Amazon set to report fourth-quarter earnings after the bell

Key Points

• Financial Projections for Q4 2023:
  • Earnings per share: Analysts expect 80 cents, as reported by LSEG (formerly Refinitiv).
  • Revenue: Projections stand at $166.2 billion, according to LSEG.
  • Amazon Web Services (AWS): Anticipated AWS revenue is $24.2 billion, as per StreetAccount.
  • Advertising: Analysts project advertising revenue to reach $14.2 billion, based on StreetAccount estimates.
• Amazon’s Post-Holiday Quarter Rebound:
  • Expected Profit Spike: Amazon is anticipated to announce a significant increase in profits compared to the previous holiday quarter, where challenges like inflation, the war in Ukraine, and supply chain constraints led to higher costs. The company had faced its slowest year of growth in 2022, with a mere 9.4% increase in sales for the year.
  • Reaccelerated Growth: Since then, Amazon’s growth has rebounded, and profits have surged, attributed to cost-cutting measures implemented by CEO Andy Jassy and resilient consumer spending. The company executed substantial layoffs, with over 27,000 employees laid off between late 2022 and mid-2023, and ongoing role reductions, including in units like Prime Video, MGM Studios, Twitch, Audible, and Buy with Prime.
  • Market Response: Amazon’s stock experienced a remarkable 77% rally in 2023, reflecting positive sentiments on Jassy’s efficiency measures. The stock has continued to rise, up almost 4% in the current year, outperforming the S&P 500’s 2% gain during the same period.
• Key Focus Areas and Analyst Expectations:
  • Net Income and Revenue Projection: Analysts project a net income of $8.4 billion, or 80 cents per share, for the period ending Dec. 31, compared to $278 million, or 3 cents per share, in the previous year. Revenue is expected to expand by 11.4% during the quarter, reflecting an acceleration from the year-ago period’s growth of just over 8%.
  • Holiday Sales Impact: The fourth quarter results will include outcomes from the holiday shopping season and Amazon’s October Prime Day event. Holiday sales, both online and in brick-and-mortar stores, rose by 3.8% year over year to $964.4 billion, aligning with the high end of prior expectations of a rise between 3% and 4%.
  • Cloud Computing Growth: Wall Street is particularly attentive to growth rates in Amazon’s cloud computing unit, AWS, where revenue is expected to increase by approximately 13% year over year, slightly faster than the previous quarter’s growth rate of 12%. Analysts are optimistic about AWS benefiting from strong demand for generative artificial intelligence, with Amazon launching AI initiatives such as the “Q” chatbot, Trainium chips for AI applications, and the generative AI service Bedrock for AWS customers.
  • Advertising Revenue: Amazon’s high-margin business, advertising, is another crucial area to watch, with revenue projected to grow by 23% to $14.2 billion. The company recently introduced ads to Prime Video programming, aligning itself with streaming peers like Netflix, Disney’s Hulu, and Warner Bros. Discovery’s Max. Analysts at Citi, with a buy rating on Amazon shares, forecast Prime Video ads to generate at least $5 billion of incremental revenue over time, emphasizing the potential impact of this move on the company’s overall financial performance.