Amazon Q3 Earnings Preview: Focus on AWS and Analyst Expectations for AMZN

Amazon.com Inc (AMZN) is preparing to release its third-quarter financial results after the market closes on Thursday. Many analysts are particularly interested in the performance of the company’s AWS (Amazon Web Services) cloud segment.

Earnings Estimates: Analysts predict that Amazon will report a revenue of approximately $157.19 billion for the third quarter. This figure represents an increase from last year’s Q3 total of $143.08 billion, based on data from various financial services.

In the previous quarter, Amazon fell short of revenue projections set by analysts. However, the company had previously exceeded these estimates for six consecutive quarters before that, and has managed to beat revenue expectations in eight out of the last ten quarters overall.

This quarter, analysts forecast that the earnings per share (EPS) will be around $1.14, a rise from 94 cents reported in the same period last year. Notably, Amazon has consistently surpassed EPS expectations for seven straight quarters, and for eight out of the last ten quarters overall.

Amazon's EPS has increased by double digits in each of the last six quarters where it beat expectations, as reported by financial data sources.

The company's guidance indicates that it expects third-quarter revenue to fall within the range of $154 billion to $158.5 billion.

Market Insights

Expert Opinions: Analysts express optimism about Amazon's potential to showcase strong revenue growth and improved operating margins in its Q3 results. Goldman Sachs analyst Eric Sheridan noted that Amazon's ongoing investments in diversifying its product offerings, including more budget-friendly options, could be evident in the upcoming earnings report.

Furthermore, the AWS segment is anticipated to benefit from advancements in artificial intelligence, as past challenges are expected to diminish.

Wedbush's analyst, Daniel Ives, remarked that Amazon's stock has remained relatively stable since the company's last earnings announcement. He advises investors to view this stability as an opportunity, maintaining an Outperform rating with a price target of $225.

He pointed out the strength of higher-margin advertising and AWS as essential factors that could drive Amazon's performance in both the short and long term.

Freedom Capital Markets Chief Global Strategist Jay Woods identified Amazon's report as one of the most compelling earnings announcements to watch this week. He commented on the mixed signals regarding Amazon's financial outlook from the previous quarter, noting that slower revenue growth in both the cloud and AWS sectors may have contributed to subdued investor enthusiasm.

Woods mentioned that while the prospects for AI growth are positive, the technology is still in its early stages, leading to some investor caution about immediate growth potentials.

Analyst Ratings and Price Targets

Additional ratings from various analysts regarding Amazon and their respective price targets are as follows:

• UBS: Maintained Buy rating, raised price target from $220 to $223.
• Needham: Reiterated Buy rating with a price target of $210.
• JMP Securities: Reiterated Market Outperform rating with a price target of $265.
• Evercore ISI: Reiterated Outperform rating with a price target of $240.

Key Areas of Focus

During the upcoming earnings report, Amazon's AWS segment is expected to attract significant attention from both analysts and investors. AWS revenue showed a year-over-year increase of 19% in the second quarter.

Amazon's CEO, Andy Jassy, has emphasized the company’s commitment to fostering growth within AWS. "As companies continue to modernize their infrastructure and transition to cloud services while leveraging new Generative AI opportunities, AWS remains the preferred choice for customers," Jassy remarked previously.

International revenue growth could also be a point of interest, having increased by 7% year-over-year in the last quarter, which is lower than the 9% growth seen in the North America segment.

Amazon may also discuss the performance of its Prime Video streaming service and Twitch gaming platform, highlighting how events like "Thursday Night Football" have impacted Prime subscriptions in the current quarter.

Current Stock Status

As of Wednesday, Amazon shares are up 2% to $193.70, within a 52-week trading range of $131.72 to $201.20. Year-to-date, Amazon's stock has risen by 29% in 2024.

Amazon, Earnings, AWS