Amazon.com’s Q3 Revenues Surge 39%

Operating income increased 7% to $268 million in the third quarter,
compared with $251 million in third quarter 2009. The unfavorable impact
from year-over-year changes in foreign exchange rates throughout the
quarter on operating income was $15 million.

Net income increased 16% to $231 million in the third quarter, or $0.51
per diluted share, compared with net income of $199 million, or $0.45
per diluted share, in third quarter 2009.

Operating cash flow increased 16% to $2.62 billion for the trailing twelve months, compared with $2.25 billion for the trailing twelve months ended September 30, 2009. Free cash flow decreased 5% to $1.83 billion for the trailing twelve months, compared with $1.92 billion for the trailing twelve months ended September 30, 2009.

Common shares outstanding plus shares underlying stock-based awards totaled 465 million on September 30, 2010, compared with 451 million a year ago.

“Every year for the last 15 years we've worked to improve the things customers care about, and this year is no exception,” said Jeff Bezos, founder and CEO of Amazon.com. “This holiday season we'll have the best prices, the biggest selection, the highest in-stock, and the fastest delivery in our history.”

Highlights

Amazon began shipping a new Kindle that offers an electronic-ink screen with 50 percent better contrast, a 21 percent smaller body, a 15 percent lighter weight, 20 percent faster page turns, up to one-month of battery life with wireless off, double the storage, and built-in Wi-Fi–all for only $139. Kindle 3G adds free 3G wireless–no monthly bills or annual contracts–all for only $189. The new generation Kindle devices are the fastest-selling Kindles of all time and the bestselling products on Amazon.com and Amazon.co.uk. More new generation Kindle devices were ordered in the first twelve weeks of availability than in the same time frame following any other Kindle launch. In addition, in the twelve weeks following the introduction of the new generation of Kindles, customers ordered more Kindle devices on Amazon.com and Amazon.co.uk than any other product.

The U.S. Kindle Store now has more than 720,000 books, including New Releases and 108 of 111 New York Times Best Sellers. Over 590,000 of these books are $9.99 or less, including 78 New York Times Best Sellers. Over 1.8 million free, out-of-copyright, pre-1923 books are also available to read on Kindle. Amazon added to its growing list of Buy Once, Read Everywhere Kindle apps, announcing it will launch a Kindle App for the new BlackBerry PlayBook tablet computer. All Kindle apps let customers Buy Once, Read Everywhere–on Kindle, Kindle 3G, Kindle DX, iPad, iPod touch, iPhone, Mac, PC, BlackBerry, Android-based devices, and in the coming months the BlackBerry PlayBook. All Kindle apps are free and incorporate Amazon's Whispersync technology, which allows readers to seamlessly switch between devices. With Kindle Worry-Free Archive, books purchased from the Kindle Store are automatically backed up online in the Kindle library on Amazon where they can be re-downloaded wirelessly for free, anytime.

The popular Kindle for Android app was updated with a number of new features that allow customers to search the full text of Kindle books by voice or text, seamlessly look up words and phrases in Wikipedia, lock screen orientation in portrait or landscape mode, and view details about a book on Shelfari, the books-focused social networking site–all without leaving the app. Amazon announced that it will launch “Kindle Singles”–compelling ideas expressed at their natural length. Kindle Singles, which can be twice the length of a New Yorker feature or as much as a few chapters of a typical book might be the perfect, natural length to lay out a single killer idea, well researched, well argued and well illustrated–whether it's a business lesson, a political point of view, a scientific argument, or a beautifully crafted essay on a current event. Kindle Singles will have their own section in the Kindle Store and be priced much lower than a typical book.

North America segment sales, representing the company's U.S. and Canadian sites, were $4.13 billion, up 45% from third quarter 2009. International segment sales, representing the Company's U.K., German, Japanese, French and Chinese sites, were $3.43 billion, up 32% from third quarter 2009. Excluding the unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, sales grew 35%. Worldwide Media sales grew 14% to $3.35 billion. Excluding the unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, sales grew 15%. Worldwide Electronics & Other General Merchandise sales grew 68% to $3.97 billion. Excluding the unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, sales grew 71%. Amazon.com announced the launch of Amazon Mom–a new, free membership program that offers exclusive promotions and discounts available only to parents and caregivers. Customers who sign up for Amazon Mom can receive one year of Amazon Prime's Unlimited Free Two-Day Shipping on items ranging from baby bottles to video cameras, and 30 percent off select diapers and wipes with Subscribe & Save. The Company introduced Amazon Student, offering college students Amazon Prime Unlimited Free Two-Day Shipping free for one year on textbooks and millions of other items. The Company announced the Heidi Klum for New Balance collection, exclusively available at Amazon.com. The collection includes tunics, knits, woven tops, leggings and outerwear pieces, all created for active women and featuring high-end fabrics such as cashmere blends, cottons and silks. Amazon Elastic Compute Cloud (EC2) and Amazon Relational Database Service (RDS) lowered On-Demand and Reserved Instance prices for their largest high-memory instances, making it even more cost efficient for developers to take advantage of Amazon Web Services (AWS). AWS announced the launch of a free usage tier. Beginning November 1, new AWS customers will be able to run a free Amazon EC2 instance for a year, while also leveraging a new free usage tier for Amazon S3, Amazon Elastic Block Store, Amazon Elastic Load Balancer, and AWS data transfer. This will enable developers to launch new applications, broaden their AWS knowledge, or simply gain hands-on familiarity with the services–all while incurring no charges. AWS announced that a wide selection of Oracle enterprise software, including Oracle E-Business Suite, PeopleSoft Enterprise, Siebel CRM, Oracle Fusion Middleware, Oracle Database, and Oracle Linux, has been certified to run on Amazon EC2, enabling customers who power their businesses with Oracle software to fully leverage the scalability, reliability, and utility-based pricing model of AWS.

Financial Guidance

The following forward-looking statements reflect Amazon.com's expectations as of October 21, 2010. Our results are inherently unpredictable and may be materially affected by many factors, such as fluctuations in foreign exchange rates, changes in global economic conditions and consumer spending, world events, the rate of growth of the Internet and online commerce and the various factors detailed below.

Fourth Quarter 2010 Guidance

Net sales are expected to be between $12.0 billion and $13.3 billion, or to grow between 26% and 40% compared with fourth quarter 2009. Operating income is expected to be between $360 million and $560 million, or between 24% decline and 18% growth compared with fourth quarter 2009. This guidance includes approximately $140 million for stock-based compensation and amortization of intangible assets, and it assumes, among other things, that no additional business acquisitions or investments are concluded and that there are no further revisions to stock-based compensation estimates.