Amazon is scheduled to announce its second-quarter earnings after the market close on Thursday. Analysts and investors are closely watching for insights into the company’s performance across key areas.
Key Financial Estimates (LSEG)
- Earnings per Share (EPS): $1.03
- Revenue: $148.56 billion
Key Revenue Projections (StreetAccount)
- Amazon Web Services (AWS): $26 billion
- Advertising Revenue: $13 billion
Performance Overview
Revenue Growth:
Amazon’s revenue growth is projected to accelerate, driven by its advertising business and cloud services. Analysts expect a 10.5% increase in revenue for the quarter, up from $134.4 billion in the previous quarter but down from the 13% growth seen in Q1.
Amazon Web Services (AWS):
AWS remains a critical focus for Amazon. With Microsoft and Google Cloud reporting robust growth in their cloud segments, Amazon is expected to show a 17.6% increase in AWS revenue. This growth is anticipated to be bolstered by higher demand for AI-related services.
Advertising Business:
Amazon’s advertising segment has become a significant revenue driver. After a 24% increase in Q1, the segment is expected to grow by 22% this quarter. The addition of ads to Prime Video, unless users pay for an ad-free option, is expected to contribute to this growth.
Recent Developments
Cost-Cutting Measures:
Under CEO Andy Jassy’s leadership, Amazon has focused on cost reduction, laying off over 27,000 employees since late 2022. This has contributed to a significant rebound in profit, with operating income increasing 200% in the first quarter. Analysts predict continued growth with a year-over-year expansion of about 79% for Q2.
Advertising Expansion:
Amazon’s advertising revenue could see substantial growth in the coming years. Analysts at Loop Capital project that Amazon’s ad business could reach $150 billion in sales by the end of the decade, a significant rise from $47 billion last year. They view Amazon’s move to include ads in Prime Video as a strategic advantage.
NBA Deal:
Amazon recently secured a position as the third rights partner in the NBA’s new 11-year TV deal. This move is expected to enhance Amazon’s advertising revenue and Prime Video platform, attracting more Prime subscribers and increasing store purchases.
Industry Context
The earnings season has been mixed for major tech companies:
- Google’s Alphabet: Met earnings expectations but reported disappointing YouTube ad revenue.
- Microsoft: Beat earnings estimates, but Azure cloud revenue fell short.
- Meta: Surpassed expectations with growth in digital ads
