FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


(Mark One)

     [X] Quarterly  Report under Section 13 or 15(d) of the Securities  Exchange
Act of 1934
               For the quarterly period ended: September 30, 1999

                                       OR

     [ ]  Transition  report  pursuant to section 13 or 15(d) of the  Securities
Exchange Act of 1934
                        For the transition period from to

                             Commission File Number:
                                    001-12143

                              America Online, Inc.
             (Exact name of registrant as specified in its charter)

           Delaware                                     54-1322110
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

                   22000 AOL Way, Dulles, Virginia 20166-9323
              (Address of principal executive offices and zip code)

Registrant's telephone number, including area code:    (703) 265-1000

     Former name, former address, and former year, if changed since last report:
Not applicable
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           X               No

Indicate the number of shares  outstanding  of each of the  Issuer's  classes of
Common Stock, as of the latest practicable date.

Title of each class
Common stock $.01 par value
Shares outstanding on October 15, 1999.............................1,117,743,377



<PAGE>


                              AMERICA ONLINE, INC.

                                      INDEX
                                                                            Page

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

        Condensed Consolidated Balance Sheets - September 30, 1999
        and June 30, 1999                                                      3

        Condensed Consolidated Statements of Operations - Three
        months ended September 30, 1999 and 1998                               4

        Condensed Consolidated Statements of Cash Flows - Three
        months ended September 30, 1999 and 1998                               5

        Condensed Consolidated Statement of Changes in
        Stockholders' Equity - Three months ended
        September 30, 1999                                                     6

        Notes to Condensed Consolidated Financial Statements                   7

Item 2. Management's Discussion and Analysis of Financial Condition
        and Results of Operations                                             10

Item 3. Quantitative and Qualitative Disclosures About Market Risk            16

PART II. OTHER INFORMATION                                                    17

Item 6.  Exhibits                                                             17

Signatures                                                                    18


<PAGE>

<TABLE>
<CAPTION>

                              AMERICA ONLINE, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (Amounts in millions, except share data)

                                                                                      September 30,  June 30,
                                                                                          1999         1999
                                                                                      -------------  --------
                                                                                       (Unaudited)
                                     ASSETS
Current assets:
<S>                                                                                        <C>        <C>
Cash and cash equivalents...........................................................       $1,330     $  887
Short-term investments..............................................................          429        537
Trade accounts receivable, less allowances of $55 and $54, respectively.............          346        323
Other receivables...................................................................          122         79
Prepaid expenses and other current assets...........................................          181        153
                                                                                      ------------  ---------
Total current assets................................................................        2,408      1,979

Property and equipment at cost, net.................................................          744        657

Other assets:
Investments including available-for-sale securities.................................        2,760      2,151
Product development costs, net......................................................          110        100
Goodwill and other intangible assets, net...........................................          422        454
Other assets and deferred income taxes..............................................           58          7
                                                                                      ------------  ---------
                                                                                           $6,502     $5,348
                                                                                      ============  =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Trade accounts payable..............................................................       $   88     $   74
Other accrued expenses and liabilities..............................................          941        795
Deferred revenue....................................................................          711        646
Accrued personnel costs.............................................................          195        134
Deferred network services credit....................................................           76         76
                                                                                      ------------  ---------
Total current liabilities...........................................................        2,011      1,725

Long-term liabilities:
Notes payable.......................................................................          341        348
Deferred revenue....................................................................          111         30
Other liabilities...................................................................           12         15
Deferred network services credit....................................................          178        197
                                                                                      ------------  ---------
Total liabilities...................................................................        2,653      2,315

Stockholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized, no shares issued
  or outstanding at September 30 and June 30, 1999..................................            -          -
Common stock, $.01 par value; 1,800,000,000 shares authorized,
  1,116,859,792 and 1,100,893,933 shares issued and outstanding at
  September 30 and June 30, 1999, respectively.....................................            11         11
Additional paid-in capital..........................................................        3,079      2,703
Accumulated other comprehensive income - unrealized gain on
  available-for-sale securities, net................................................          424        168
Retained earnings...................................................................          335        151
                                                                                      ------------  ---------
Total stockholders' equity..........................................................        3,849      3,033
                                                                                      ------------  ---------
                                                                                           $6,502     $5,348
                                                                                      ============  =========


                             See accompanying notes.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>


                              AMERICA ONLINE, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  (Amounts in millions, except per share data)
                                   (Unaudited)

                                                                             Three months ended
                                                                                 September 30,
                                                                               1999      1998
                                                                             --------  --------
Revenues:
<S>                                                                           <C>       <C>
Subscription services.....................................................    $  995    $  723
Advertising, commerce and other...........................................       350       175
Enterprise solutions......................................................       122       101
                                                                             --------  --------
Total revenues............................................................     1,467       999

Costs and expenses:
Cost of revenues..........................................................       791       583
Sales and marketing.......................................................       209       174
Product development.......................................................        67        67
General and administrative................................................       117        82
Amortization of goodwill and other intangible assets......................        18        16
                                                                             --------  --------
Total costs and expenses..................................................     1,202       922

Income from operations... ................................................       265        77
Other income, net.........................................................        37         5
                                                                             --------  --------
Income before provision for income taxes..................................       302        82
Provision for income taxes................................................      (118)       (6)
                                                                             --------  --------
Net income................................................................    $  184     $  76
                                                                             ========  ========

Earnings per share:
Earnings per share-diluted................................................    $ 0.14    $ 0.06
Earnings per share-basic..................................................    $ 0.17    $ 0.08
Weighted average shares outstanding-diluted...............................     1,287     1,199
Weighted average shares outstanding-basic.................................     1,110       997



                             See accompanying notes.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>


                              AMERICA ONLINE, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (Amounts in millions)
                                   (Unaudited)

                                                                                       Three months ended
                                                                                          September 30,
                                                                                         1999     1998
                                                                                        -------  -------
Cash flows from operating activities:
<S>                                                                                     <C>      <C>
Net income ............................................................................ $  184   $   76
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash restructuring charges.........................................................      2        -
Amortization of deferred network services credit.......................................    (19)     (19)
Depreciation and amortization..........................................................     79       67
Compensatory stock options.............................................................      3        3
Deferred income taxes..................................................................    117        6
Changes in assets and liabilities, net of the effects of acquisitions and dispositions:
  Trade accounts receivable............................................................    (24)     (43)
  Other receivables....................................................................    (43)     (44)
  Prepaid expenses and other current assets............................................    (27)      (9)
  Other assets.........................................................................    (52)       4
  Investments including available-for-sale securities..................................    (99)       4
  Accrued expenses and other current liabilities.......................................    204       30
  Deferred revenue and other liabilities...............................................    147       45
                                                                                        -------  -------
Total adjustments......................................................................    288       44
                                                                                        -------  -------
Net cash provided by operating activities..............................................    472      120

Cash flows from investing activities:
Purchase of property and equipment.....................................................   (134)     (63)
Product development costs..............................................................    (18)     (10)
Proceeds from sale of investments......................................................      -       14
Purchase of investments, including available-for-sale securities.......................    (94)     (82)
Proceeds of short-term investments, net................................................    108       89
Other investing activities.............................................................     15      (13)
                                                                                        -------  -------
Net cash used in investing activities..................................................   (123)     (65)

Cash flows from financing activities:
Proceeds from issuance of common stock, net...........................................      97      602
Principal and accrued interest payments on line of credit and debt.....................     (3)      (1)
Proceeds from line of credit and issuance of debt......................................      -        1
                                                                                         ------  -------
Net cash provided by financing activities..............................................     94      602
                                                                                         ------  -------
Net increase in cash and cash equivalents..............................................    443      657
Cash and cash equivalents at beginning of period.......................................    887      677
                                                                                        -------  -------
Cash and cash equivalents at end of period............................................. $1,330   $1,334
                                                                                        =======  =======
Supplemental cash flow information
Cash paid during the period for:
Interest............................................................................... $    2   $    5
                                                                                        =======  =======


                             See accompanying notes.
</TABLE>



<PAGE>
<TABLE>
<CAPTION>


                              AMERICA ONLINE, INC.
       CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                    (Amounts in millions, except share data)
                                   (Unaudited)


                                                                               Accumulated
                                                Common Stock       Additional    Other
                                           -----------------------  Paid-In    Comprehensive     Retained
                                              Shares        Amount  Capital     Income, Net      Earnings    Total
                                           --------------  ------- ---------  ---------------  ------------ ---------

<S>                                         <C>              <C>     <C>          <C>             <C>         <C>
Balances at June 30, 1999.................  1,100,893,933    $ 11    $ 2,703      $  168          $ 151       $3,033
Common stock issued:
Exercise of options....................        15,907,999       -         97           -              -           97
Amortization of compensatory
   stock options..........................              -       -          3           -              -            3
Unrealized gain on
   available-for-sale securities, net.....              -       -        157         256              -          413
Conversion of debt........................         57,860       -          1           -              -            1
Tax benefit related to stock options......              -       -        118           -              -          118
Net income................................              -       -          -           -            184          184
                                           --------------  ------- ---------  ---------------  ------------ ---------
Balances at September 30, 1999............  1,116,859,792    $ 11    $ 3,079      $  424          $ 335       $3,849
                                           ==============  ======= =========  ===============  ============ ========


                             See accompanying notes.
</TABLE>


<PAGE>


                              AMERICA ONLINE, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Note 1.  Basis of Presentation

     The accompanying  unaudited condensed  consolidated  financial  statements,
which  include the accounts of America  Online,  Inc.  (the  "Company")  and its
wholly and majority owned  subsidiaries,  have been prepared in accordance  with
generally accepted accounting  principles for interim financial  information and
with  the   instructions  to  Form  10-Q  and  Article  10  of  Regulation  S-X.
Accordingly,  they do not include all of the information and footnotes  required
by generally accepted accounting  principles for complete financial  statements.
In the  opinion  of  management,  all  adjustments,  consisting  only of  normal
recurring  accruals  considered  necessary  for a fair  presentation,  have been
included in the accompanying  unaudited  financial  statements.  All significant
intercompany  transactions  and balances have been eliminated in  consolidation.
Operating  results  for the  three  months  ended  September  30,  1999  are not
necessarily  indicative  of the results  that may be expected  for the full year
ending  June 30,  2000.  For  further  information,  refer  to the  consolidated
financial statements and notes thereto,  included in the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1999.

Note 2.  Earnings Per Share

     The  following  table  sets  forth the  computation  of basic  and  diluted
earnings per share for the three months ended September 30, 1999 and 1998:
<TABLE>

                                                                                    Three months ended
                                                                                       September 30,
     (in millions except for per share data)                                           1999     1998
                                                                                     -------- --------
     Basic earnings per share:
     <S>                                                                             <C>      <C>
     Net income available to common shareholders...................................  $   184  $    76
                                                                                     -------- --------
     Weighted average shares outstanding...........................................    1,110      997

     Basic earnings per share......................................................  $  0.17  $  0.08
                                                                                     ======== ========


     Diluted earnings per share:
     Net income available to common shareholders...................................  $   184  $    76
     Interest on convertible debt, net of tax......................................        2        -
                                                                                     -------- --------
     Adjusted net income available to common shareholders
        assuming conversion........................................................  $   186  $    76
                                                                                     -------- --------
     Weighted average shares outstanding...........................................    1,110      997
     Effect of dilutive securities:
        Employee stock options.....................................................      157      174
        Warrants...................................................................        -       28
        Convertible debt...........................................................       20        -
                                                                                     -------- --------
     Adjusted weighted average shares and assumed conversions......................    1,287    1,199
                                                                                     ======== ========
     Diluted earnings per share....................................................  $  0.14  $  0.06
                                                                                     ======== ========
</TABLE>


<PAGE>


Note 3.  Comprehensive Income

     For the three  months  ended  September  30,  1999 and 1998,  comprehensive
income was $440 million and $31 million,  respectively.  The difference  between
net income and  comprehensive  income for each  period  presented  is due to net
unrealized gains or losses on available-for-sale securities.

Note 4.  Merger and Restructuring Charges

     During fiscal 1999, the Company  recorded the following  charges related to
mergers and restructurings:

o           Approximately  $15 million of direct costs primarily  related to the
            mergers  of  MovieFone,   Inc.   ("MovieFone"),   Spinner   Networks
            Incorporated  ("Spinner")  and Nullsoft,  Inc.  ("Nullsoft").  These
            charges primarily consisted of investment banker fees, severance and
            other personnel  costs,  fees for legal and accounting  services and
            other expenses directly related to the transaction.

o           Approximately  $78 million of direct costs primarily  related to the
            mergers of Netscape and When, Inc. and the Company's  reorganization
            plans to integrate Netscape's  operations and build on the strengths
            of the  Netscape  brand  and  capabilities.  This  charge  primarily
            consists of investment  banker fees,  severance and other  personnel
            costs (related to the elimination of  approximately  850 positions),
            fees for legal and accounting  services and other expenses  directly
            related to the transaction.

o           Approximately  $2 million in merger related costs in connection with
            the merger of AtWeb,  Inc. These expenses were primarily  associated
            with fees for investment  banking,  legal and  accounting  services,
            severance  costs and other related  charges in  connection  with the
            transaction.

     The  following  table  summarizes  the  activity  during the  period  ended
September  30,  1999.  The balance of the  restructuring  accrual is included in
other accrued expenses and liabilities on the consolidated  balance sheet and is
expected to be paid by the end of this fiscal year.

<TABLE>

         (in millions)
                                               Balance                             Balance
                                             June 30,     Non Cash              September 30,
                                               1999         Items     Payments      1999
                                           -------------   --------   --------    --------
         Banking, legal, regulatory
         <S>                                    <C>            <C>       <C>        <C>
           and accounting fees...........       $ 4            $ -       $ (3)      $ 1
         Severance and related costs.....        11             (2)        (3)        6
         Facilities shutdown costs.......         8              -         (1)        7
         Miscellaneous expenses..........        (3)             -          -        (3)
                                           -------------   --------   --------    --------
         Total...........................       $20           $ (2)      $ (7)      $11
                                           =============   ========   ========    ========
</TABLE>

Note 5.  Segment Information

     There are no  intersegment  revenues  between the two reportable  segments.
Shared support service functions such as human resources,  facilities management
and  other  infrastructure  support  groups  are  allocated  based  on  usage or
headcount,  where practical, to the two operating segments.  Charges that cannot
be  allocated  are  reported  as  general  &  administrative  costs  and are not
allocated to the segments.  Special  charges  determined to be  significant  are
reported  separately in the  Consolidated  Statements of Operations  and are not
assigned or allocated to the segments. All other accounting policies are applied
consistently to the segments, where applicable.

<PAGE>

         A summary of the segment financial information is as follows:
<TABLE>

                                                       Three months ended
                                                          September 30,
                                                       1999         1998
                                                   ------------  -----------
                                                      (Amounts in millions)
     Revenues:
     <S>                                                <C>          <C>
     Interactive Online Services.................       $1,345       $  898
     Enterprise Solutions........................          122          101
                                                   ------------  -----------
         Total revenues..........................       $1,467       $  999

     Income (loss) from operations:
     Interactive Online Services (1).............       $  356       $  166
     Enterprise Solutions  (2)...................           26           (7)
     General & Administrative....................         (117)         (82)
                                                   ------------  -----------
         Total income from operations............       $  265       $   77

1.   For the  periods  ended  September  30, 1999 and 1998,  Interactive  Online
     Services include goodwill and other intangible  assets  amortization of $18
     million and $16 million, respectively.

2.   Enterprise  Solutions  amortization of goodwill and other intangible assets
     is immaterial for periods presented.
</TABLE>


Note 6.  Subsequent Events

     On October 20, 1999, the Company entered into a strategic relationship with
Gateway,  Inc.  to increase  growth of the  Company's  services.  As part of the
agreement, the Company will invest $800 million in common and preferred stock in
Gateway,  Inc. over a two-year period. Of the $800 million, $180 million will be
the Company's common stock and the remainder will be cash. In addition, Gateway,
Inc. will make an $85 million  commitment to market  software and Gateway,  Inc.
products and services on the  Company's  brands.  The Company  expects to take a
pre-tax charge of $30 million in connection  with its acquisition of an interest
in Gateway.net subscribers in the quarter in which the transaction closes.

     On October 28, 1999,  the Company's  stockholders  approved an amendment to
the Company's  Restated  Certificate of Incorporation to increase the authorized
number of shares of common stock from 1,800,000,000 to 6,000,000,000.

     On October 28,  1999,  the Board of  Directors  of the  Company  declared a
two-for-one  common stock split, to be effected in the form of a stock dividend.
On the  payment  date of  November  22,  1999,  stockholders  will  receive  one
additional  share for each share  owned on the record  date of November 8, 1999.
The impact of this stock split is not  reflected in the  accompanying  financial
statements.

Note 7.  Legal Proceedings

     The Department of Labor ("DOL") is investigating  the  applicability of the
Fair Labor Standards Act ("FLSA") to the Company's Community Leader program. The
Company believes the Community Leader program reflects industry practices,  that
the Community  Leaders are  volunteers,  not  employees,  and that the Company's
actions  comply with the law.  The Company is  cooperating  with the DOL, but is
unable to predict the outcome of the DOL's investigation. Former volunteers have
sued the Company on behalf of an alleged class  consisting of current and former
volunteers,  alleging violations of the FLSA and comparable state statutes.  The
Company believes the claims have no merit and intends to defend them vigorously.
The Company  cannot predict the outcome of the claims or whether other former or
current volunteers will file additional actions.


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

     Founded in 1985,  America Online,  Inc.,  (the "Company")  based in Dulles,
Virginia,  is the world's leader in interactive services,  Web brands,  Internet
technologies  and  electronic  commerce  services.   The  Company  operates  two
worldwide  subscription  based Internet online services,  the AOL service,  with
more than 19  million  members,  and the  CompuServe  service,  with more than 2
million  members;  several leading  Internet  brands  including ICQ, AOL Instant
Messenger and Digital City,  Inc.; the Netscape  Netcenter and AOL.COM  Internet
portals;  the Netscape  Communicator  client  software,  including  the Netscape
Navigator  browser;  AOL MovieFone,  the nation's number one movie listing guide
and  ticketing  service;  and Spinner and Nullsoft,  leaders in Internet  music.
Through its strategic  alliance with Sun  Microsystems,  Inc.,  the Company also
develops  and  offers   easy-to-deploy,   end-to-end   electronic  commerce  and
enterprise  solutions  for  companies  operating  in and doing  business  on the
Internet.

Consolidated Results of Operations

         Revenues

     The following  table and discussion  highlights the revenues of the Company
for the three months ended September 30, 1999 and 1998:


<TABLE>
                                                               Three Months Ended
                                                                  September 30,
                                                               1999            1998
                                                         --------------- ---------------
                                                               (Dollars in millions)
Revenues:
<S>                                                      <C>      <C>    <C>      <C>
Subscription services................................... $  995   67.8%  $  723   72.4%
Advertising, commerce and other.........................    350   23.9      175   17.5
Enterprise solutions....................................    122    8.3      101   10.1
                                                         ------- ------- ------- -------
Total revenues.......................................... $1,467  100.0%  $  999  100.0%
</TABLE>

                  Subscription Services Revenues

     For the three  months  ended  September  30,  1999,  subscription  services
revenues,   which  are  generated  mainly  from  subscribers  paying  a  monthly
membership  fee,  increased from $723 million to $995 million,  or 38%, over the
three months ended September 30, 1998. This increase is comprised of an increase
in AOL subscription services revenues of $268 million, as well as an increase in
CompuServe  subscription  services  revenues of $4 million.  The increase in AOL
subscription  services revenues was primarily  attributable to a 36% increase in
the average number of AOL revenue  generating  subscribers  for the three months
ended September 30, 1999, compared to the three months ended September 30, 1998,
as well as a 3% increase in the average monthly  subscription  services  revenue
per AOL subscriber.

     At  September  30,  1999,  the Company had  approximately  18.7 million AOL
service subscribers, including 16.2 million in the United States and 2.5 million
in the rest of the world.  Also at that date, the Company had  approximately 2.2
million  CompuServe service  subscribers,  with 1.3 million in the United States
and 900,000 in the rest of the world.

<PAGE>


                  Advertising, Commerce and Other Revenues

     The following  table  summarizes  the material  components of  advertising,
commerce and other  revenues for the three months ended  September  30, 1999 and
1998:
<TABLE>

                                                                Three Months Ended
                                                                   September 30,
                                                               1999            1998
                                                         --------------- ---------------
                                                               (Dollars in millions)

<S>                                                      <C>      <C>     <C>     <C>
Advertising and electronic commerce fees................ $  272   77.7%   $ 132   75.4%
Merchandise.............................................     47   13.4       21   12.0
Other...................................................     31    8.9       22   12.6
                                                         ------- ------- ------- -------
Total advertising, commerce and other revenues.......... $  350  100.0%   $ 175  100.0%
</TABLE>

     Advertising,  commerce and other  revenues,  which consist  principally  of
advertising and related revenues,  fees associated with commerce and the sale of
merchandise across the Company's  multiple brands,  increased by 100%, from $175
million in the quarter  ended  September 30, 1998 to $350 million in the quarter
ended  September 30, 1999. The increase is primarily  attributable to additional
advertising  on the  Company's  AOL  service,  Netcenter  portal,  and  from the
Company's other brands, as well as an increase in commerce fees. Advertising and
commerce  fees  increased  by 106%,  from $132 million in the three months ended
September 30, 1998 to $272 million in the three months ended September 30, 1999.
Merchandise  sales increased by 124%, from $21 million in the three months ended
September 30, 1998 to $47 million in the three months ended  September 30, 1999.
This increase is mainly  attributable to improved response rates to advertising,
as well as a larger base of  subscribers.  At September 30, 1999,  the Company's
advertising and commerce backlog, representing the contract value of advertising
and commerce  agreements  signed,  less revenues  already  recognized from these
agreements,  was  approximately $2 billion,  up approximately  $500 million from
June 30, 1999.

                  Enterprise Solutions Revenues

     Enterprise  solutions  revenues,   which  consist  principally  of  product
licensing fees and fees from technical support, consulting and training services
increased by 21%, from $101 million in three months ended  September 30, 1998 to
$122  million in the three  months ended  September  30, 1999.  The increase was
primarily driven by revenues  generated from the alliance with Sun Microsystems,
Inc., which did not exist during the three months ended September 30, 1998.

         Costs and Expenses

     The following table and discussion highlights the costs and expenses of the
Company for the three months ended September 30, 1999 and 1998:

<TABLE>
                                                                Three Months Ended
                                                                   September 30,
                                                               1999            1998
                                                         --------------- ---------------
                                                               (Dollars in millions)

<S>                                                      <C>     <C>     <C>     <C>
Total revenues.......................................... $1,467  100.0%  $  999  100.0%

Costs and expenses:
Cost of revenues........................................ $  791   53.9%  $  583   58.4%
Sales and marketing.....................................    209   14.2      174   17.4
Product development.....................................     67    4.6       67    6.7
General and administrative..............................    117    8.0       82    8.2
Amortization of goodwill and other intangible assets....     18    1.2       16    1.6
                                                         ------- ------- ------- -------
Total costs and expenses................................ $1,202   81.9%  $  922   92.3%
</TABLE>


<PAGE>



                  Cost of Revenues

     Cost of revenues includes  network-related  costs,  consisting primarily of
data network costs,  personnel and related costs  associated  with operating the
data centers, data network and providing customer support, consulting, technical
support/training  and billing,  host computer and network  equipment  costs, the
costs of merchandise  sold,  royalties paid to information and service providers
and  royalties  paid for  licensed  technologies.  For the  three  months  ended
September  30,  1999,  cost of  revenues  increased  from $583  million  to $791
million,  or 36%, over the three months ended  September 30, 1998, and decreased
as a percentage of total revenues from 58.4% to 53.9%.

     The increase in cost of revenues in the three months  ended  September  30,
1999 was primarily  attributable  to increases in data network costs, as well as
personnel and related costs  associated  with  operating the data centers,  data
network and providing customer support,  consulting,  technical support/training
and billing.  Data network costs  increased  primarily as a result of the larger
customer  base and  increased  usage per  customer.  Personnel and related costs
associated with operating the data centers,  data network and providing customer
support and  billing  increased  primarily  as a result of the  requirements  of
supporting  a  larger  data   network,   larger   customer  base  and  increased
subscription services revenues.

     The decrease in cost of revenues as a percentage  of total  revenues in the
three months ended  September 30, 1999 was primarily  attributable  to growth of
the  higher  margin  advertising,  commerce  and  other  revenues,  as well as a
decrease in  network-related  costs as a  percentage  of  subscription  services
revenue.  The decrease in network-related  costs as a percentage of subscription
services  revenue was primarily  driven by a 19% decrease in our hourly  network
cost for the three months ended  September  30, 1999.  This  decrease was mostly
offset by an  increase  in daily  member  usage,  from an  average  of nearly 47
minutes per day in the three months ended September 30, 1998 to an average of 55
minutes per day in the three months ended September 30, 1999.

                  Sales and Marketing

     Sales and  marketing  expenses  include  the costs to  acquire  and  retain
subscribers,  the  operating  expenses  associated  with the sales and marketing
organizations  and  other  general  marketing  costs to  support  the  Company's
multiple  brands.  For the three months  ended  September  30,  1999,  sales and
marketing expenses increased from $174 million to $209 million, or 20%, over the
three months ended  September  30, 1998,  and decreased as a percentage of total
revenues from 17.4% to 14.2%.  The increase in sales and marketing  expenses for
the three months  ended  September  30, 1999 was  primarily  attributable  to an
increase  in  direct  subscriber  acquisition  costs  related  to  the  AOL  and
CompuServe  services and brand advertising  across multiple brands. The decrease
in  marketing  expenses as a percentage  of total  revenues for the three months
ended  September  30, 1999 was primarily a result of the  substantial  growth in
total revenues.

                  Product Development

     Product  development  costs include  research and development  expenses and
other product  development costs. For the three months ended September 30, 1999,
product  development  costs were  unchanged  at $67 million and  decreased  as a
percentage  of  total  revenues  from  6.7% to 4.6%.  The  decrease  in  product
development  costs as a percentage of total  revenues for the three months ended
September  30, 1999 was  primarily a result of the  substantial  growth in total
revenues.

                   General and Administrative

     For the three months ended September 30, 1999,  general and  administrative
expenses  increased  from $82 million to $117  million,  or 43%,  over the three
months ended September 30, 1998, and decreased as a percentage of total revenues
from 8.2% to 8.0%.  The  increase  in general and  administrative  costs for the
three months  ended  September  30, 1999 was  primarily  attributable  to higher
personnel costs,  including  payroll taxes associated with employee stock option
exercises.  The decrease in general and administrative  costs as a percentage of
total revenues for the three months ended September 30, 1999 was mainly a result
of the substantial growth in total revenues.

              Amortization of Goodwill and Other Intangible Assets

     Amortization  of goodwill  and other  intangible  assets  increased  to $18
million in the three  months  ended  September  30, 1999 from $16 million in the
three months ended September 30, 1998. The increase in  amortization  expense in
the three months ended September 30, 1999 is primarily  attributable to goodwill
associated  with the  acquisition  of the  CompuServe  online service in January
1998, with minor subsequent adjustments.

                  Other Income, Net

     Other income, net consists primarily of investment income and non-operating
gains net of interest expense and  non-operating  charges.  The Company recorded
other income of $37 million and $5 million in the three  months ended  September
30,  1999 and 1998,  respectively.  The  increase  in other  income in the three
months ended September 30, 1999 was primarily  attributable to interest  income.
The  increase in interest  income is due to a higher cash  balance and  interest
earned on investments.

                  Provision for Income Taxes

     The provision for income taxes was $118 million and $6 million in the three
months ended September 30, 1999 and 1998,  respectively.  Income tax expense for
the three months ended September 30, 1999 includes $117 million for U.S. federal
and state income  taxes and $1 million for foreign  taxes.  As of September  30,
1999, the Company had net operating loss  carryforwards  of  approximately  $8.2
billion available to offset future U.S. federal taxable income.

Segment Results of Operations

     The  Company  operates  two major  lines of  business:  Interactive  Online
Services and Enterprise  Solutions.  For further information regarding segments,
refer to Note 5 of the Notes to Consolidated Financial Statements.

     A summary of the segment financial information is as follows:

<TABLE>
                                                       Three months ended
                                                          September 30,
                                                       1999         1998
                                                   ------------  -----------
                                                      (Amounts in millions)
     Revenues:
<S>                                                     <C>          <C>
     Interactive Online Services.................       $1,345       $  898
     Enterprise Solutions........................          122          101
                                                   ------------  -----------
         Total revenues..........................       $1,467       $  999

     Income (loss) from operations:
     Interactive Online Services (1).............       $  356       $  166
     Enterprise Solutions  (2)...................           26           (7)
     General & Administrative....................         (117)         (82)
                                                   ------------  -----------
         Total income from operations............       $  265       $   77

1.   For the  periods  ended  September  30, 1999 and 1998,  Interactive  Online
     Services include goodwill and other intangible  assets  amortization of $18
     million and $16 million, respectively.

2.   Enterprise  Solutions  amortization of goodwill and other intangible assets
     is immaterial for periods presented.
</TABLE>

     For an overview of the segment revenues,  refer to the consolidated results
of operations discussion earlier in this section.

     Interactive  Online  Services  income from  operations  increased from $166
million in the three  months  ended  September  30, 1998 to $356  million in the
three months ended  September 30, 1999. This increase is primarily the result of
increases in subscription services revenues and advertising,  commerce and other
revenues,  coupled with improved margins and a decrease in marketing expenses as
a percentage of total revenues.

     Enterprise  Solutions income (loss) from operations improved from a loss of
$(7)  million in the three  months  ended  September  30,  1998 to income of $26
million in the three  months ended  September  30, 1999.  This  improvement  was
mainly  attributable  to the  increase  in  revenues,  as well as a  decline  in
operating expenses,  as the Company began to realize efficiencies from using the
AOL  infrastructure  to support the Enterprise  Solutions segment as well as the
other lines of businesses.  In addition,  Enterprise  Solutions is  experiencing
benefits from the Sun Alliance which was not in place a year ago.

Liquidity and Capital Resources

     The Company is currently  financing its operations  primarily  through cash
generated from operations.  In addition, the Company has generated cash from the
sale of its capital  stock,  the sale of its  convertible  notes and the sale of
marketable  securities  it held.  The Company has  financed its  investments  in
telecommunications  equipment  principally through leasing. Net cash provided by
operating activities was $472 million and $120 million in the three months ended
September 30, 1999 and 1998,  respectively,  and increased  primarily due to the
Company's  increase  in net  income  before  taxes.  Net cash used in  investing
activities was $123 million and $65 million in the three months ended  September
30,  1999 and 1998,  respectively,  and  increased  mainly due to the  Company's
purchases of property and equipment.  Net cash provided by financing  activities
was $94 million and $602 million in the three months  ended  September  30, 1999
and 1998,  respectively.  Included in financing  activities for the three months
ended  September  30, 1998,  was $550 million in aggregate  net proceeds  from a
public  stock  offering  of  its  common  stock.   The  Company   currently  has
approximately  $450 million available under a shelf  registration  filed in June
1998.  In May 1999,  the  Company  filed a  registration  statement  to raise an
additional $4.5 billion by sale of the Company's debt securities,  common stock,
preferred  stock  depositary  shares,  warrants or stock  purchase  contracts to
purchase common stock or preferred stock. The total offering price of securities
under  these  registration  statements,  in the  aggregate,  will not  exceed $5
billion.

     The  Company  expects  to  continue  using its  working  capital to finance
ongoing  operations  and to fund marketing  programs and the  development of its
products and  services.  The Company  plans to continue to invest in  subscriber
acquisition,  retention and brand  marketing to expand its  subscriber  base, as
well as in network,  computing  and support  infrastructure.  Additionally,  the
Company  expects to use a portion of its cash for the acquisition and subsequent
funding  of   technologies,   content,   products,   investments  or  businesses
complementary to the Company's  current business.  The Company  anticipates that
cash on hand, cash provided by operating  activities and cash available from the
capital markets and  traditional  lending markets will be sufficient to fund its
operations for the next twelve months.

Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")

     The following table and discussion  summarizes  EBITDA for the three months
ended September 30, 1999 and 1998:

<TABLE>
                                                  Three Months Ended
                                                    September 30,
                                                  1999         1998
                                              ------------  ------------
                                                (Amounts in millions)

<S>                                               <C>          <C>
EBITDA......................................      $386         $153
</TABLE>

     The Company defines EBITDA as net income plus: (1)  provision/(benefit) for
income taxes,  (2) interest  expense,  (3) depreciation and amortization and (4)
special  charges/(gains).  EBITDA is presented and discussed because the Company
considers  EBITDA  an  important  indicator  of  the  operational  strength  and
performance  of its  business  including  the  ability to provide  cash flows to
service  debt and fund  capital  expenditures.  EBITDA,  however,  should not be
considered  an  alternative  to  operating  or net income as an indicator of the
performance  of the Company,  or as an  alternative to cash flows from operating
activities as a measure of liquidity, in each case determined in accordance with
generally accepted accounting principles ("GAAP").

     For the three months ended September 30, 1999,  EBITDA  increased from $153
million to $386 million or 152% over the three months ended  September 30, 1998.
The EBITDA margin (EBITDA  divided by total  revenues)  increased from 15.3% for
the three  months ended  September  30, 1998 to 26.3% for the three months ended
September  30, 1999.  In addition,  the  incremental  EBITDA margin (the current
quarter  increase over the year ago quarter in EBITDA of $233 million divided by
the increase in revenues of $468 million for the same periods)  increased nearly
50%. This increase in the incremental  EBITDA margin is mainly due to the shared
infrastructure  that supports the  Company's  multiple  brands;  as these brands
begin to generate additional  revenues,  a larger percentage of each incremental
dollar flows to EBITDA.

Year 2000 Compliance

     The Company utilizes a significant number of computer software programs and
operating systems across its entire organization, including applications used in
operating its online services and Web sites, the proprietary software of the AOL
and  CompuServe  services,  Netscape  software  products,  member  and  customer
services,   network  access,  content  providers,  joint  ventures  and  various
administrative  and billing  functions.  To the extent  that these  applications
contain  source codes that are unable to  appropriately  interpret  the upcoming
calendar year 2000, some level of modification, or even possibly replacement may
be necessary.

     In 1997,  the Company  appointed a Year 2000 Task Force to perform an audit
to assess  the scope of the  Company's  risks  and bring its  applications  into
compliance.  This  Task  Force  has  overseen  testing  and  is  continuing  its
assessment  of the  Company's  company-wide  compliance.  The  Company's  system
hardware  components,  client and host  software,  current  versions of Netscape
software  products  and  corporate  business and  information  systems have been
tested and continue to be reviewed.  To date,  the Company has  experienced  few
problems  related  to  Year  2000  testing,  and the  problems  that  have  been
identified either have been addressed or are in the process of being addressed.

     The Company  has made Year 2000  compliant  certain  versions of the client
software for the AOL service and the  CompuServe  service that are  available on
the Windows and  Macintosh  operating  systems,  as well as certain  versions of
Netscape software products that are currently shipped. While the majority of AOL
and CompuServe  members use  proprietary  client  software that is compliant,  a
third-party  Internet  browser  utilized in most versions of the client software
may not be Year 2000  compliant.  A free patch or upgrade  will be required  for
members  using some  versions of the client  software or browser to achieve Year
2000  compliance.  The Company is encouraging  members of its online services to
upgrade  their  browser  and/or  their  software to versions  that are Year 2000
compliant,  if they have not already done so. The Company is making available to
members,  and is communicating that availability,  free patches or upgrades that
can be downloaded from the online services. The Company has not tested, and does
not expect to certify as Year 2000 compliant,  certain older versions of the AOL
and CompuServe software. The Company has developed, and is implementing over the
remainder of the year,  a  communication  program  that  informs  members how to
obtain the free patch or upgrade to a Year 2000 compliant  version of the client
software or browser.

     With respect to the Company's Netscape software business,  testing has been
completed  on  currently  shipped  products  and the review and  analysis of the
testing results continues. The Company is making available at no additional cost
to customers any required patch or upgrade to the versions of Netscape  software
products   currently   being  shipped  to  customers and is communicating  their
availability.  In addition,  the Company is encouraging  customers to upgrade to
versions of the software  that are expected to be Year 2000  compliant,  if they
have not already done so.

     In  addition,  the Company is  continuing  to gather  information  from its
vendors,  joint venture  partners and content  partners  about their progress in
identifying  and  addressing  problems that their  computer  systems may face in
correctly  processing  date  information  related to the Year 2000.  The Company
continues its efforts to seek reassurances regarding the Year 2000 compliance of
vendors,  joint venture  partners and content  partners.  In the event any third
parties  cannot timely provide the Company with content,  products,  services or
systems  that meet the Year 2000  requirements,  the  content  on the  Company's
services,  access to the Company's  services,  the ability to offer products and
services  and the  ability  to  process  sales  could  be  materially  adversely
affected.

     The  costs  incurred  through  September  30,  1999 to  address  Year  2000
compliance were  approximately $16 million.  The Company currently  estimates it
will  incur a total  of  approximately  $20  million  in costs  to  support  its
compliance initiatives.  The Company cannot predict the outcome of its Year 2000
program, whether third party systems and component software are, or will be Year
2000 compliant,  the costs required to address the Year 2000 issue, or whether a
failure to achieve substantial Year 2000 compliance will have a material adverse
effect on the Company's business,  financial condition or results of operations.
Failure to achieve Year 2000 compliance  could result in some  interruptions  in
the work of some  employees,  the  inability  of some  members and  customers to
access the Company's  online services and Web sites or errors and defects in the
Netscape  products.  This,  in turn,  may  result  in the  loss of  subscription
services  revenue,  advertising  and  commerce  revenue or  enterprise  solution
revenue,  the  inability  to  deliver  minimum  guaranteed  levels  of  traffic,
diversion of development  resources,  or increased  service and warranty  costs.
Occurrence  of any of these may also  result in  additional  remedial  costs and
damage to reputation.

     The Company has developed a contingency  plan to address possible Year 2000
risks to its systems.  The plan  identifies  a hierarchy of critical  functions,
acceptable delay times,  recovery  strategies to return functions to operational
status and defines the core team for managing this recovery process. The Company
will continue to modify this plan to address systems of its recent acquisitions.

Forward-Looking Statements

     This  report and other oral and written  statements  made by the Company to
the public  contain and  incorporate  by  reference  forward-looking  statements
within the meaning of the "safe  harbor"  provisions  of the Private  Securities
Litigation Reform Act of 1995. In particular, statements regarding the following
subjects  are   forward-looking:   future   financial  and  operating   results;
anticipated  subscriber,  usage and commerce growth; new and developing markets,
products,  services,  features and content;  anticipated  timing and benefits of
acquisitions and other alliances and relationships; the availability,  benefits,
and  timing of  deployment  of new  access and  distribution  technologies;  and
regulatory developments,  including the Company's ability to shape public policy
in, for example, telecommunications, privacy and tax areas.

     The   forward-looking   statements  are  based  on   management's   current
expectations or beliefs and are subject to a number of factors and uncertainties
that could cause actual results to differ materially from those described in the
forward-looking  statements. For a discussion of factors that could cause actual
results  to  differ  materially  from  those  described  in the  forward-looking
statements, please refer to the section entitled "Forward-Looking Statements" in
the Company's Annual Report on Form 10-K for the year ended June 30, 1999.
<PAGE>

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     Market risk is the  potential  loss arising from adverse  changes in market
rates and prices,  such as foreign  currency  exchange and interest  rates.  The
Company is exposed to immaterial  levels of market risks,  including these types
of  risks.  The  Company  does not enter  into  derivatives  or other  financial
instruments for trading or speculative purposes.  From time to time, the Company
has  entered  into  financial  instruments  to manage  and  reduce the impact of
changes in foreign currency  exchange rates. In June 1998, the Company initiated
hedging activities to mitigate the impact on intercompany balances of changes in
foreign  exchange  rates.  The Company uses foreign  currency  forward  exchange
contracts  as a vehicle  for  hedging  these  intercompany  balances.  A foreign
currency   forward   exchange   contract   obligates  the  Company  to  exchange
predetermined  amounts of specified  foreign  currencies  at specified  exchange
rates on  specified  dates and to make or  receive  an  equivalent  U.S.  dollar
payment  equal to the  value of such  exchange.  For  these  contracts  that are
designated  and effective as hedges,  realized and  unrealized  gains and losses
resulting  from changes in the spot  exchange rate  (including  those from open,
matured and terminated contracts) are included in other income and net discounts
or  premiums  (the  difference  between the spot  exchange  rate and the forward
exchange  rate at inception of the  contract)  are also accreted or amortized to
other income,  over the life of each contract,  using the straight-line  method.
These gains and losses offset gains and losses on intercompany  balances,  which
are  also  included  in  other  income.  The  related  amounts  due  to or  from
counterparties  are included in other assets or other  liabilities.  In general,
these foreign  currency  forward  exchange  contracts  mature in three months or
less.  The estimated  fair value of the contracts  are  immaterial  due to their
short-term nature.


PART II.  OTHER INFORMATION
Item 6.   Exhibits and Reports on Form 8-K

(a)              Exhibits
Exhibit 3.1      Certificate of Amendment of Restated Certificate of
                 Incorporation of America Online, Inc.

(b)              Reports on Form 8-K
                  None

<PAGE>


                              AMERICA ONLINE, INC.

                                   SIGNATURES


Pursuant  to the  requirements  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.


                                            AMERICA ONLINE, INC.


DATE: November 2, 1999                 SIGNATURE:/s/ Stephen M. Case
                                                 -----------------------
                                                 Stephen M. Case
                                                 Chairman of the Board and Chief
                                                 Executive Officer



DATE: November 2, 1999                 SIGNATURE:/s/ J. Michael Kelly
                                                 ------------------------
                                                 J. Michael Kelly
                                                 Senior Vice President and Chief
                                                 Financial Officer


<PAGE>


Exhibit Index

Exhibit 3.1 Certificate of Amendment of Restated Certificate of Incorporation of
            America Online, Inc.



<PAGE>


 Exhibit 3.1

      CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF
                              AMERICA ONLINE, INC.

         America  Online,  Inc.,  a  Delaware  corporation  duly  organized  and
existing  under  the  General  Corporation  Law of the  State of  Delaware  (the
"Corporation"), does hereby certify:

         FIRST: That Section A of Article FOURTH of the Restated  Certificate of
Incorporation is hereby amended to read in its entirety as follows:

         FOURTH: A. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 6,005,000,000 shares,  divided into
two classes, consisting of:

     6,000,000,000  shares of Common Stock, par value one cent ($0.01) per share
(the "Common Stock"); and

     5,000,000  shares of Preferred  Stock, par value one cent ($0.01) per share
(the "Undesignated Preferred Stock").

         SECOND:  That said  amendment was duly adopted in  accordance  with the
provisions  of  Section  242 of the  General  Corporation  Law of the  State  of
Delaware.

         IN WITNESS WHEREOF, America Online, Inc. has caused this Certificate of
Amendment to be signed by its duly authorized  officer this 28th day of October,
1999.


                                                             /s/Sheila A. Clark
                                                             Sheila A. Clark
                                                             Corporate Secretary