Amazon.com (AMZN)

AMAZON.COM ANNOUNCES THIRD QUARTER FINANCIAL RESULTS; FOR THE FIRST TIME ELECTRONICS AND OTHER GENERAL MERCHANDISE SALES SURPASS $2 BILLION OVER THE PAST YEAR; EXPECTS RECORD HOLIDAY SEASON

SEATTLE—(BUSINESS WIRE)—October 25, 2005—Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its third quarter ended September 30, 2005.

Operating cash flow grew 35% to $661 million for the trailing twelve months, compared with $490 million for the trailing twelve months ended September 30, 2004. Free cash flow grew 13% to $475 million for the trailing twelve months, compared with $420 million for the trailing twelve months ended September 30, 2004. As previously announced in August 2005, the Company settled a patent lawsuit on terms including a previously unanticipated one-time payment of $40 million in third quarter 2005. Excluding this payment, free cash flow would have grown 22% to $515 million for the trailing twelve months.

Common shares outstanding plus shares underlying stock-based awards outstanding totaled 438 million at September 30, 2005, compared with 434 million a year ago.

Net sales increased 27% to $1.86 billion in the third quarter, compared with $1.46 billion in third quarter 2004. Excluding the $7 million unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 28% compared with third quarter 2004.

Operating income decreased 32% to $55 million in the third quarter, compared with $81 million in third quarter 2004. Excluding the negative impact of the $40 million legal settlement, operating income would have increased 17% to $95 million.

Net income was $30 million in the third quarter, or $0.07 per diluted share, compared with net income of $54 million, or $0.13 per diluted share in third quarter 2004, which includes $21 million in income tax expense, compared with $3 million income tax expense in third quarter 2004. Excluding the negative impact of the $40 million legal settlement—$20 million after tax—net income would have been $50 million or $0.12 per diluted share.

“For $79 a year, Amazon Prime members get ‘all-you-can-eat’ free express shipping,” said Jeff Bezos, founder and CEO of Amazon.com. “Customers continue to join Amazon Prime and we anticipate even higher enrollment rates as we get closer to the holidays.”

Amazon Prime, Amazon.com’s first-ever membership program, was introduced 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 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.