- Amazon will release its financial results for the second quarter today after the market closes.
- The company is expected to announce a significant increase in both revenue and earnings per share.
- Revenue is projected to climb 11% year-over-year to $148.76 billion, while earnings per share (EPS) are expected to soar nearly 60% to $1.03.
- Investors will be closely watching the performance of Amazon's advertising business, a relatively new but rapidly growing segment, as well as its cloud computing division, Amazon Web Services (AWS).
Market Expectations
Amazon has consistently exceeded earnings expectations for the past six quarters. In fact, on average, the company has surpassed analyst estimates by a remarkable 70% over the last decade. More recently, the average earnings surprise has been around 40%. To maintain this trend, Amazon would need to report EPS of approximately $1.40.
Similarly, the company has outperformed revenue expectations for six consecutive quarters. While the most recent beat was a more modest 0.51%, Amazon's average revenue surprise historically has been 1.3%. Based on this, revenue is anticipated to surpass $150 billion.
Market expectations for Q2 2024. Source: Amazon, Bloomberg, XTB
Key Areas of Focus
Several factors will be in the spotlight. Amazon's advertising business is gaining traction and contributing increasingly to overall results. AWS, the company's cloud computing arm, achieved 17% growth in the first quarter, reaching $25 billion in revenue. Expectations for Q2 AWS growth are also around 17%. Amazon's CEO has emphasized the company's commitment to technology and its belief that AWS will be a cornerstone of global artificial intelligence development. The acquisition of AI startup Anthropic earlier this year underscores this focus.
Investors will also be keen to hear about the progress of Alexa, Amazon's AI-powered virtual assistant. Recent reports suggest the product is still under development, and any lack of updates or a delayed launch could dampen investor sentiment.
Core Business and Challenges
Online retail remains Amazon's core business, although the company has expanded into food delivery, which has the potential to increase revenue from Prime members (now totaling 200 million). However, Amazon faces growing competition from Chinese e-commerce giants like Temu, Shein, and AliExpress.
Other Key Indicators
Beyond the top line and bottom line, investors should monitor the following:
- AWS Growth: Any slowdown in AWS growth below the expected 17% could disappoint investors, especially given the strong performance of competitors like Alphabet's cloud business.
- Impact of Food Delivery: The contribution of food delivery subscriptions to overall sales and profitability will be closely watched.
- Competitive Response: Amazon's recent introduction of discounts for Chinese customers could positively impact future results, but the company's ability to compete effectively against Chinese rivals remains a key challenge.
Stock Performance
Amazon's stock price has experienced a recent correction after reaching highs above $200 per share. Analysts have set a 12-month price target of $223, implying potential upside of around 7% from the current level of $185. Key support and resistance levels are identified at $175, $185-$190, and $198.
