Amazon.com (AMZN)

AMAZON.COM ANNOUNCES FOURTH QUARTER SALES UP 34%; MEDIA GROWS 25%; ELECTRONICS AND OTHER GENERAL MERCHANDISE GROWS 55%

SEATTLE—(BUSINESS WIRE)—February 1, 2007—Amazon.com, Inc. (NASDAQ: AMZN) today announced financial results for its fourth quarter and year ended December 31, 2006.

Operating cash flow was $702 million in 2006, compared with $733 million in 2005. Free cash flow decreased 8% to $486 million in 2006, compared with $529 million in 2005.

Common shares outstanding plus shares underlying stock-based awards outstanding totaled 436 million on December 31, 2006, compared with 438 million a year ago. During the year, 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 34% to $3.99 billion in the fourth quarter, compared with $2.98 billion in fourth quarter 2005. Excluding the $122 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 30% compared with fourth quarter 2005.

Operating income increased 20% to $197 million in the fourth quarter, compared with $165 million in fourth quarter 2005. Excluding the $8 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, operating income grew 14% compared with fourth quarter 2005.

Net income was $98 million in the fourth quarter, or $0.23 per diluted share, compared with net income of $199 million, or $0.47 per diluted share in fourth quarter 2005. Fourth quarter 2006 income tax expense increased $130 million, to $91 million or $0.22 per diluted share, compared with a tax benefit of $38 million, or $0.09 per diluted share, in fourth quarter 2005. The prior year tax benefit was primarily related to determining certain deferred tax assets were realizable.

“We had a record holiday season with accelerating revenue growth and significant sequential improvement in operating leverage,” said Jeff Bezos, founder and CEO of Amazon.com. “Amazon Prime members spent more with us across categories as they took advantage of unlimited free two-day shipping.”

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.

Full Year 2006

Net sales increased 26% to $10.71 billion in 2006, compared with $8.49 billion in 2005.

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Operating income declined 10% to $389 million in 2006, compared with $432 million in 2005, due mainly to increased spending on technology and content.

Net income was $190 million in 2006, or $0.45 per diluted share, compared with net income of $359 million, or $0.84 per diluted share, in 2005. Income tax expense increased $92 million to $187 million, or $0.44 per diluted share, compared with income tax expense of $95 million, or $0.22 per diluted share, in 2005.