Andy Jassy, the CEO of Amazon, spoke at the ceremonial ribbon cutting before the opening night of the Seattle Kraken, the NHL’s newest hockey franchise, at the Climate Pledge Arena on October 22, 2021, in Seattle. Amazon will release its second-quarter earnings after the market closes on Thursday. Here are the expectations from Wall Street analysts:
– Earnings: Analysts surveyed by Refinitiv expect 35 cents per share.
– Revenue: Analysts surveyed by Refinitiv expect $131.5 billion.
– Amazon Web Services: StreetAccount predicts $21.8 billion in revenue.
– Advertising: StreetAccount predicts $10.4 billion in revenue.
Amazon’s revenue growth has been consistent but stagnant in recent quarters, with single-digit growth in five out of the last six quarters. Analysts expect this trend to continue, with 8.5% growth in the second quarter and slightly higher numbers in the third quarter.
While Amazon Web Services has been a significant growth driver for the company, the pace of expansion is slowing down as customers tighten their spending due to economic uncertainty. In the first quarter, AWS sales grew by approximately 16%, the slowest rate since 2015 when Amazon started reporting cloud revenue separately. Brian Olsavsky, Amazon’s finance chief, warned in April about the expectation of similar results in the second quarter. Analysts foresee a growth dip to 10% for the second quarter.
Investors will pay attention to profit margins and artificial intelligence, which are focal points for companies in the sector. Evercore analysts, who have a buy rating on Amazon, noted that the key question is whether AWS will show revenue growth acceleration in the third quarter. Last week, Microsoft and Alphabet, AWS rivals, reported strong results in their cloud businesses but still observed organizations scaling back on cloud spending.
Apple also reports its earnings on Thursday, concluding the earnings season for mega-cap tech companies. Artificial intelligence has been a central theme. During an AWS Summit held last week, Amazon announced updates related to generative AI, including a service that uses the technology to transcribe and summarize doctor’s patient visits.
Investors will also be interested in seeing if Amazon’s cost-cutting efforts are starting to pay off. Evercore analysts expect improving margins in Amazon’s retail business in the second quarter as comparisons against previous cost spikes, recovery in capacity utilization, and increased efficiencies from the regionalization of retail operations come into effect. Amazon has shown improvements in delivery speeds and efficiencies in its fulfillment network and aims to establish one- and same-day delivery as the standard for Prime members while reducing costs.
The company’s advertising business is gaining importance for its financials. Surveys indicate a slow rebound in the digital ad market, with Meta (formerly Facebook) reporting better-than-expected results, while Snap fell short of sales expectations and provided a weak forecast for the current quarter.
Investors will also be interested in Amazon’s guidance for the third quarter, which may reveal the impact of Prime Day on sales. Amazon promoted Prime Day as its “biggest ever” during this quarter.
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