Amazon will report second-quarter earnings after the market close on Thursday.
Here’s what Wall Street is expecting:
- Earnings: 35 cents per share, according to analysts surveyed by Refinitiv
- Revenue: $131.5 billion, according to analysts surveyed by Refinitiv
- Amazon Web Services: $21.8 billion in revenue, according to StreetAccount
- Advertising: $10.4 billion in revenue, according to StreetAccount
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While revenue growth remains steady at Amazon, it’s been stuck in the single digits for five out of the past six quarters. That trend is expected to continue, as analysts are looking for 8.5% growth in the second quarter and a number just slightly higher in the third period.
Amazon Web Services has been a growth driver for years, but the pace of expansion is slowing as customers clamp down on spending due to an uncertain economic outlook. In the first quarter, AWS sales increased roughly 16%, the slowest growth since 2015, when Amazon began breaking out cloud revenue.
Brian Olsavsky, Amazon’s finance chief, warned in April that the company expects to see more of the same in the second quarter in cloud. Analysts expect growth to dip down to 10% for the second quarter.
In addition to cloud, profit margins will be an area of emphasis for investors, as well as artificial intelligence, a focus for companies across the sector.
“The key question will be whether management suggests that with the timing of the optimization cycle, AI workloads, and easing comps that AWS is likely to start showing revenue growth acceleration beginning in Q3,” analysts at Evercore, who have the equivalent of a buy rating on Amazon, wrote in a note this week. “We don’t know.”
AWS rivals Microsoft and Alphabet last week reported solid results in their cloud businesses, beating analysts’ revenue expectations. But both companies said they continue to see organizations moderating their cloud spend.
Along with Amazon, Apple also reports on Thursday, to close out earnings season for the mega-cap tech companies. AI has been a central theme.
Last week, Amazon hosted an AWS Summit, where the company announced updates related to generative AI, including a service that uses the technology to transcribe and summarize doctors’ patient visits.
Amazon’s results will give investors a sense of whether the company’s ongoing cost-cutting efforts are beginning to bear fruit. Evercore analysts said they expect to see improving margins in Amazon’s retail business in the second quarter, as “comps against ’22’s massive cost spikes, capacity utilization recovers, and newfound efficiencies from the regionalization of Amazon’s retail operations kick in.”
Recent data released by the company showed improving delivery speeds and efficiencies in Amazon’s fulfillment network. The company said it’s made significant headway on its efforts to establish one- and same-day delivery as the standard for Prime members, while also bringing costs down.
Also during the quarter, Amazon hosted its annual Prime Day discount bonanza, which it touted as its “biggest ever.” Amazon’s guidance for the third quarter could give a glimpse into how much Prime Day lifted sales.
Amazon’s advertising business is becoming increasingly important to the company’s financials. Several industry surveys have indicated a slow rebound in the digital ad market may be underway. Meta showed better-than-expected results last week, but rival Snap fell short of sales expectations and gave a weak forecast for the current quarter.