computing services, electronic devices, digital content, advertising, grocery, and transportation and logistics services. 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 continues to 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 continue to increase our competition. The Internet facilitates competitive entry and comparison shopping, which enhances the ability of new, smaller, or lesser known businesses to compete against us. As a result of competition, our product and service offerings may not be successful, we may fail to gain or may lose business, and we may be required to increase our spending or lower prices, any of which could materially reduce our sales and profits.

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

We are continuing to rapidly and significantly expand our global operations, including increasing our product and service offerings and scaling our infrastructure to support our retail and services businesses. The complexity of the current scale of our business can place significant strain on our management, personnel, operations, systems, technical performance, financial resources, and internal financial control and reporting functions, and our expansion increases these factors. Failure to manage growth effectively 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 Risks

We may have limited or no experience in our newer market segments, and our customers may not adopt our product or service offerings. These offerings, which can present new and difficult technology challenges, may subject us 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 not meet our expectations, and we may not be successful enough in these newer activities to recoup our investments in them. Failure to realize the benefits of amounts we invest in new technologies, products, or services could result in the value of those investments being written down or written off.

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

We are not always 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 are not always 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 factors described elsewhere in this section and the following:~~

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

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~~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 fast and free delivery, continue to reduce prices worldwide, and provide additional benefits to our customers;~~

~~factors affecting our reputation or brand image;~~

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

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

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

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

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

disruptions from natural or man-made disasters, extreme weather, geopolitical events and security issues (including terrorist attacks and armed hostilities), labor or trade disputes, and similar events.

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 stores, and promote our brand internationally. Our international operations may not become profitable on a sustained basis.

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

•local economic and political conditions;

•government regulation (such as regulation of our product and service offerings and of competition); 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;

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

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

•limited fulfillment and technology infrastructure;

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

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

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lower levels of use of the Internet;

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

•lower levels of credit card usage and increased payment risk;

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

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

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

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

•geopolitical events, including war and terrorism.

As international physical, e-commerce, and omnichannel retail and other services grow, competition will intensify, including through adoption of evolving business models. Local companies may have a substantial competitive advantage because of their greater understanding of, and focus on, the local customer, as well as their more established local brand names. The inability to hire, train, retain, and manage sufficient required personnel 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, regulatory licensing, and cybersecurity requirements, we provide certain technology services in China through contractual relationships with third parties that hold PRC licenses to provide services. In India, the government restricts the ownership or control of Indian companies by foreign entities involved in online multi-brand retail trading activities. For www.amazon.in, we provide certain marketing tools and logistics services to third-party sellers to enable them to sell online and deliver to customers, and we hold indirect minority interests in entities that are third-party sellers on the www.amazon.in marketplace. Although we believe these structures and activities comply with existing laws, they involve unique risks, and the PRC and India may from time to time consider and implement additional changes in their regulatory, licensing, or other requirements that could impact these structures and activities. There are substantial uncertainties regarding the interpretation of PRC and Indian laws and regulations, and it is possible that these governments will ultimately take a view contrary to ours. In addition, our Chinese and Indian businesses and operations may be unable to continue to operate if we or our affiliates are unable to access sufficient funding or, in China, enforce contractual relationships we or our affiliates have in place. Violation of any existing or future PRC, Indian, or other laws or regulations or changes in the interpretations of those laws and regulations could result in our businesses in those countries being subject to fines and other financial penalties, having licenses revoked, or being forced to restructure our operations or shut down entirely.

~~We Face Risks Related to Successfully Optimizing and Operating Our Fulfillment Network and Data Centers~~

Failures to adequately predict customer demand or otherwise optimize and operate our fulfillment network and data centers successfully from time to time result in excess or insufficient fulfillment or data center capacity, increased costs, and impairment charges, any of which could materially harm our business. 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, failure to optimize inventory in our fulfillment network increases 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. 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 the other businesses on whose behalf we perform inventory fulfillment services to accurately forecast product demand may result in us being unable to secure sufficient storage space or to optimize our fulfillment network or cause other unexpected costs and other harm to our business and reputation.

We rely on a limited number of shipping companies to deliver inventory to us and completed orders to our customers. The inability to negotiate acceptable terms with these companies or performance problems or other difficulties experienced by these companies or by our own transportation systems 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 natural or man-made disasters, extreme weather, geopolitical events and security issues, labor or trade disputes, and similar events.

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The ~~Seasonality of~~Variability in Our Retail Business Places Increased Strain on Our Operations

WeDemand for our products and services can fluctuate significantly for many reasons, including as a result of seasonality, promotions, product launches, or unforeseeable events, such as in response to natural or man-made disasters, extreme weather, or geopolitical events. For example, we expect a disproportionate amount of our retail sales to occur during our fourth quarter. Our failure to stock or restock popular products in sufficient amounts such that we fail to meet customer demand could significantly affect our revenue and our future growth. When we overstock products, we may be required to take significant inventory markdowns or write-offs and incur commitment costs, which could materially reduce profitability. We regularly experience increases 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 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 offer or 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. Risks described elsewhere in this Item 1A relating to fulfillment network optimization and inventory are magnified during periods of high demand.

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 Commercial Agreements, Strategic Alliances,~~We Are Impacted by Fraudulent or Unlawful Activities of Sellers

The law relating to the liability of online service providers is currently unsettled. In addition, governmental agencies have in the past and ~~Other Business Relationships Expose Us to Risks~~

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

~~We have acquired and invested in a number of companies, and we may~~require changes in the ~~future acquire~~way this business is conducted. Under our seller programs, we maintain policies and processes designed to prevent sellers from collecting payments, fraudulently or ~~invest~~otherwise, when buyers never receive the products they ordered or when the products received are materially different from the sellers’ descriptions, and to prevent sellers in our stores or ~~enter into joint ventures with additional companies. These transactions create risks such as:~~

~~disruption~~through other stores from selling unlawful, counterfeit, pirated, or stolen goods, selling goods in an unlawful or unethical manner, violating the proprietary rights of others, or otherwise violating our ~~ongoing business, including loss of management focus on existing businesses;~~

~~problems retaining key personnel;~~

~~additional operating losses~~policies. When these policies and ~~expenses of the businesses we acquired~~processes are circumvented or ~~in which we invested;~~

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

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~~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~~fail 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 successfully implemented;

~~losses we may incur as a result of declines in the value of an investment or as a result of incorporating an investee’s financial performance into our financial results;~~

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 andoperate sufficiently, it can 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. 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 stores and product and service offerings are exposed to foreign exchange rate fluctuations. Due to these fluctuations, 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. When the U.S. Dollar strengthens compared to these currencies, cash equivalents, and marketable securities balances, when translated, may be materially less than expected and vice versa.

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

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

~~We Could Be Harmed by Data Loss or Other Security Breaches~~

Because we collect, process, store, and transmit large amounts of data, including confidential, sensitive, proprietary, and business and personal information, failure to prevent or mitigate data loss, theft, misuse, or other security breaches or vulnerabilities affecting our or our vendors’ or customers’ technology, products, and systems, could expose us or our customers to a risk of loss, disclosure, or misuse of such information, adversely affect our operating results, result in litigation, regulatory action (including under privacy or data protection laws), and potential liability for us, deter customers or sellers from using our stores and services, and otherwise harm our business and reputation. We use third-party technology and systems for a variety of reasons, including, without limitation, encryption and authentication technology, employee email, content delivery to customers, back-office support, and other functions. Some of our systems have experienced past security breaches, and,

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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 such incidents, including systems and processes designed to reduce the impact of a security breach at a third-party vendor or customer, such measures cannot provide absolute security and may fail to operate as intended or be circumvented.

~~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 accepting or fulfilling orders or providing services to third parties, which may reduce our net sales and the attractiveness of our products and services. Steps we take to add software and hardware, upgrade our systems and network infrastructure, and improve the stability and efficiency of our systems may not be sufficient to avoid system interruptions or delays that could adversely affect our operating results.

Our computer and communications systems and operations in the past have been, or in the future could be, damaged or interrupted due to events such as natural or man-made disasters, extreme weather, geopolitical events and security issues (including terrorist attacks and armed hostilities), 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, our insurance may not provide sufficient coverage to compensate for related losses. Any of these events could damage our reputation and ~~be expensive~~we could face civil or criminal liability for unlawful activities by our sellers. Under our A2Z Guarantee, we reimburse buyers for payments up to ~~remedy.~~

~~We Face Significant Inventory Risk~~

~~In addition to risks described elsewhere~~certain limits in these situations, and as our third-party seller sales grow, the cost of this ~~Item 1A relating to fulfillment network~~program will increase 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 requires 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 at times we are unable to sell products in sufficient quantities or to meet demand during the relevant selling seasons. Any one of the inventory risk factors set forth above may adverselycould negatively affect our operating results.

We Face Risks Related to Adequately Protecting Our Intellectual Property Rights and Being 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 is not 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 are not always able to discover or determine the extent of any unauthorized use of our proprietary rights. Actions taken by third parties that license our proprietary rights may materially diminish the value of our proprietary rights or reputation. The protection of our intellectual property requires the expenditure of significant financial and managerial resources. Moreover, the steps we take to protect our intellectual property do not always 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.

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, have in the past, and may in the future, result in the expenditure of significant financial and managerial resources, injunctions against us, or significant payments for damages, including to satisfy indemnification obligations or to obtain licenses from third parties who allege that we have infringed their rights. Such licenses may not be available on terms acceptable to us or at all. These risks have been amplified by the increase in third parties whose sole or primary business is to assert such claims.

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Item 7.			Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Annual Report on Form 10-K 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 Annual Report on Form 10-K 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 claims, litigation, government investigations, and other proceedings, fulfillment, sortation, delivery, and data center optimization, risks of inventory management, ~~seasonality,~~variability in demand, 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 global economic climate ~~amplifies~~and additional or unforeseen effects from the COVID-19 pandemic amplify 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 I, “Risk Factors.”

Overview

Our primary source of revenue is the sale of a wide range of products and services to customers. The products offered through our stores include merchandise and content we have purchased for resale and products offered by third-party sellers, and we also manufacture and sell electronic devices and produce media content. Generally, we recognize gross revenue from items we sell from our inventory as product sales and recognize our net share of revenue of items sold by third-party sellers as service sales. We seek to increase unit sales across our stores, through increased product selection, across numerous product categories. We also offer other services such as compute, storage, and database offerings, fulfillment, advertising, publishing, and digital content subscriptions.

Our financial focus is on long-term, sustainable growth in free cash ~~flows~~¹.flows. Free cash flows are driven primarily by increasing operating income and efficiently managing ~~working capital~~²accounts receivable, inventory, accounts payable, and cash capital expenditures, including our decision to purchase or lease property and equipment. Increases in operating income primarily result from increases in sales of products and services and efficiently managing our operating costs, partially offset by investments we make in longer-term strategic initiatives, including capital expenditures focused on improving the customer experience. To increase sales of products and services, we focus on improving all aspects of the customer experience, including lowering prices, improving availability, offering faster delivery and performance times, increasing selection, producing original content, increasing product categories and service offerings, expanding product information, improving ease of use, improving reliability, and earning customer trust. See “Results of Operations — Non-GAAP Financial Measures” below for additional information on our non-GAAP free cash flows financial measures.

We seek to reduce our variable costs per unit and work to leverage our fixed costs. Our variable costs include product and content costs, payment processing and related transaction costs, picking, packaging, and preparing orders for shipment, transportation, customer service support, costs necessary to run AWS, and a portion of our marketing costs. Our fixed costs include the costs necessary to build and run our technology infrastructure; to build, enhance, and add features to our online stores, web services, electronic devices, and digital offerings; and to build and optimize our fulfillment ~~and delivery~~ networks and related facilities. Variable costs generally change directly with sales volume, while fixed costs generally are dependent on the timing of capacity needs, geographic expansion, category expansion, and other factors. To decrease our variable costs on a per unit basis and enable us to lower prices for customers, we seek to increase our direct sourcing, increase discounts from suppliers, and reduce defects in our processes. To minimize unnecessary growth in fixed costs, we seek to improve process efficiencies and maintain a lean culture.

~~_______________________~~


~~(1)~~	~~See “Results of Operations — Non-GAAP Financial Measures” below for additional information on our non-GAAP free cash flows financial measures.~~


~~(2)~~	~~Working capital consists of accounts receivable, inventory, and accounts payable.~~

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Because of our model we are able to turn our inventory quickly and have a cash-generating operating cycle³1. On average, our high inventory velocity means we generally collect from consumers before our payments to suppliers come due. We expect variability in inventory turnover over time since it is affected by numerous factors, including our product mix, the mix of sales

1 The operating cycle is the number of days of sales in inventory plus the number of days of sales in accounts receivable minus accounts payable days.

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by us and by third-party sellers, our continuing focus on in-stock inventory availability and selection of product offerings, our investment in new geographies and product lines, and the extent to which we choose to utilize third-party fulfillment providers. We also expect some variability in accounts payable days over time since they are affected by several factors, including the mix of product sales, the mix of sales by third-party sellers, the mix of suppliers, seasonality, and changes in payment terms over time, including the effect of balancing pricing and timing of payment terms with suppliers.

We expect spending in technology and content will increase over time as we add computer scientists, designers, software and hardware engineers, and merchandising employees. 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 seek to invest efficiently in several areas of technology and content, including AWS, and expansion of new and existing product categories and service offerings, as well as in technology infrastructure to enhance the customer experience and improve our process efficiencies. We believe that advances in technology, specifically the speed and reduced cost of processing power, ~~the advances of~~data storage and analytics, improved wireless connectivity, and the practical applications of artificial intelligence and machine learning, will continue to improve ~~the consumer~~users’ experience on the Internet and increase its ubiquity in people’s lives. To best take advantage of these continued advances in technology, we are investing in AWS, which offers a broad set of on-demand technology services, including compute, storage, database, analytics, and machine learning, and other services, to developers and enterprises of all sizes. We are also investing in initiatives to build and deploy innovative and efficient software and electronic devices. ~~We are also investing in AWS, which offers a broad set of global compute, storage, database, and other service offerings to developers and enterprises of all sizes.~~

We seek to efficiently manage shareholder dilution while maintaining the flexibility to issue shares for strategic purposes, such as financings, acquisitions, and aligning employee compensation with shareholders’ interests. We utilize restricted stock units as our primary vehicle for equity compensation because we believe this compensation model aligns the long-term interests of our shareholders and employees. In measuring shareholder dilution, we include all vested and unvested stock awards outstanding, without regard to estimated forfeitures. Total shares outstanding plus outstanding stock awards were ~~507~~512 million and ~~512~~518 million as of December 31, ~~2018~~2019 and ~~2019.~~2020.

Our financial reporting currency is the U.S. Dollar and changes in foreign exchange rates significantly affect our reported results and consolidated trends. For example, if the U.S. Dollar weakens year-over-year relative to currencies in our international locations, our consolidated net sales and operating expenses will be higher than if currencies had remained constant. Likewise, if the U.S. Dollar strengthens year-over-year relative to currencies in our international locations, our consolidated net sales and operating expenses will be lower than if currencies had remained constant. We believe that our increasing diversification beyond the U.S. economy through our growing international businesses benefits our shareholders over the long-term. We also believe it is useful to evaluate our operating results and growth rates before and after the effect of currency changes.

In addition, the remeasurement of our intercompany balances can result in significant gains and losses associated with the effect of movements in foreign currency exchange rates. Currency volatilities may continue, which may significantly impact (either positively or negatively) our reported results and consolidated trends and comparisons.

For additional information about each line item addressed above, refer to Item 8 of Part II, “Financial Statements and Supplementary Data — Note 1 — Description of Business, Accounting Policies, and ~~Accounting Policies.~~Supplemental Disclosures.”

Our Annual Report on Form 10-K for the year ended December 31, ~~2018~~2019 includes a discussion and analysis of our financial condition and results of operations for the year ended December 31, ~~2017~~2018 in Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Effects of COVID-19

The COVID-19 pandemic and resulting global disruptions have affected our businesses, as well as those of our customers, suppliers, and third-party sellers. To serve our customers while also providing for the safety of our employees and service providers, we have modified numerous aspects of our logistics, transportation, supply chain, purchasing, and third-party seller processes. Beginning in Q1 2020, we made numerous process updates across our operations worldwide, and adapted our fulfillment network, to implement employee and customer safety measures, such as enhanced cleaning and physical distancing, personal protective gear, disinfectant spraying, and temperature checks. Since February 2020, we have hired over 400,000 full-time and part-time employees to increase our fulfillment network capacity. We incurred approximately $4.0 billion in COVID-19 related costs in Q4 2020, for a total of more than $11.5 billion during 2020. We will continue to prioritize employee and customer safety and comply with evolving federal, state, and local standards as well as to implement standards or processes that we determine to be in the best interests of our employees, customers, and communities.

~~_______________________~~


~~(3)~~	~~The operating cycle is the number of days of sales in inventory plus the number of days of sales in accounts receivable minus accounts payable days.~~

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Item 8.			Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



			Page
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm			3536
Consolidated Statements of Cash Flows			3738
Consolidated Statements of Operations			3839
Consolidated Statements of Comprehensive Income			3940
Consolidated Balance Sheets			4041
Consolidated Statements of Stockholders’ Equity			4142
Notes to Consolidated Financial Statements			4243

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Amazon.com, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Amazon.com, Inc. (the Company) as of December 31, ~~2019~~2020 and ~~2018,~~2019, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, ~~2019~~2020 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, ~~2019~~2020 and ~~2018,~~2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, ~~2019,~~2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, ~~2019,~~2020, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated ~~January 30, 2020~~February 2, 2021 expressed an unqualified opinion thereon.

~~Adoption of New Accounting Standard~~

~~As discussed in Note 1 to the consolidated financial statements, the Company has changed its method for accounting for leases in 2019 due to the adoption of ASU No. 2016-02, Leases (Topic 842).~~

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.



Uncertain Tax Positions
Description of the Matter			The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions and, as discussed in Note 9 of the consolidated financial statements, during the ordinary course of business, there are many tax positions for which the ultimate tax determination is uncertain. As a result, significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. The Company uses significant judgment in (1) determining whether a tax position’s technical merits are more likely than not to be sustained and (2) measuring the amount of tax benefit that qualifies for recognition. As of December 31, ~~2019,~~2020, the Company accrued liabilities of ~~$3.9~~$2.8 billion for various tax contingencies. Auditing the measurement of the Company’s tax contingencies was challenging because the evaluation of whether a tax position is more likely than not to be sustained and the measurement of the benefit of various tax positions can be complex, involves significant judgment, and is based on interpretations of tax laws and legal rulings.

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How We Addressed the Matter in Our Audit			We tested controls over the Company’s process to assess the technical merits of its tax contingencies, including controls over the assessment as to whether a tax position is more likely than not to be sustained, management’s process to measure the benefit of its tax positions, and the development of the related disclosures. We involved our international tax, transfer pricing, and research and development tax professionals in assessing the technical merits of certain of the Company’s tax positions. Depending on the nature of the specific tax position and, as applicable, developments with the relevant tax authorities relating thereto, our procedures included obtaining and examining the Company’s analysis including the Company’s correspondence with such tax authorities and evaluating the underlying facts upon which the tax positions are based. We used our knowledge of, and experience with, international, transfer pricing, and other income tax laws by the relevant income tax authorities to evaluate the Company’s accounting for its tax contingencies. We evaluated developments in the applicable regulatory environments to assess potential effects on the Company’s ~~positions.~~positions, including recent decisions in relevant court cases. We analyzed the Company’s assumptions and data used to determine the amount of tax benefits to recognize and tested the accuracy of the Company’s calculations. We have also evaluated the Company’s income tax disclosures included in Note 9 in relation to these matters.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1996.

Seattle, Washington

~~January 30, 2020~~

February 2, 2021

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AMAZON.COM, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)


	Year Ended December 31,										Year Ended December 31,
	2017			2018			2019				2018		2019		2020
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD	$	19,934		$	21,856		$	32,173		CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD	$	21,856	$	32,173	$	36,410
OPERATING ACTIVITIES:										OPERATING ACTIVITIES:
Net income	3,033			10,073			11,588			Net income	10,073		11,588		21,331
Adjustments to reconcile net income to net cash from operating activities:										Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization of property and equipment and capitalized content costs, operating lease assets, and other	11,478			15,341			21,789			Depreciation and amortization of property and equipment and capitalized content costs, operating lease assets, and other	15,341		21,789		25,251
Stock-based compensation	4,215			5,418			6,864			Stock-based compensation	5,418		6,864		9,208
Other operating expense (income), net	202			274			164			Other operating expense (income), net	274		164		(71)
Other expense (income), net	(292		)	219			(249		)	Other expense (income), net	219		(249)		(2,582)
Deferred income taxes	(29		)	441			796			Deferred income taxes	441		796		(554)
Changes in operating assets and liabilities:										Changes in operating assets and liabilities:
Inventories	(3,583		)	(1,314		)	(3,278		)	Inventories	(1,314)		(3,278)		(2,849)
Accounts receivable, net and other	(4,780		)	(4,615		)	(7,681		)	Accounts receivable, net and other	(4,615)		(7,681)		(8,169)
Accounts payable	7,100			3,263			8,193			Accounts payable	3,263		8,193		17,480
Accrued expenses and other	283			472			(1,383		)	Accrued expenses and other	472		(1,383)		5,754
Unearned revenue	738			1,151			1,711			Unearned revenue	1,151		1,711		1,265
Net cash provided by (used in) operating activities	18,365			30,723			38,514			Net cash provided by (used in) operating activities	30,723		38,514		66,064
INVESTING ACTIVITIES:										INVESTING ACTIVITIES:
Purchases of property and equipment	(11,955		)	(13,427		)	(16,861		)	Purchases of property and equipment	(13,427)		(16,861)		(40,140)
Proceeds from property and equipment sales and incentives	1,897			2,104			4,172			Proceeds from property and equipment sales and incentives	2,104		4,172		5,096
Acquisitions, net of cash acquired, and other	(13,972		)	(2,186		)	(2,461		)	Acquisitions, net of cash acquired, and other	(2,186)		(2,461)		(2,325)
Sales and maturities of marketable securities	9,677			8,240			22,681			Sales and maturities of marketable securities	8,240		22,681		50,237
Purchases of marketable securities	(12,731		)	(7,100		)	(31,812		)	Purchases of marketable securities	(7,100)		(31,812)		(72,479)
Net cash provided by (used in) investing activities	(27,084		)	(12,369		)	(24,281		)	Net cash provided by (used in) investing activities	(12,369)		(24,281)		(59,611)
FINANCING ACTIVITIES:										FINANCING ACTIVITIES:
Proceeds from long-term debt and other	16,228			768			2,273
Repayments of long-term debt and other	(1,301		)	(668		)	(2,684		)
Proceeds from short-term debt, and other										Proceeds from short-term debt, and other	886		1,402		6,796
Repayments of short-term debt, and other										Repayments of short-term debt, and other	(813)		(1,518)		(6,177)
Proceeds from long-term debt										Proceeds from long-term debt	182		871		10,525
Repayments of long-term debt										Repayments of long-term debt	(155)		(1,166)		(1,553)
Principal repayments of finance leases	(4,799		)	(7,449		)	(9,628		)	Principal repayments of finance leases	(7,449)		(9,628)		(10,642)
Principal repayments of financing obligations	(200		)	(337		)	(27		)	Principal repayments of financing obligations	(337)		(27)		(53)
Net cash provided by (used in) financing activities	9,928			(7,686		)	(10,066		)	Net cash provided by (used in) financing activities	(7,686)		(10,066)		(1,104)
Foreign currency effect on cash, cash equivalents, and restricted cash	713			(351		)	70			Foreign currency effect on cash, cash equivalents, and restricted cash	(351)		70		618
Net increase (decrease) in cash, cash equivalents, and restricted cash	1,922			10,317			4,237			Net increase (decrease) in cash, cash equivalents, and restricted cash	10,317		4,237		5,967
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD	$	21,856		$	32,173		$	36,410		CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD	$	32,173	$	36,410	$	42,377
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest on long-term debt	$	328		$	854		$	875
Cash paid for operating leases	—			—			3,361
Cash paid for interest on finance leases	200			381			647
Cash paid for interest on financing obligations	119			194			39
Cash paid for income taxes, net of refunds	957			1,184			881
Assets acquired under operating leases	—			—			7,870
Property and equipment acquired under finance leases	9,637			10,615			13,723
Property and equipment acquired under build-to-suit arrangements	3,541			3,641			1,362

See accompanying notes to consolidated financial statements.

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AMAZON.COM, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)


	Year Ended December 31,
	2018		2019		2020
Net product sales	$	141,915	$	160,408	$	215,915
Net service sales	90,972		120,114		170,149
Total net sales	232,887		280,522		386,064
Operating expenses:
Cost of sales	139,156		165,536		233,307
Fulfillment	34,027		40,232		58,517
Technology and content	28,837		35,931		42,740
Marketing	13,814		18,878		22,008
General and administrative	4,336		5,203		6,668
Other operating expense (income), net	296		201		(75)
Total operating expenses	220,466		265,981		363,165
Operating income	12,421		14,541		22,899
Interest income	440		832		555
Interest expense	(1,417)		(1,600)		(1,647)
Other income (expense), net	(183)		203		2,371
Total non-operating income (expense)	(1,160)		(565)		1,279
Income before income taxes	11,261		13,976		24,178
Provision for income taxes	(1,197)		(2,374)		(2,863)
Equity-method investment activity, net of tax	9		(14)		16
Net income	$	10,073	$	11,588	$	21,331
Basic earnings per share	$	20.68	$	23.46	$	42.64
Diluted earnings per share	$	20.14	$	23.01	$	41.83
Weighted-average shares used in computation of earnings per share:
Basic	487		494		500
Diluted	500		504		510

Year Ended December 31,
2017 2018 2019
Net product sales $ 118,573
$ 141,915
$ 160,408
Net service sales 59,293
90,972
120,114
Total net sales 177,866
232,887
280,522
Operating expenses:
Cost of sales 111,934
139,156
165,536
Fulfillment 25,249
34,027
40,232
Technology and content 22,620
28,837
35,931
Marketing 10,069
13,814
18,878
General and administrative 3,674
4,336
5,203
Other operating expense (income), net 214
296
201
Total operating expenses 173,760
220,466
265,981
Operating income 4,106
12,421
14,541
Interest income 202
440
832
Interest expense (848 ) (1,417 ) (1,600 )
Other income (expense), net 346
(183 ) 203
Total non-operating income (expense) (300 ) (1,160 ) (565 )
Income before income taxes 3,806
11,261
13,976
Provision for income taxes (769 ) (1,197 ) (2,374 )
Equity-method investment activity, net of tax (4 ) 9
(14 )
Net income $ 3,033
$ 10,073
$ 11,588
Basic earnings per share $ 6.32
$ 20.68
$ 23.46
Diluted earnings per share $ 6.15
$ 20.14
$ 23.01
Weighted-average shares used in computation of earnings per share:
Basic 480
487
494
Diluted 493
500
504

See accompanying notes to consolidated financial statements.

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AMAZON.COM, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)


	Year Ended December 31,										Year Ended December 31,
	2017			2018			2019				2018		2019		2020
Net income	$	3,033		$	10,073		$	11,588		Net income	$	10,073	$	11,588	$	21,331
Other comprehensive income (loss):										Other comprehensive income (loss):
Net change in foreign currency translation adjustments:										Net change in foreign currency translation adjustments:
Foreign currency translation adjustments, net of tax of $5, $6, and $(5)	533			(538		)	78
Reclassification adjustment for foreign currency translation included in “Other operating expense (income), net,” net of tax of $0, $0, and $29	—			—			(108		)
Foreign currency translation adjustments, net of tax of $6, $(5), and $(36)										Foreign currency translation adjustments, net of tax of $6, $(5), and $(36)	(538)		78		561
Reclassification adjustment for foreign currency translation included in “Other operating expense (income), net,” net of tax of $0, $29, and $0										Reclassification adjustment for foreign currency translation included in “Other operating expense (income), net,” net of tax of $0, $29, and $0	0		(108)		0
Net foreign currency translation adjustments	533			(538		)	(30		)	Net foreign currency translation adjustments	(538)		(30)		561
Net change in unrealized gains (losses) on available-for-sale debt securities:										Net change in unrealized gains (losses) on available-for-sale debt securities:
Unrealized gains (losses), net of tax of $5, $0, and $(12)	(39		)	(17		)	83
Reclassification adjustment for losses (gains) included in “Other income (expense), net,” net of tax of $0, $0, and $0	7			8			(4		)
Unrealized gains (losses), net of tax of $0, $(12), and $(83)										Unrealized gains (losses), net of tax of $0, $(12), and $(83)	(17)		83		273
Reclassification adjustment for losses (gains) included in “Other income (expense), net,” net of tax of $0, $0, and $8										Reclassification adjustment for losses (gains) included in “Other income (expense), net,” net of tax of $0, $0, and $8	8		(4)		(28)
Net unrealized gains (losses) on available-for-sale debt securities	(32		)	(9		)	79			Net unrealized gains (losses) on available-for-sale debt securities	(9)		79		245
Total other comprehensive income (loss)	501			(547		)	49			Total other comprehensive income (loss)	(547)		49		806
Comprehensive income	$	3,534		$	9,526		$	11,637		Comprehensive income	$	9,526	$	11,637	$	22,137

See accompanying notes to consolidated financial statements.

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AMAZON.COM, INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except per share data)


	December 31,							December 31,
	2018			2019				2019		2020
ASSETS							ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	31,750		$	36,092		Cash and cash equivalents	$	36,092	$	42,122
Marketable securities	9,500			18,929			Marketable securities	18,929		42,274
Inventories	17,174			20,497			Inventories	20,497		23,795
Accounts receivable, net and other	16,677			20,816			Accounts receivable, net and other	20,816		24,542
Total current assets	75,101			96,334			Total current assets	96,334		132,733
Property and equipment, net	61,797			72,705			Property and equipment, net	72,705		113,114
Operating leases	—			25,141			Operating leases	25,141		37,553
Goodwill	14,548			14,754			Goodwill	14,754		15,017
Other assets	11,202			16,314			Other assets	16,314		22,778
Total assets	$	162,648		$	225,248		Total assets	$	225,248	$	321,195
LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:							Current liabilities:
Accounts payable	$	38,192		$	47,183		Accounts payable	$	47,183	$	72,539
Accrued expenses and other	23,663			32,439			Accrued expenses and other	32,439		44,138
Unearned revenue	6,536			8,190			Unearned revenue	8,190		9,708
Total current liabilities	68,391			87,812			Total current liabilities	87,812		126,385
Long-term lease liabilities	9,650			39,791			Long-term lease liabilities	39,791		52,573
Long-term debt	23,495			23,414			Long-term debt	23,414		31,816
Other long-term liabilities	17,563			12,171			Other long-term liabilities	12,171		17,017
Commitments and contingencies (Note 7)							Commitments and contingencies (Note 7)	0		0
Stockholders’ equity:							Stockholders’ equity:
Preferred stock, $0.01 par value:							Preferred stock, $0.01 par value:
Authorized shares — 500							Authorized shares — 500
Issued and outstanding shares — none	—			—
Issued and outstanding shares — NaN							Issued and outstanding shares — NaN	0		0
Common stock, $0.01 par value:							Common stock, $0.01 par value:
Authorized shares — 5,000							Authorized shares — 5,000
Issued shares — 514 and 521
Outstanding shares — 491 and 498	5			5
Issued shares — 521 and 527							Issued shares — 521 and 527
Outstanding shares — 498 and 503							Outstanding shares — 498 and 503	5		5
Treasury stock, at cost	(1,837		)	(1,837		)	Treasury stock, at cost	(1,837)		(1,837)
Additional paid-in capital	26,791			33,658			Additional paid-in capital	33,658		42,865
Accumulated other comprehensive income (loss)	(1,035		)	(986		)	Accumulated other comprehensive income (loss)	(986)		(180)
Retained earnings	19,625			31,220			Retained earnings	31,220		52,551
Total stockholders’ equity	43,549			62,060			Total stockholders’ equity	62,060		93,404
Total liabilities and stockholders’ equity	$	162,648		$	225,248		Total liabilities and stockholders’ equity	$	225,248	$	321,195

See accompanying notes to consolidated financial statements.

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AMAZON.COM, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions)


																		Common Stock
	Common Stock																	Shares	Amount		Treasury Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total Stockholders’ Equity
	Shares	Amount		Treasury Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)			Retained Earnings		Total Stockholders’ Equity
Balance as of January 1, 2017	477	$	5	$	(1,837	)	$	17,186	$	(985	)	$	4,916	$	19,285
Cumulative effect of a change in accounting principle related to stock-based compensation	—	—		—			—		—			687		687
Net income	—	—		—			—		—			3,033		3,033
Other comprehensive income (loss)	—	—		—			—		501			—		501
Exercise of common stock options	7	—		—			1		—			—		1
Stock-based compensation and issuance of employee benefit plan stock	—	—		—			4,202		—			—		4,202
Balance as of December 31, 2017	484	5		(1,837		)	21,389		(484		)	8,636		27,709
Balance as of January 1, 2018																	Balance as of January 1, 2018	484	$	5	$	(1,837)	$	21,389	$	(484)	$	8,636	$	27,709
Cumulative effect of change in accounting principles related to revenue recognition, income taxes, and financial instruments	—	—		—			—		(4		)	916		912			Cumulative effect of change in accounting principles related to revenue recognition, income taxes, and financial instruments	—	—		—		—		(4)		916		912
Net income	—	—		—			—		—			10,073		10,073			Net income	—	—		—		—		—		10,073		10,073
Other comprehensive income (loss)	—	—		—			—		(547		)	—		(547		)	Other comprehensive income (loss)	—	—		—		—		(547)		—		(547)
Exercise of common stock options	7	—		—			—		—			—		—			Exercise of common stock options	7	—		—		—		—		—		—
Stock-based compensation and issuance of employee benefit plan stock	—	—		—			5,402		—			—		5,402			Stock-based compensation and issuance of employee benefit plan stock	—	—		—		5,402		—		—		5,402
Balance as of December 31, 2018	491	5		(1,837		)	26,791		(1,035		)	19,625		43,549			Balance as of December 31, 2018	491	5		(1,837)		26,791		(1,035)		19,625		43,549
Cumulative effect of change in accounting principle related to leases	—	—		—			—		—			7		7			Cumulative effect of change in accounting principle related to leases	—	—		—		—		—		7		7
Net income	—	—		—			—		—			11,588		11,588			Net income	—	—		—		—		—		11,588		11,588
Other comprehensive income (loss)	—	—		—			—		49			—		49			Other comprehensive income (loss)	—	—		—		—		49		—		49
Exercise of common stock options	7	—		—			—		—			—		—			Exercise of common stock options	7	—		—		—		—		—		—
Stock-based compensation and issuance of employee benefit plan stock	—	—		—			6,867		—			—		6,867			Stock-based compensation and issuance of employee benefit plan stock	—	—		—		6,867		—		—		6,867
Balance as of December 31, 2019	498	$	5	$	(1,837	)	$	33,658	$	(986	)	$	31,220	$	62,060		Balance as of December 31, 2019	498	5		(1,837)		33,658		(986)		31,220		62,060

Net income																	Net income	—	—		—		—		—		21,331		21,331
Other comprehensive income (loss)																	Other comprehensive income (loss)	—	—		—		—		806		—		806
Exercise of common stock options																	Exercise of common stock options	5	—		—		—		—		—		—
Stock-based compensation and issuance of employee benefit plan stock																	Stock-based compensation and issuance of employee benefit plan stock	—	—		—		9,207		—		—		9,207
Balance as of December 31, 2020																	Balance as of December 31, 2020	503	$	5	$	(1,837)	$	42,865	$	(180)	$	52,551	$	93,404

See accompanying notes to consolidated financial statements.

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AMAZON.COM, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — DESCRIPTION OF BUSINESS, ~~AND~~ ACCOUNTING POLICIES, AND SUPPLEMENTAL DISCLOSURES

Description of Business

We seek to be Earth’s most customer-centric company. In each of our segments, we serve our primary customer sets, consisting of consumers, sellers, developers, enterprises, and content creators. We serve consumers through our online and physical stores and focus on selection, price, and convenience. We offer programs that enable sellers to grow their businesses, sell their products in our stores, and fulfill orders through us, and programs that allow authors, musicians, filmmakers, skill and app developers, and others to publish and sell content. We serve developers and enterprises of all sizes through ~~our~~ AWS, ~~segment,~~ which offers a broad set of ~~global~~on-demand technology services, including compute, storage, database, analytics, and machine learning, and other ~~service offerings.~~services. We also manufacture and sell electronic devices. In addition, we provide services, such as advertising to sellers, vendors, publishers, authors, and ~~authors,~~others, through programs such as sponsored ads, display, and video advertising.

We have organized our operations into 3 segments: North America, International, and AWS. See “Note 10 — Segment Information.”

Prior Period Reclassifications

Certain prior period amounts have been reclassified to conform to the current period ~~presentation, including the addition~~presentation. “Proceeds from short-term debt, and other” were reclassified from “Proceeds from long-term debt and other” and “Repayments of ~~restricted cash to cash~~short-term debt, and ~~cash equivalents~~other” were reclassified from “Repayments of long-term debt and other” on our consolidated statements of cash flows and the reclassification of long-term capital lease obligations that existed at December 31, 2018 from “Other long-term liabilities” to “Long-term lease liabilities” within the consolidated balance sheets, as a result of the adoption of new accounting guidance. See “Accounting Pronouncements Recently Adopted.”flows.

Principles of Consolidation

The consolidated financial statements include the accounts of Amazon.com, Inc. and its consolidated entities (collectively, the “Company”), consisting of 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 certain entities that support our seller lending financing activities. 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, useful lives of equipment, commitments and contingencies, valuation of acquired intangibles and goodwill, stock-based compensation forfeiture rates, vendor funding, inventory valuation, collectability of receivables, and ~~inventory valuation. Actual~~valuation and impairment of investments. Given the global economic climate and additional or unforeseen effects from the COVID-19 pandemic, these estimates have become more challenging, and actual results could differ materially from ~~those~~these estimates. ~~For example, in Q4 2019~~

We review the useful lives of equipment on an ongoing basis, and effective January 1, 2020 we ~~completed a~~changed our estimate of the useful life ~~study~~ for our servers ~~and are increasing the useful life~~ from three years to four ~~years~~years. The longer useful life is due to continuous improvements in our hardware, software, and data center designs. The effect of this change in estimate for ~~servers in January~~the year ended December 31, 2020, ~~which,~~ based on servers that ~~are~~were included in “Property and equipment, net” as of December 31, 2019 ~~will have~~and those acquired during the year ended December 31, 2020, was a reduction in depreciation and amortization expense of $2.7 billion and an ~~anticipated impact to our 2020 operating~~increase in net income of ~~$2.3 billion.~~$2.0 billion, or $4.06 per basic share and $3.98 per diluted share.

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Supplemental Cash Flow Information

The following table shows supplemental cash flow information (in millions):


	Year Ended December 31,
	2018		2019		2020
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest on debt	$	854	$	875	$	916
Cash paid for operating leases	$	0	$	3,361	$	4,475
Cash paid for interest on finance leases	$	381	$	647	$	612
Cash paid for interest on financing obligations	$	194	$	39	$	102
Cash paid for income taxes, net of refunds	$	1,184	$	881	$	1,713
Assets acquired under operating leases	$	0	$	7,870	$	16,217
Property and equipment acquired under finance leases	$	10,615	$	13,723	$	11,588
Property and equipment acquired under build-to-suit arrangements	$	3,641	$	1,362	$	2,267

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.

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

Year Ended December 31,
2017 2018 2019
Shares used in computation of basic earnings per share 480
487
494
Total dilutive effect of outstanding stock awards 13
13
10
Shares used in computation of diluted earnings per share 493
500
504


	Year Ended December 31,
	2018	2019	2020
Shares used in computation of basic earnings per share	487	494	500
Total dilutive effect of outstanding stock awards	13	10	10
Shares used in computation of diluted earnings per share	500	504	510

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 a third-party carrier or, in the case of an Amazon delivery, to the customer.

Third-party seller services - We offer programs that enable sellers to sell their products in our stores, 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 when the services are rendered, which generally occurs upon delivery of the related products to a third-party carrier or, in the case of an Amazon delivery, to the customer.

Subscription services - Our subscription sales include fees associated with Amazon Prime memberships and access to content including ~~audiobooks,~~ digital video, audiobooks, digital music, e-books, 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 arrangements include global sales of compute, storage, database, and other services. Revenue is allocated to services using stand-alone selling prices and is primarily recognized when the customer uses these services, based on the quantity of services rendered, such as compute or storage capacity delivered on-demand. Certain services, including compute and database, are also offered as a fixed quantity over a specified term, for which revenue is recognized ratably. Sales commissions we pay in connection with contracts that exceed one year are capitalized and amortized over the contract term.

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Other - Other revenue primarily includes sales of advertising services, which are recognized as ads are delivered based on the number of clicks or impressions.

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,~~ $623 million, $712 million, and ~~$712~~$859 million as of December 31, ~~2017,~~ 2018, 2019, and ~~2019.~~2020. Additions to the allowance were ~~$1.8 billion,~~ $2.3 billion, $2.5 billion, and ~~$2.5~~$3.5 billion and deductions from the allowance were ~~$1.9 billion,~~ $2.3 billion, ~~and~~ $2.5 billion, and $3.6 billion in ~~2017,~~ 2018, 2019, and ~~2019.~~2020. Included in “Inventories” on our consolidated balance sheets are assets totaling ~~$406 million,~~ $519 million, $629 million, and ~~$629~~$852 million as of December 31, ~~2017,~~ 2018, 2019, and ~~2019,~~2020, 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, inbound and outbound shipping costs, including costs related to sortation and delivery centers and where we are the transportation service provider, and digital media content costs where we record revenue gross, including video and music. 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.

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Vendor Agreements

We have agreements with our vendors to receive ~~funds~~consideration 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.

Fulfillment

Fulfillment costs primarily consist of those costs incurred in operating and staffing our North America and International segments’ fulfillment centers, physical stores, and customer service centers, including costs attributable to buying, receiving, inspecting, and warehousing inventories; picking, packaging, and preparing customer orders for shipment; payment processing and related transaction costs, including costs associated with our guarantee for certain seller transactions; responding to inquiries from customers; and supply chain management for our manufactured electronic devices. Fulfillment costs also include amounts paid to third parties that assist us in fulfillment and customer service operations.

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 stores, curation and display of products and services made available in our online stores, and infrastructure costs. Infrastructure costs include servers, networking equipment, and data center related depreciation and amortization, rent, utilities, and other expenses necessary to support AWS and other Amazon businesses. Collectively, these costs reflect the investments we make in order to offer a wide variety of products and services to our customers. Technology and content costs are generally expensed as incurred.

Marketing

Marketing costs primarily consist of advertising and payroll and related expenses for personnel engaged in marketing and selling activities, including sales commissions related to AWS. We pay commissions to third parties when their customer referrals result in sales. We also participate in cooperative advertising arrangements with certain of our vendors, and other third parties.

Advertising and other promotional costs to market our products and services are expensed as incurred and were ~~$6.3 billion,~~ $8.2 billion, ~~and~~ $11.0 billion, and $10.9 billion in ~~2017,~~ 2018, 2019, and ~~2019.~~2020.

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General and Administrative

General and administrative expenses primarily consist of costs for corporate functions, including payroll and related expenses; facilities and equipment expenses, such as depreciation and amortization expense and rent; and professional fees and litigation costs.

Stock-Based Compensation

Compensation cost for all equity-classified stock awards expected to vest is measured at fair value on the date of grant and recognized over the service period. The fair value of restricted stock units is determined based on the number of shares granted and the quoted price of our common stock. Such value is recognized as expense over the service period, net of estimated forfeitures, using the accelerated method. The estimated number of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including historical forfeiture experience and employee level. Additionally, stock-based compensation includes stock appreciation rights that are expected to settle in cash. These liability-classified awards are remeasured to fair value at the end of each reporting period until settlement or expiration.

Other Operating Expense (Income), Net

Other operating expense (income), net, consists primarily of ~~marketing-related, contract-based,~~a benefit from accelerated vesting of warrants to acquire equity of a vendor in Q4 2020, offset by a lease impairment in Q2 2020 and ~~customer-related~~the amortization of intangible ~~asset amortization expense, and expenses related to legal settlements.~~

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assets.

Other Income (Expense), Net

Other income (expense), net, consists primarily of valuations and adjustments ~~to and gains on~~of equity securities of ~~$18 million,~~ $145 million, ~~and~~ $231 million, and $833 million in ~~2017,~~ 2018, 2019, and ~~2019,~~2020, equity warrant valuation gains (losses) of ~~$109 million,~~ $(131) million, ~~and~~ $11 million, and $1.5 billion in ~~2017,~~ 2018, 2019, and ~~2019,~~2020, and foreign currency gains (losses) of ~~$247 million,~~ $(206) million, ~~and~~ $(20) million, and $35 million in ~~2017,~~ 2018, 2019, and ~~2019.~~2020.

During the period from January 1, 2021 to February 2, 2021, we expect to record upward adjustments relating to equity investments in private companies of approximately $1.5 billion. In addition, for this same period, our equity and equity warrant investments in public companies, which are subject to volatility based on changes in market prices, have experienced gains of approximately $1.5 billion based on available trading prices.

Income Taxes

Income tax expense includes U.S. (federal and state) and foreign income taxes. Certain foreign subsidiary earnings and losses are subject to current U.S. taxation ~~under the U.S. Tax Act, which also repeals U.S. taxation on~~and the subsequent repatriation of those ~~earnings.~~earnings is not subject to tax in the U.S. We intend to invest substantially all of our foreign subsidiary earnings, as well as our capital in our foreign subsidiaries, indefinitely outside of the U.S. in those jurisdictions in which we would incur significant, additional costs upon repatriation of such amounts.

Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases, as well as net operating loss and tax credit carryforwards, and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.

Deferred tax assets represent amounts available to reduce income taxes payable in future periods. Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent we believe they will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent cumulative loss experience and expectations of future earnings, capital gains and investment in such jurisdiction, the carry-forward periods available to us for tax reporting purposes, and other relevant factors. The effects of the COVID-19 pandemic on our business make estimates of future earnings in relevant jurisdictions more challenging.

We utilize a two-step approach to recognizing and measuring uncertain income tax positions (tax contingencies). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. We consider many factors when evaluating our tax positions and estimating our tax benefits, which may require periodic adjustments and which may not accurately forecast actual outcomes. We include interest and penalties related to our tax contingencies in income tax expense.

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Fair Value of Financial Instruments

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.

~~For our cash, cash equivalents, or marketable securities, we~~We measure the fair value of money market funds and certain marketable equity securities based on quoted prices in active markets for identical assets or liabilities. Other marketable securities 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 significant amounts of ~~cash, cash equivalents, restricted cash, or~~ marketable securities categorized as Level 3 assets as of December 31, ~~2018~~2019 and ~~2019.~~2020.

We hold equity warrants giving us the right to acquire stock of other companies. As of December 31, ~~2018~~2019 and ~~2019,~~2020, these warrants had a fair value of ~~$440~~$669 million and ~~$669 million,~~$3.0 billion, and are recorded within “Other assets” on our consolidated balance ~~sheets.~~sheets with gains and losses recognized in “Other income (expense), net” on our consolidated statements of operations. These ~~assets~~warrants are primarily classified as Level 2 assets.

Cash and Cash Equivalents

We classify all highly liquid instruments with an original maturity of three months or less as cash equivalents.

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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. The inventory valuation allowance, representing a write-down of inventory, was $1.6 billion and $2.3 billion as of December 31, 2019 and 2020.

We provide Fulfillment by Amazon services in connection with certain of our sellers’ programs. Third-party sellers maintain ownership of their inventory, regardless of whether fulfillment is provided by us or the third-party sellers, and therefore these products are not included in our inventories.

We also purchase electronic device components from a variety of suppliers and use several contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate supply, we enter into agreements with contract manufacturers and suppliers for certain electronic device components. A portion of our reported purchase commitments arising from these agreements consists of firm, non-cancellable commitments. These commitments are based on forecasted customer demand. If we reduce these commitments, we may incur additional costs. We also have firm, non-cancellable commitments for certain products offered in our Whole Foods Market stores.

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, ~~2018~~2019 and ~~2019,~~2020, customer receivables, net, were ~~$9.4~~$12.6 billion and ~~$12.6~~$14.8 billion, vendor receivables, net, were ~~$3.2~~$4.2 billion and ~~$4.2~~$4.8 billion, and seller receivables, net, were ~~$710~~$863 million and ~~$863~~$381 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~~expected losses, including our historical experience of ~~losses incurred.~~actual losses. 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,~~ $495 million, ~~and~~ $718 million, and $1.1 billion as of December 31, ~~2017,~~ 2018, 2019, and ~~2019.~~2020. Additions to the allowance were ~~$626 million,~~ $878 million, $1.0 billion, and ~~$1.0~~$1.4 billion, and deductions to the allowance were ~~$515 million,~~ $731 million, ~~and~~ $793 million, and $1.0 billion in ~~2017,~~ 2018, 2019, and ~~2019.~~2020.

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Software Development Costs

We incur software development costs related to products to be sold, leased, or marketed to external users, internal-use software, and our websites. Software development costs capitalized were not significant for the years presented. All other costs, including those related to design or maintenance, are expensed as incurred.

Property and Equipment, Net

Property and equipment are stated at cost less accumulated depreciation and amortization. Incentives that we receive from property and equipment vendors are recorded as a reduction into our costs. Property includes buildings and land that we own, along with property we have acquired under build-to-suit lease arrangements when we have control over the building during the construction period and finance lease arrangements. Equipment includes assets such as servers and networking equipment, heavy equipment, and other fulfillment equipment. Depreciation and amortization is recorded on a straight-line basis over the estimated useful lives of the assets (generally the lesser of 40 years or the remaining life of the underlying building, three years prior to January 1, 2020 and four years subsequent to January 1, 2020 for our servers, five years for networking equipment, ten years for heavy equipment, and three to ~~seven~~ten years for other fulfillment equipment). Depreciation and amortization expense is classified within the corresponding operating expense categories on our consolidated statements of operations.

Leases

We categorize leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those leases that allow us to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in ~~property~~“Property and equipment, net.” All other leases are categorized as operating leases. Our leases generally have terms that range from one to ten years for equipment and one to twenty years for property.

Certain lease contracts include obligations to pay for other services, such as operations and maintenance. For leases of property, we account for these other services as a component of the lease. For substantially all other leases, the services are accounted for separately and we allocate payments to the lease and other services components based on estimated stand-alone prices.

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Lease liabilities are recognized at the present value of the fixed lease payments, reduced by landlord incentives using a discount rate based on similarly secured borrowings available to us. Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the leases or lease prepayments reclassified from “Other assets” upon lease commencement. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term.

When we have the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that we will exercise the option, we consider ~~these options~~the option in determining the classification and measurement of the lease. Our leases may include variable payments based on measures that include changes in price indices, market interest rates, or the level of sales at a physical store, which are expensed as incurred.

Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease. Finance lease assets are amortized within operating expenses on a straight-line basis over the shorter of the estimated useful lives of the assets or, in the instance where title does not transfer at the end of the lease term, the lease term. The interest component of a finance lease is included in interest expense and recognized using the effective interest method over the lease term.

We establish assets and liabilities for the present value of estimated future costs to retire long-lived assets at the termination or expiration of a lease. Such assets are ~~depreciated~~amortized over the lease period into operating expense, and the recorded liabilities are accreted to the future value of the estimated retirement costs.

Financing Obligations

We record assets and liabilities for estimated construction costs under build-to-suit lease arrangements when we have control over the building during the construction period. If we continue to control the building after the construction period, the arrangement is classified as a financing obligation instead of a lease. The building is depreciated over the shorter of its useful life or the term of the obligation.

If we do not control the building after the construction period ends, the assets and liabilities for construction costs are derecognized, and we classify the lease as either operating or finance.

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Goodwill and Indefinite-Lived Intangible Assets

We evaluate goodwill and indefinite-lived intangible assets for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable. ~~In testing goodwill for impairment, we~~We may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying ~~amount. If our qualitative assessment indicates that goodwill impairment is more likely than not,~~value and if so, we perform a ~~two-step impairment~~quantitative test. We ~~test goodwill for impairment under~~compare the ~~two-step impairment test by first comparing the book~~carrying value of ~~net assets~~each reporting unit and indefinite-lived intangible asset to ~~the~~its estimated fair value ~~of the reporting units. If~~and if the fair value is determined to be less than the ~~book~~carrying value, ~~or qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute~~we recognize an impairment loss for the ~~amount of impairment as the difference between the estimated fair value of goodwill and the carrying value.~~difference. We estimate the fair value of the reporting units using discounted cash flows. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions.

We completed the required annual ~~testing~~impairment test of goodwill ~~for impairment~~ for all reporting units and indefinite-lived intangible assets as of April 1, ~~2019, and determined that goodwill is~~2020, resulting in 0~~t impaired as the~~ impairments. The fair value of our reporting units substantially exceeded their ~~book~~carrying value. There were no events that caused us to update our annual impairment test. See “Note 5 — Acquisitions, Goodwill, and Acquired Intangible Assets.”

Other Assets

Included in “Other assets” on our consolidated balance sheets are amounts primarily related to ~~acquired intangible assets, net of accumulated amortization;~~ video and music content, net of accumulated amortization; acquired intangible assets, net of accumulated amortization; certain equity investments; equity warrant assets; long-term deferred tax assets; ~~certain equity investments; marketable securities restricted for longer than one year, the majority of which are attributable to collateralization of bank guarantees~~ and ~~debt related to our international operations;~~ lease prepayments made prior to lease ~~commencement; and equity warrant assets.~~commencement.

Digital Video and Music Content

We obtain video content, inclusive of episodic television and movies, and music content for customers through licensing agreements that have a wide range of licensing provisions including both fixed and variable payment schedules. When the license fee for a specific video or music title is determinable or reasonably estimable and the content is available to us, we recognize an asset and a corresponding liability for the amounts owed. We reduce the liability as payments are made and we

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amortize the asset to “Cost of sales” on an accelerated basis, based on estimated usage or viewing patterns, or on a straight-line basis. If the licensing fee is not determinable or reasonably estimable, no asset or liability is recorded and licensing costs are expensed as incurred. We also develop original video content for which the production costs are capitalized and amortized to “Cost of sales” predominantly on an accelerated basis that follows the viewing patterns associated with the content. The weighted average remaining life of our capitalized video content is ~~2.7~~2.5 years.

Our produced and licensed video content is primarily monetized together as a unit, referred to as a film group, in each major geography where we offer Amazon Prime memberships. These film groups are evaluated for impairment whenever an event occurs or circumstances change indicating the fair value is less than the carrying value. The total capitalized costs of video, which is primarily released content, and music as of December 31, ~~2018~~2019 and ~~2019~~2020 were ~~$3.8~~$5.8 billion and ~~$5.8~~$6.8 billion. Total video and music expense was ~~$6.7~~$7.8 billion and ~~$7.8~~$11.0 billion for the year ended December 31, ~~2018~~2019 and ~~2019.~~2020. Total video and music expense includes licensing and production costs associated with content offered within Amazon Prime memberships, and costs associated with digital subscriptions and sold or rented content.

Investments

We generally invest our excess cash in AAA-rated money market funds and investment grade short- to intermediate-term fixed income securities. Such investments are included in “Cash and cash equivalents” or “Marketable securities” on the accompanying consolidated balance sheets.

Marketable debt securities are classified as available-for-sale and reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive income (loss).” Each reporting period, we evaluate whether declines in fair value below carrying value are due to expected credit losses, as well as our ability and intent to hold the investment until a forecasted recovery occurs. Expected credit losses are recorded as an allowance through “Other income (expense), net” on our consolidated statements of operations.

Equity investments in private companies for which we do not have the ability to exercise significant influence are accounted for at cost, with adjustments for observable changes in prices or impairments, and are classified as “Other assets” on our consolidated balance sheets with adjustments recognized in “Other income (expense), net” on our consolidated statements of operations. Each reporting period, we perform a qualitative assessment to evaluate whether the investment is impaired. Our assessment includes a review of recent operating results and trends, recent sales/acquisitions of the investee securities, and other publicly available data. If the investment is impaired, we write it down to its estimated fair value. As of December 31, 2019 and 2020, these investments had a carrying value of $1.5 billion and $2.7 billion.

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Equity investments are accounted for using the equity method of accounting if the investment gives us the ability to exercise significant influence, but not control, over an investee. Equity-method investments are included within “Other assets” on our consolidated balance sheets. Our share of the earnings or losses as reported by equity-method investees, amortization of basis differences, ~~and~~ related gains or losses, and impairments, if any, are ~~classified as~~recognized in “Equity-method investment activity, net of tax” on our consolidated statements of operations.

~~Equity investments without readily determinable~~ Each reporting period, we evaluate whether declines in fair values and for which we do not have the ability to exercise significant influence are accounted for at cost with adjustments for observable changes in prices or impairments and are classified as “Other assets” on our consolidated balance sheets with adjustments recognized in “Other income (expense), net” on our consolidated statements of operations. As of December 31, 2018 and 2019, these investments had avalue below carrying value ~~of $282 million~~are other-than-temporary and ~~$1.5 billion.~~if so, we write down the investment to its estimated fair value.

Equity investments that have readily determinable fair values are included in “Marketable securities” on our consolidated balance sheets and measured at fair value with changes recognized in “Other income (expense), net” on our consolidated ~~statement~~statements of operations.

We periodically evaluate whether declines in fair values of our investments indicate impairment. For debt securities and equity-method investments, we also evaluate whether declines in fair value of our investments below their book value are other-than-temporary. This evaluation consists of several qualitative and quantitative factors regarding the severity and duration of the unrealized loss as well as our ability and intent to hold the investment until a forecasted recovery occurs. Additionally, we assess whether we have plans to sell the security or it is more likely than not we will be required to sell any investment before recovery of its amortized cost basis. Factors considered include: quoted market prices; recent financial results and operating trends; implied values from any recent transactions or offers of investee securities; credit quality of debt instrument issuers; other publicly available information that may affect the value of our investments; duration and severity of the decline in value; and our strategy and intentions for holding the investment.

Long-Lived Assets

Long-lived assets, other than goodwill and indefinite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or any other significant adverse change that would indicate that the carrying amount of an asset or group of assets may not be recoverable.

For long-lived assets used in operations, including lease assets, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. We measure the impairment loss based on the difference between the carrying amount and estimated fair value. Long-lived assets are considered held for sale when certain criteria are met, including when management has committed to a plan to sell the asset, the asset is available for sale in its immediate condition, and the sale is probable within one year of the reporting date. Assets held for sale are reported at the lower of cost or fair value less costs to sell. Assets held for sale were not significant as of December 31, ~~2018~~2019 and ~~2019.~~

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2020.

Accrued Expenses and Other

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

As of December 31, ~~2018~~2019 and ~~2019,~~2020, our liabilities for payroll related expenses were ~~$3.4~~$4.3 billion and ~~$4.3~~$7.6 billion and our liabilities for unredeemed gift cards were ~~$2.8~~$3.3 billion and ~~$3.3~~$4.7 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.

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 AWS services and Amazon Prime memberships. Our total unearned revenue as of December 31, ~~2018~~2019 was ~~$7.9~~$10.2 billion, of which ~~$6.3~~$7.9 billion was recognized as revenue during the year ended December 31, ~~2019~~2020 and our total unearned revenue as of December 31, ~~2019~~2020 was ~~$10.2~~$11.6 billion. Included in “Other long-term liabilities” on our consolidated balance sheets was ~~$1.4~~$2.0 billion and ~~$2.0~~$1.9 billion of unearned revenue as of December 31, ~~2018~~2019 and ~~2019.~~2020.

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, those commitments not yet recognized were ~~$29.8~~$50.0 billion as of December 31, ~~2019.~~2020. The weighted average remaining life of our long-term contracts is ~~3.3~~3.4 years. However, the amount and timing of revenue recognition is largely driven by customer usage, which can extend beyond the original contractual term.

Other Long-Term Liabilities

Included in “Other long-term liabilities” on our consolidated balance sheets are liabilities primarily related to ~~deferred tax liabilities,~~ financing obligations, asset retirement obligations, deferred tax liabilities, unearned revenue, tax contingencies, and digital video and music content.

Foreign Currency

We have internationally-focused stores for which the net sales generated, as well as most of the related expenses directly incurred from those operations, are denominated in local functional currencies. The functional currency of our subsidiaries that either operate or support these stores is generally the same as the local currency. Assets and liabilities of these subsidiaries are translated into U.S. Dollars at period-end foreign exchange rates, and revenues and expenses are translated at average rates

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prevailing throughout the period. Translation adjustments are included in “Accumulated other comprehensive income (loss),” a separate component of stockholders’ equity, and in the “Foreign currency effect on cash, cash equivalents, and restricted cash,” on our consolidated statements of cash flows. Transaction gains and losses including intercompany transactions denominated in a currency other than the functional currency of the entity involved are included in “Other income (expense), net” on our consolidated statements of operations. In connection with the settlement and remeasurement of intercompany balances, we recorded gains (losses) of ~~$202 million,~~ $(186) million, ~~and~~ $95 million, and $118 million in ~~2017,~~ 2018, ~~and 2019.~~

~~Accounting Pronouncements Recently Adopted~~

In May 2014, the Financial Accounting Standards Board (“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. Prior year amounts have not been adjusted and continue to be reported in accordance with our historic accounting policy.

The impact of applying this ASU for the year ended December 31, 2018 primarily resulted in a decrease in product sales and an increase in service sales driven by the reclassification of Prime membership fees of approximately $3.8 billion. Service sales also increased by approximately $3.0 billion for the year ended December 31, 2018 due to the reclassification of certain advertising services.

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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 February 2016, the FASB issued an ASU amending the accounting for leases, primarily requiring the recognition of lease assets and liabilities for operating leases with terms of more than twelve months on our consolidated balance sheets. Under the new guidance, leases previously described as capital lease obligations and finance lease obligations are now referred to as finance leases and financing obligations, respectively. We adopted this ASU on January 1, 2019 by recording an immaterial cumulative adjustment to retained earnings rather than retrospectively adjusting prior periods. Prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting policies resulting in a balance sheet presentation that is not comparable to the prior period in the first year of adoption. The adoption of this ASU resulted in the recognition of operating lease assets and liabilities of approximately $21 billion, which included the reclassification of finance lease obligations to operating leases of $1.2 billion. As of December 31, 2018, amounts related to finance lease obligations and construction liabilities totaled $9.6 billion, of which $1.5 billion was derecognized for buildings that we do not control during the construction period and $5.4 billion and $1.5 billion were reclassified to finance leases and operating leases, respectively.

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):

Year Ended December 31, 2017 Previously Reported Adjustments As Revised
Operating activities $ 18,434
$ (69 ) $ 18,365
Investing activities (27,819 ) 735
(27,084 )
Financing activities 9,860
68
9,928
Net change in cash, cash equivalents, and restricted cash $ 475
$ 734
$ 1,209

In March 2019, the FASB issued an ASU amending the accounting for film costs, inclusive of episodic television and movie costs. The new guidance aligns the accounting for production costs of episodic television with that of movies by requiring production costs to be capitalized. Previously, we only capitalized a portion of the production costs related to our produced episodic television content. We adopted this ASU as of January 1, 2019, and began capitalizing substantially all of our production costs. Adoption of this ASU resulted in approximately $1.0 billion of incremental capitalized film costs classified in “Other Assets” as of December 31, 2019.2020.

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Note 2 — FINANCIAL INSTRUMENTS

Cash, Cash Equivalents, Restricted Cash, and Marketable Securities

As of December 31, ~~2018~~2019 and ~~2019,~~2020, our cash, cash equivalents, restricted cash, and marketable securities primarily consisted of cash, AAA-rated money market funds, U.S. and foreign government and agency securities, and other investment grade securities. Cash equivalents and marketable securities are recorded at fair value. 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, 2019
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Total Estimated Fair Value
Cash	$	9,776	$	—	$	—	$	9,776
Level 1 securities:
Money market funds	18,850		—		—		18,850
Equity securities							202
Level 2 securities:
Foreign government and agency securities	4,794		0		0		4,794
U.S. government and agency securities	7,070		11		(1)		7,080
Corporate debt securities	11,845		37		(1)		11,881
Asset-backed securities	2,355		6		(1)		2,360
Other fixed income securities	393		1		0		394
Equity securities							5
	$	55,083	$	55	$	(3)	$	55,342
Less: Restricted cash, cash equivalents, and marketable securities (2)							(321)
Total cash, cash equivalents, and marketable securities							$	55,021

December 31, 2018

Cost or
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Total
Estimated
Fair Value
Cash $ 10,406
$ —
$ —
$ 10,406
Level 1 securities:
Money market funds 12,515
—
—
12,515
Equity securities 170
Level 2 securities:
Foreign government and agency securities 815
—
—
815
U.S. government and agency securities 11,686
1
(20 ) 11,667
Corporate debt securities 5,008
1
(19 ) 4,990
Asset-backed securities 896
—
(4 ) 892
Other fixed income securities 190
—
(2 ) 188
Equity securities 33
$ 41,516

$ 2

$ (45 )
$ 41,676
Less: Restricted cash, cash equivalents, and marketable securities (2) (426 )
Total cash, cash equivalents, and marketable securities $ 41,250

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	December 31, 2019											December 31, 2020
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Total Estimated Fair Value				Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Total Estimated Fair Value
Cash	$	9,776	$	—	$	—		$	9,776		Cash	$	10,063	$	—	$	—	$	10,063
Level 1 securities:											Level 1 securities:
Money market funds	18,850		—		—			18,850			Money market funds	27,430		—		—		27,430
Equity securities (1)								202			Equity securities (1)							617
Level 2 securities:											Level 2 securities:
Foreign government and agency securities	4,794		—		—			4,794			Foreign government and agency securities	5,130		1		0		5,131
U.S. government and agency securities	7,070		11		(1		)	7,080			U.S. government and agency securities	7,410		30		(1)		7,439
Corporate debt securities	11,845		37		(1		)	11,881			Corporate debt securities	29,684		305		(1)		29,988
Asset-backed securities	2,355		6		(1		)	2,360			Asset-backed securities	3,206		32		(3)		3,235
Other fixed income securities	393		1		—			394			Other fixed income securities	701		9		0		710
Equity securities (1)								5			Equity securities (1)							40
	$	55,083	$	55	$	(3	)	$	55,342			$	83,624	$	377	$	(5)	$	84,653
Less: Restricted cash, cash equivalents, and marketable securities (2)								(321		)	Less: Restricted cash, cash equivalents, and marketable securities (2)							(257)
Total cash, cash equivalents, and marketable securities								$	55,021		Total cash, cash equivalents, and marketable securities							$	84,396

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Item 9.			Changes in and Disagreements with Accountants On Accounting and Financial Disclosure

None.



Item 9A.			Controls and Procedures

Evaluation of Disclosure 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 December 31, ~~2019.~~2020. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of December 31, ~~2019,~~2020, 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.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the 1934 Act. Management has assessed the effectiveness of our internal control over financial reporting as of December 31, ~~2019~~2020 based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, management concluded that, as of December 31, ~~2019,~~2020, our internal control over financial reporting was effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Ernst & Young has independently assessed the effectiveness of our internal control over financial reporting and its report is included below.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended December 31, ~~2019~~2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Controls

Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures or our internal control over financial reporting 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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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Amazon.com, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Amazon.com, Inc.’s internal control over financial reporting as of December 31, ~~2019~~,2020, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Amazon.com, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2019,~~2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, ~~2019~~2020 and ~~2018,~~2019, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, ~~2019~~2020 and the related notes and our report dated ~~January 30, 2020~~February 2, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Seattle, Washington

~~January 30, 2020~~

February 2, 2021

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~~Item 9B.~~	~~Other Information~~

Item 9B.Other Information

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

WeAs previously disclosed, we determined that, between January 2012 and ~~December 2019,~~June 2020, 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 $13,700 for individuals who may have been acting for 14 Iranian embassies and diplomatic organizations located in countries other than Iran; consumer products valued at approximately $90 for an individual designated under Executive Order 13224; consumer products valued at approximately $8,600 for individuals who may have been acting for seven entities owned or controlled by the Iranian government; and consumer products valued at approximately $1,800 for individuals who may have been acting for five entities designated under Executive Order 13224 or Executive Order 13382, three of which are owned or controlled by the Iranian Government.Act. The consumer products included books, other media, apparel, home and kitchen, jewelry, health and beauty, office, toys, consumer electronics, lawn and patio, automotive, software, grocery, and pet products. In addition, the information provided pursuant to Section 13(r) of the Exchange Act in Item 5 of Part II of the Company’s Quarterly Reports on 10-Q for the quarters ended March 31, ~~2019~~2020, and June 30, ~~2019~~2020~~, and~~ ~~September 30, 2019~~ is hereby incorporated by reference to such reports. 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.

PART III


~~Item 10.~~	~~Directors, Executive Officers, and Corporate Governance~~

Item 10.Directors, Executive Officers, and Corporate Governance

Information regarding our Executive Officers required by Item 10 of Part III is set forth in Item 1 of Part I “Business — Information About Our Executive Officers.” Information required by Item 10 of Part III regarding our Directors and any material changes to the process by which security holders may recommend nominees to the Board of Directors is included in our Proxy Statement relating to our ~~2020~~2021 Annual Meeting of Shareholders, and is incorporated herein by reference. Information relating to our Code of Business Conduct and Ethics and, to the extent applicable, compliance with Section 16(a) of the 1934 Act is set forth in our Proxy Statement relating to our ~~2020~~2021 Annual Meeting of Shareholders and is incorporated herein by reference. To the extent permissible under Nasdaq rules, we intend to disclose amendments to our Code of Business Conduct and Ethics, as well as waivers of the provisions thereof, on our investor relations website under the heading “Corporate Governance” at amazon.com/ir.


~~Item 11.~~	~~Executive Compensation~~

Item 11.Executive Compensation

Information required by Item 11 of Part III is included in our Proxy Statement relating to our ~~2020~~2021 Annual Meeting of Shareholders and is incorporated herein by reference.


~~Item 12.~~	~~Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters~~

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

Information required by Item 12 of Part III is included in our Proxy Statement relating to our ~~2020~~2021 Annual Meeting of Shareholders and is incorporated herein by reference.


~~Item 13.~~	~~Certain Relationships and Related Transactions, and Director Independence~~

Item 13.Certain Relationships and Related Transactions, and Director Independence

Information required by Item 13 of Part III is included in our Proxy Statement relating to our ~~2020~~2021 Annual Meeting of Shareholders and is incorporated herein by reference.


~~Item 14.~~	~~Principal Accountant Fees and Services~~

Item 14.Principal Accountant Fees and Services

Information required by Item 14 of Part III is included in our Proxy Statement relating to our ~~2020~~2021 Annual Meeting of Shareholders and is incorporated herein by reference.

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PART IV


~~Item 15.~~	~~Exhibits, Financial Statement Schedules~~

Item 15.Exhibits, Financial Statement Schedules

(a) List of Documents Filed as a Part of This Report:

(1) Index to Consolidated Financial Statements:

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

Consolidated Statements of Cash Flows for each of the three years ended December 31, ~~2019~~2020

Consolidated Statements of Operations for each of the three years ended December 31, ~~2019~~2020

Consolidated Statements of Comprehensive Income for each of the three years ended December 31, ~~2019~~2020

Consolidated Balance Sheets as of December 31, ~~2018~~2019 and ~~2019~~2020

Consolidated Statements of Stockholders’ Equity for each of the three years ended December 31, ~~2019~~2020

Notes to Consolidated Financial Statements

Report of Ernst & Young LLP, Independent Registered Public Accounting Firm

(2) Index to Financial Statement Schedules:

All schedules have been omitted because the required information is included in the consolidated financial statements or the notes thereto, or because it is not required.

(3) Index to Exhibits

See exhibits listed under Part (b) below.

(b) Exhibits:


Exhibit Number		Description

~~Exhibit Number~~3.1		~~Description~~

~~3.1~~	Restated Certificate of Incorporation of the Company (incorporated by reference to ~~Exhibit 3.1 to~~ the Company’s ~~Quarterly~~Current Report on Form ~~10-Q for the Quarter ended March 31, 2000)~~8K, filed May 29, 2020 ).

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)~~May 29, 2020 ).

4.1		Indenture, dated as of November 29, 2012, between Amazon.com, Inc. and Wells Fargo Bank, National Association, as trustee, and Form of 0.650% Note due 2015, Form of 1.200% Note due 2017, and Form of 2.500% Note due 2022 (incorporated by reference to the Company’s Current Report on Form 8-K, filed November 29, 2012).

4.2		Officers’ Certificate of Amazon.com, Inc., dated as of December 5, 2014, containing Form of 2.600% Note due 2019, Form of 3.300% Note due 2021, Form of 3.800% Note due 2024, Form of 4.800% Note due 2034, and Form of 4.950% Note due 2044 (incorporated by reference to the Company’s Current Report on Form 8-K, filed December 5, 2014).

4.3		Officers’ Certificate of Amazon.com, Inc., dated as of August 22, 2017, containing Form of 1.900% Note due 2020, Form of 2.400% Note due 2023, Form of 2.800% Note due 2024, Form of 3.150% Note due 2027, Form of 3.875% Note due 2037, Form of 4.050% Note due 2047, and Form of 4.250% Note due 2057 (incorporated by reference to the Company’s Current Report on Form 8-K, filed August 22, 2017).

4.4		Registration Rights Agreement, dated as of August 22, 2017, among Amazon.com, Inc. and the representatives of the initial purchasers of Amazon.com, Inc.’s 1.900% Notes due 2020, 2.400% Notes due 2023, 2.800% Notes due 2024, 3.150% Notes due 2027, 3.875% Notes due 2037, 4.050% Notes due 2047, and 4.250% Notes due 2057 (incorporated by reference to the Company’s Current Report on Form 8-K, filed August 22, 2017).

~~4.5~~	Officers’ Certificate of Amazon.com, Inc., dated as of December 20, 2017, containing Form of 5.200% Note due 2025 (incorporated by reference to the Company’s Current Report on Form 8-K, filed December 20, 2017).

~~4.6~~4.5		~~Description~~Officers’ Certificate of ~~Securities.~~Amazon.com, Inc., dated as of June 3, 2020, containing Form of 0.400% Note due 2023, Form of 0.800% Note due 2025, Form of 1.200% Note due 2027, Form of 1.500% Note due 2030, Form of 2.500% Note due 2050, and Form of 2.700% Note due 2060 (incorporated by reference to the Company’s Current Report on Form 8-K, filed June 3, 2020).

~~10.1†~~4.6		Description of Securities (incorporated by reference to the Company’s Annual Report on Form 10-K for the Year ended December 31, 2019).

10.1†		1997 Stock Incentive Plan (amended and restated) (incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 2013).

~~Table of Contents~~

Table of Contents

~~10.2†~~
10.2†						1999 Nonofficer Employee Stock Option Plan (amended and restated) (incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 2013).

10.3†						Form of Indemnification Agreement between the Company and each of its Directors (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form S-1 (Registration No. 333-23795) filed March 24, 1997, as amended on April 21, 1997).

10.4†						Form of Restricted Stock Unit Agreement for Officers and Employees (incorporated by reference to the Company’s Annual Report on Form 10-K for the Year ended December 31, 2002).

10.5†						Form of Restricted Stock Unit Agreement for Directors (incorporated by reference to the Company’s Annual Report on Form 10-K for the Year ended December 31, 2002).

10.6†						Form of Restricted Stock Agreement (incorporated by reference to the Company’s Annual Report on Form 10-K for the Year ended December 31, 2001).

10.7†						Form of Global Restricted Stock Unit Award Agreement for Executive Officers (incorporated by reference to the Company’s Annual Report on Form 10-K for the Year ended December 31, 2018).

10.8						Amended and Restated Credit Agreement, dated as of ~~May 20, 2016,~~June 23, 2020, among Amazon.com, Inc., JPMorgan Chase Bank, ~~of America,~~ N.A., as administrative agent, and the other lenders party thereto (incorporated by reference to the Company’s ~~Quarterly~~Current Report on Form ~~10-Q for the Quarter ended~~8-K, filed June ~~30, 2016)~~23, 2020).

21.1						List of Significant Subsidiaries.

23.1						Consent of Independent Registered Public Accounting Firm.

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 Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, formatted in XBRL: (i) Consolidated Statements of Cash Flows, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Balance Sheets, (v) Consolidated Statements of Stockholders’ Equity, and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

						As permitted by Item 601(b)(4)(iii)(A) of Regulation S-K, the Company has not filed with this Annual Report on Form 10-K certain instruments defining the rights of holders of long-term debt of the Company and its subsidiaries because the total amount of securities authorized thereunder does not exceed 10 percent of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to furnish a copy of such agreements to the Commission upon request.

104						The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, formatted in iXBRL (included as Exhibit 101).

__________________

† Executive Compensation Plan or Agreement.


~~Item 16.~~	~~Form 10-K Summary~~

Item 16.Form 10-K Summary

None.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, as of ~~January 30, 2020~~.February 2, 2021.


			AMAZON.COM, INC.

			~~AMAZON.COM, INC.~~
By:
	~~By:~~	/s/ Jeffrey P. Bezos
				Jeffrey P. Bezos
				President, Chief Executive Officer, and Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities indicated as of ~~January 30, 2020~~.February 2, 2021.


Signature		Title

~~Signature~~	~~Title~~

/s/ Jeffrey P. Bezos
Jeffrey P. Bezos		Chairman of the Board, President, and Chief Executive Officer (Principal Executive Officer)

/s/ Brian T. Olsavsky
Brian T. Olsavsky		Senior Vice President and Chief Financial Officer (Principal Financial Officer)

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

/s/ Keith B. Alexander
Keith B. Alexander		Director

/s/ Rosalind G. Brewer
Rosalind G. Brewer		Director

/s/ Jamie S. Gorelick
Jamie S. Gorelick		Director

/s/ Daniel P. Huttenlocher
Daniel P. Huttenlocher		Director

/s/ Judith A. McGrath
Judith A. McGrath		Director

/s/ Indra K. Nooyi
Indra K. Nooyi		Director

/s/ Jonathan J. Rubinstein
Jonathan J. Rubinstein		Director

/s/ Thomas O. Ryder
Thomas O. Ryder		Director

/s/ Patricia Q. Stonesifer
Patricia Q. Stonesifer		Director

/s/ Wendell P. Weeks
Wendell P. Weeks		Director

7674


Description of Use	Leased Square Footage (1)	Owned Square Footage	Location	Description of Use	Leased Square Footage (1)	Owned Square Footage	Location
Office space	18,051	4,961	North America	Office space	23,731	5,696	North America
Office space	15,863	1,831	International	Office space	19,023	1,823	International
Physical stores (2)	20,072	662	North America	Physical stores (2)	21,157	662	North America
Physical stores (2)	169	—	International	Physical stores (2)	169	—	International
Fulfillment, data centers, and other	187,148	5,591	North America	Fulfillment, data centers, and other	285,677	8,461	North America
Fulfillment, data centers, and other	76,868	2,570	International	Fulfillment, data centers, and other	104,668	3,449	International
Total	318,171	15,615		Total	454,425	20,091



Segment	Leased Square Footage (1)	Owned Square Footage (1)
North America	199,473	1,983
International	74,231	958
AWS	10,553	5,882
Total	284,257	8,823


Segment	Leased Square Footage (1)	Owned Square Footage (1)
North America	298,879	3,813
International	102,192	1,294
AWS	10,599	7,465
Total	411,670	12,572


	Year Ended December 31, 2018							Year Ended December 31, 2019								Year Ended December 31, 2019						Year Ended December 31, 2020
	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	$	232,887	$	(1,253	)	$	231,634	$	280,522	$	2,560		$	283,082	Net sales	$	280,522	$	2,560	$	283,082	$	386,064	$	(1,438)	$	384,626
Operating expenses	220,466		(1,027		)	219,439		265,981		2,740			268,721		Operating expenses	265,981		2,740		268,721		363,165		(989)		362,176
Operating income	12,421		(226		)	12,195		14,541		(180		)	14,361		Operating income	14,541		(180)		14,361		22,899		(449)		22,450


	2020			2021			2022			2023			2024			Thereafter			Total			Estimated Fair Value as of December 31, 2019			2021			2022			2023			2024			2025			Thereafter			Total			Estimated Fair Value as of December 31, 2020
Money market funds	$	18,850		$	—		$	—		$	—		$	—		$	—		$	18,850		$	18,850	Money market funds	$	27,430		$	—		$	—		$	—		$	—		$	—		$	27,430		$	27,430
Weighted average interest rate	1.09		%	—		%	—		%	—		%	—		%	—		%	1.09		%			Weighted average interest rate	(0.16)		%	—		%	—		%	—		%	—		%	—		%	(0.16)		%
Corporate debt securities	7,629			2,988			1,052			152			8			—			11,829			11,881		Corporate debt securities	16,505			4,459			5,531			1,990			886			—			29,371			29,988
Weighted average interest rate	2.29		%	2.63		%	2.57		%	2.38		%	2.90		%	—		%	2.41		%			Weighted average interest rate	0.42		%	1.65		%	1.32		%	1.86		%	1.84		%				0.92		%
U.S. government and agency securities	4,893			1,634			486			43			16			—			7,072			7,080		U.S. government and agency securities	5,439			587			899			298			67			71			7,361			7,439
Weighted average interest rate	1.64		%	2.09		%	2.01		%	2.29		%	2.03		%	—		%	1.77		%			Weighted average interest rate	0.30		%	1.38		%	1.12		%	1.74		%	1.13		%	2.97		%	0.58		%
Asset-backed securities	1,492			546			180			95			38			—			2,351			2,360		Asset-backed securities	870			773			472			763			243			46			3,167			3,235
Weighted average interest rate	2.57		%	2.52		%	2.53		%	2.29		%	2.52		%	—		%	2.54		%			Weighted average interest rate	2.08		%	2.00		%	1.53		%	2.13		%	1.57		%	1.25		%	1.94		%
Foreign government and agency securities	4,630			168			4			—			2			—			4,804			4,794		Foreign government and agency securities	4,932			147			45			3			—			—			5,127			5,131
Weighted average interest rate	1.90		%	2.57		%	2.08		%	—		%	2.30		%	—		%	1.92		%			Weighted average interest rate	0.25		%	0.74		%	1.28		%	1.76		%	—		%	—		%	0.28		%
Other fixed income securities	93			94			129			75			—			—			391			394		Other fixed income securities	109			156			230			160			43			—			698			710
Weighted average interest rate	2.39		%	2.32		%	2.10		%	1.92		%	—		%	—		%	2.19		%			Weighted average interest rate	2.10		%	1.85		%	1.10		%	0.84		%	1.31		%	—		%	1.38		%
	$	37,587		$	5,430		$	1,851		$	365		$	64		$	—		$	45,297					$	55,285		$	6,122		$	7,177		$	3,214		$	1,239		$	117		$	73,154
Cash equivalents and marketable fixed income securities																						$	45,359	Cash equivalents and marketable fixed income securities																						$	73,933



Aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2019	$	786,284,080,955
Number of shares of common stock outstanding as of January 22, 2020	497,810,444


~~(1)~~	~~For leased properties, represents the total leased space excluding sub-leased space.~~


~~(2)~~	~~This includes 564 North America and 7 International stores as of December 31, 2019.~~


~~(1)~~	Segment amounts exclude corporate facilities. Shared facilities are allocated among the segments based on usage and primarily relate to facilities that hold our technology infrastructure. See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 10 — Segment Information.”



Item 5.			Market for the Registrant’s Common Stock, Related Shareholder Matters, and Issuer Purchases of Equity Securities


	Year Ended December 31,											Year Ended December 31,
	2015		2016		2017 (1)		2018		2019			2016		2017 (1)		2018		2019		2020
	(in millions, except per share data)											(in millions, except per share data)
Statements of Operations:											Statements of Operations:
Net sales	$	107,006	$	135,987	$	177,866	$	232,887	$	280,522	Net sales	$	135,987	$	177,866	$	232,887	$	280,522	$	386,064
Operating income	$	2,233	$	4,186	$	4,106	$	12,421	$	14,541	Operating income	$	4,186	$	4,106	$	12,421	$	14,541	$	22,899
Net income (loss)	$	596	$	2,371	$	3,033	$	10,073	$	11,588	Net income (loss)	$	2,371	$	3,033	$	10,073	$	11,588	$	21,331
Basic earnings per share (2)	$	1.28	$	5.01	$	6.32	$	20.68	$	23.46	Basic earnings per share (2)	$	5.01	$	6.32	$	20.68	$	23.46	$	42.64
Diluted earnings per share (2)	$	1.25	$	4.90	$	6.15	$	20.14	$	23.01	Diluted earnings per share (2)	$	4.90	$	6.15	$	20.14	$	23.01	$	41.83
Weighted-average shares used in computation of earnings per share:											Weighted-average shares used in computation of earnings per share:
Basic	467		474		480		487		494		Basic	474		480		487		494		500
Diluted	477		484		493		500		504		Diluted	484		493		500		504		510
Statements of Cash Flows:											Statements of Cash Flows:
Net cash provided by (used in) operating activities (3)	$	11,909	$	17,203	$	18,365	$	30,723	$	38,514	Net cash provided by (used in) operating activities (3)	$	17,203	$	18,365	$	30,723	$	38,514	$	66,064

	December 31,											December 31,
	2015		2016		2017		2018		2019 (4)			2016		2017		2018		2019 (4)		2020
	(in millions)											(in millions)
Balance Sheets:											Balance Sheets:
Total assets	$	64,747	$	83,402	$	131,310	$	162,648	$	225,248	Total assets	$	83,402	$	131,310	$	162,648	$	225,248	$	321,195
Total long-term obligations	$	17,477	$	20,301	$	45,718	$	50,708	$	75,376	Total long-term obligations	$	20,301	$	45,718	$	50,708	$	75,376	$	101,406


~~(1)~~	~~We acquired Whole Foods Market on August 28, 2017. The results of Whole Foods Market have been included in our results of operation from the date of acquisition.~~


~~(2)~~	~~For further discussion of earnings per share, see Item 8 of Part II, “Financial Statements and Supplementary Data — Note 1 — Description of Business and Accounting Policies.”~~


~~(1)~~	For the twelve months ended December 31, 2019, this amount relates to equipment included in “Property and equipment acquired under finance leases” of $13,723 million. Amounts for 2018 have not been retrospectively adjusted.


~~(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.~~


•	Operating income is expected to be between $3.0 billion and $4.2 billion, compared with $4.4 billion in first quarter 2019. This guidance includes approximately $800 million lower depreciation expense due to an increase in the estimated useful life of our servers beginning on January 1, 2020.



1.900% Notes due on August 21, 2020	$	1,000
3.300% Notes due on December 5, 2021	$	1,000
2.500% Notes due on November 29, 2022	$	1,250
2.400% Notes due on February 22, 2023	$	1,000
2.800% Notes due on August 22, 2024	$	2,000
3.800% Notes due on December 5, 2024	$	1,250
5.200% Notes due on December 3, 2025	$	1,000
3.150% Notes due on August 22, 2027	$	3,500
4.800% Notes due on December 5, 2034	$	1,250
3.875% Notes due on August 22, 2037	$	2,750
4.950% Notes due on December 5, 2044	$	1,500
4.050% Notes due on August 22, 2047	$	3,500
4.250% Notes due on August 22, 2057	$	2,250



Year Ended December 31, 2017	Previously Reported			Adjustments			As Revised
Operating activities	$	18,434		$	(69	)	$	18,365
Investing activities	(27,819		)	735			(27,084		)
Financing activities	9,860			68			9,928
Net change in cash, cash equivalents, and restricted cash	$	475		$	734		$	1,209



	December 31, 2018
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Total Estimated Fair Value
Cash	$	10,406	$	—	$	—		$	10,406
Level 1 securities:
Money market funds	12,515		—		—			12,515
Equity securities								170
Level 2 securities:
Foreign government and agency securities	815		—		—			815
U.S. government and agency securities	11,686		1		(20		)	11,667
Corporate debt securities	5,008		1		(19		)	4,990
Asset-backed securities	896		—		(4		)	892
Other fixed income securities	190		—		(2		)	188
Equity securities								33
	$	41,516	$	2	$	(45	)	$	41,676
Less: Restricted cash, cash equivalents, and marketable securities (2)								(426		)
Total cash, cash equivalents, and marketable securities								$	41,250


~~(1)~~	~~The related unrealized gain (loss) recorded in “Other income (expense), net” was $4 million for the year ended December 31, 2019.~~



	Amortized Cost		Estimated Fair Value
Due within one year	$	35,064	$	35,071
Due after one year through five years	9,262		9,304
Due after five years through ten years	301		302
Due after ten years	680		682
Total	$	45,307	$	45,359


~~(1)~~	~~Includes the original cost and accumulated depreciation of fully-depreciated assets.~~



	Year Ended December 31, 2019

Operating lease cost (1)	$	3,669
Finance lease cost:
Amortization of lease assets	10,094
Interest on lease liabilities	695
Finance lease cost	10,789
Variable lease cost	966
Total lease cost	$	15,424


~~(1)~~	~~Rental expense under operating lease agreements was $2.2 billion and $3.4 billion for 2017 and 2018.~~


	December 31, 2019		December 31, 2020

Weighted-average remaining lease term – operating leases	11.5		11.3
Weighted-average remaining lease term – finance leases	5.5		6.2
Weighted-average discount rate – operating leases	3.1	%	2.5	%
Weighted-average discount rate – finance leases	2.7	%	2.1	%



	~~December 31, 2019~~

~~Weighted-average remaining lease term – operating leases~~	~~11.5~~
~~Weighted-average remaining lease term – finance leases~~	~~5.5~~
~~Weighted-average discount rate – operating leases~~	~~3.1~~	%
~~Weighted-average discount rate – finance leases~~	~~2.7~~	%



	Operating Leases			Finance Leases			Total

Gross lease liabilities	$	31,963		$	28,875		$	60,838
Less: imputed interest	(6,128		)	(1,896		)	(8,024		)
Present value of lease liabilities	25,835			26,979			52,814
Less: current portion of lease liabilities	(3,139		)	(9,884		)	(13,023		)
Total long-term lease liabilities	$	22,696		$	17,095		$	39,791


~~(1)~~	Intangible assets acquired in 2017, 2018, and 2019 have estimated useful lives of between one and twenty-five years, two and seven years, and two and seven years, with weighted-average amortization periods of twenty-one years, six years, and five years.



	North America			International			AWS			Consolidated
Goodwill - January 1, 2018	$	11,165		$	1,108		$	1,077		$	13,350
New acquisitions (1)	1,031			177			20			1,228
Other adjustments (2)	(5		)	(15		)	(10		)	(30		)
Goodwill - December 31, 2018	12,191			1,270			1,087			14,548
New acquisitions	71			29			89			189
Other adjustments (2)	2			1			14			17
Goodwill - December 31, 2019	$	12,264		$	1,300		$	1,190		$	14,754


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


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


~~(1)~~	~~Excludes the original cost and accumulated amortization of fully-amortized intangibles.~~


~~(2)~~	~~Intangible assets have estimated useful lives of between one and twenty-five years.~~


	Maturities (1)	Stated Interest Rates	Effective Interest Rates	December 31, 2019		December 31, 2020
2012 Notes issuance of $3.0 billion	2022	2.50%	2.66%	1,250		1,250
2014 Notes issuance of $6.0 billion	2021 - 2044	3.30% - 4.95%	3.43% - 5.11%	5,000		5,000
2017 Notes issuance of $17.0 billion	2023 - 2057	2.40% - 5.20%	2.56% - 4.33%	17,000		16,000
2020 Notes issuance of $10.0 billion	2023 - 2060	0.40% - 2.70%	0.56% - 2.77%	0		10,000
Credit Facility				740		338
Other long-term debt				830		586
Total face value of long-term debt				24,820		33,174
Unamortized discount and issuance costs, net				(101)		(203)
Less current portion of long-term debt				(1,305)		(1,155)
Long-term debt				$	23,414	$	31,816