Amazon.com (AMZN)

AMAZON.COM ANNOUNCES THIRD QUARTER FINANCIAL RESULTS; NET SALES UP 24% YEAR OVER YEAR; EXPECTS RECORD HOLIDAY SEASON

SEATTLE—(BUSINESS WIRE)—October 24, 2006—Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its third quarter ended September 30, 2006.

Operating cash flow declined 11% to $587 million for the trailing twelve months, compared with $661 million for the trailing twelve months ended September 30, 2005. Free cash flow decreased 23% to $366 million for the trailing twelve months, compared with $475 million for the trailing twelve months ended September 30, 2005, driven primarily by our increased expenditure in technology and content.

Common shares outstanding plus shares underlying stock-based awards outstanding totaled 435 million at September 30, 2006, compared with 438 million a year ago. During the quarter, the Company repurchased 8 million shares, or $252 million under its previously announced authorization to repurchase up to $500 million of the Company’s common stock.

Net sales increased 24% to $2.31 billion in the third quarter, compared with $1.86 billion in third quarter 2005. Excluding the $20 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 23% compared with third quarter 2005.

Operating income decreased 28% to $40 million in the third quarter, compared with $55 million in third quarter 2005. The decline in operating income was mainly due to technology and content investments. Third quarter 2005 operating income included a negative impact of $40 million relating to a patent litigation settlement.

Net income was $19 million in the third quarter, or $0.05 per diluted share, compared with net income of $30 million, or $0.07 per diluted share in third quarter 2005.

“We’re pleased with the strong revenue growth and rapid adoption of Amazon Prime,” said Jeff Bezos, founder and CEO of Amazon.com. “We look forward to seeing significant sequential improvement in operating leverage this Q4, even as we continue to invest in many initiatives including new retail categories, seller platforms, web services, and digital.”

Amazon Prime continues to demonstrate strong quarter-to-quarter sequential growth for new memberships. Amazon Prime, Amazon.com’s first-ever membership program, was introduced in February 2005. For a flat membership fee of $79 per year, Amazon Prime members get unlimited, express two-day shipping for free, with no minimum purchase requirement on over a million eligible items sold by Amazon.com. Members can order as late as 6:30 p.m. ET and still get their order the next day for only $3.99 per item, and they can share the benefits of Amazon Prime with up to four family members living in their household. Sign up for Amazon Prime at www.amazon.com/prime.

Page 1 of 18