Amazon’s Upcoming Earnings Report: What to Expect

Amazon is set to announce its second-quarter earnings on Thursday after the market closes. Analysts from LSEG have provided their expectations, highlighting key financial metrics that investors are eager to review.

Financial Predictions

For the second quarter, analysts are forecasting an earnings per share (EPS) of $1.33 and total revenue of $162.1 billion. This report will also shed light on specific segments that are crucial to Amazon’s performance, particularly:

• Amazon Web Services (AWS): Expected revenue is around $30.8 billion.
• Advertising Revenue: Estimated to reach $14.99 billion.

In its previous earnings report, Amazon expressed concerns about the impact of "tariff and trade policies" and raised "recessionary fears," which could weigh on the company’s outcomes for this quarter. CEO Andy Jassy acknowledged the uncertainty surrounding tariffs and their possible effects on demand. He mentioned that, so far, there has been no noticeable decline in demand due to tariffs, and that Amazon has been working to stabilize prices for consumers.

The Impact of Tariffs

Amazon’s extensive e-commerce operations could face challenges due to President Donald Trump’s shifting tariff policies. The online store division is expected to generate approximately $58.98 billion in sales, with seller services predicted to contribute around $38.7 billion this quarter. Over recent months, analysts have noted that the tariff and geopolitical situation has improved, fostering a more optimistic outlook for the company’s upcoming report.

Deutsche Bank analysts pointed out that the domestic consumer environment has remained robust as concerns surrounding tariffs diminish, which has helped maintain consumer spending.

Competitive Landscape

Interestingly, the changing tariff landscape may have inadvertently benefited Amazon. Deutsche Bank highlighted that the company has captured a larger share of the U.S. e-commerce market, partly due to decreased competition from low-cost rivals like Shein and Temu. Both of these companies have struggled to maintain their market share after the administration changed regulations aimed at affordable imports and imposed increased tariffs on Chinese goods.

Looking Ahead: Third Quarter Guidance

Amazon’s guidance for the third quarter will offer insight into the company’s outlook regarding any ongoing tariff risks. Analysts project revenues to reach around $173.3 billion in the upcoming quarter.

In addition to retail operations, Amazon’s cloud service, AWS, is under close scrutiny. AWS experienced a year-over-year growth of 17% in the first quarter, but this fell short of analyst expectations, marking the slowest growth rate experienced in a year. Analysts anticipate similar growth patterns in the second quarter.

Jassy previously stated that AWS growth might have been faster without capacity constraints caused by shortages in AI chips and other vital components. Amazon has committed to an investment of up to $100 billion this year, primarily focused on AI initiatives for AWS.

The AI Revolution at Amazon

AI continues to transform various aspects of Amazon’s business. Recently, Amazon launched an upgraded version of its Alexa voice assistant equipped with AI enhancements. They have also established a new group dedicated to generative AI within its research and development sectors.

This technological shift is likely to impact Amazon’s workforce significantly. In a communication to employees, Jassy forecasted a reduction in the corporate workforce over the coming years as more AI tools are integrated into operations.

Stock Performance Compared to Peers

Despite heavy investments in artificial intelligence, Amazon’s stock performance has lagged behind other major tech companies this year. Amazon shares have risen by 5.4% year-to-date, while companies like Meta and Microsoft have seen increases close to 20%. In contrast, Apple’s stock has faced challenges, down approximately 15.5% this year.

Investors are keen to see how Amazon will balance its growth strategy amidst these changing dynamics. The forthcoming earnings report will be crucial in assessing the company’s ability to navigate these challenges and capitalize on opportunities in the retail and cloud sectors.