Amazon Stock Earnings Forecast: Keep An Eye On AWS And Revenue Growth

Press Room

1 year ago

Wall Street is awaiting Amazon’s
AMZN
third quarter earnings release with optimism. The tech giant’s previous earnings release was a surprising outperformance and investors want more of the same.

Read on for the details on when Amazon will report its earnings and which quarterly details could potentially move the company’s stock price.

Amazon Stock Key Metrics

Key metrics to watch in Amazon’s upcoming earnings release include revenue growth, AWS revenue, advertising revenue, operating income and diluted earnings per share (EPS).

Revenue Growth

Amazon is a growth stock, so Wall Street expects double-digit, year-over-year revenue increases. Without that ongoing growth performance, investors will be less willing to spend the premium required to buy AMZN.

Note that the stock currently trades at a P/E ratio of 105, which is Amazon’s highest P/E since 2017.

AWS Revenue

AWS is Amazon’s cloud computing business. The segment has historically been fast-growing and very profitable.

A year and a half ago, in the first quarter of 2022, Amazon delivered quarter-over-quarter AWS revenue growth of 37%, excluding foreign exchange impacts. Unfortunately, the growth has fallen every quarter since. Last quarter, AWS revenue grew just 12%. Investors are craving a return to AWS’ former growth rates.

Advertising Revenue

Advertising is an up-and-coming growth engine for Amazon. In recent quarters, Amazon’s advertising revenue growth has exceeded 20%. That outpaces advertising rivals Google
GOOG
and Facebook.

Operating Income

Amazon’s operating income was in steady decline from the first quarter of 2021 through the fourth quarter of 2022. The company has turned that trend around recently, notching large operating income increases in the first two quarters of this year. Cost-cutting efforts have been key. Investors expect efficiency gains to continue.

Diluted EPS

Diluted EPS is always a focus for investors, particularly for established companies. Amazon is no exception. While Wall Street was patient with Amazon in its early days when profits were elusive, that patience has run out. Case in point: Investors battered AMZN in October 2022 when the company beat analysts’ expectations but reported a quarter-over-quarter EPS decline of 8%.

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How Was Amazon’s Previous Earnings

Amazon’s second quarter, 2023 performance was strong. Key metrics included:

Revenue growth of 11%, from $121.2 billion in last year’s second quarter to $134.4 billion
AWS revenue of $22.1 billion, up 12% quarter over quarter
Advertising revenue $10.7 billion, up 22% quarter over quarter
Operating income of $7.7 billion, more than double the $3.3 billion earned in the prior-year quarter
Diluted EPS of $0.65, which nearly doubled the consensus estimate of $0.35

In prepared remarks, Amazon CEO Andy Jassy highlighted the effectiveness of ongoing cost efficiencies, record-fast delivery speeds for Prime members, stabilization of AWS growth and AWS investments that position the unit for increased growth going forward.

What Day And Time Does Amazon Report Earnings Next?

Amazon will report its third quarter 2023 earnings on Thursday, October 26. An earnings summary will be published to Amazon’s Investor Relations website after the market closes at 4:00 p.m. Eastern Time (ET). At 5:30 p.m. ET, Amazon will host a webcast to present the quarterly results and answer questions from analysts and institutional investors.

Amazon Stock Earnings Forecast

Amazon previously shared a third-quarter net revenue outlook of $138 billion to $143 billion, including a favorable foreign exchange impact. Those numbers translate to topline growth of 9% to 13% vs. the third quarter of 2022.

The company also provided an operating income guidance of $5.5 billion to $8.5 billion, which potentially triples the $2.5 billion earned in last year’s third quarter.

Wall Street’s expectations largely align with the official company guidance. On average, analysts expect quarterly revenue of $141 billion from Amazon, along with diluted EPS of $0.58. That EPS figure would more than double the $0.28 AMZN earned in the third quarter of 2022.

Given the effectiveness of Jassy’s cost-cutting, the prior quarter’s blowout results and Amazon’s own optimism, it’s hard not to be bullish about AMZN in the near-term. Although the company is likely to post an impressive EPS result in the third quarter, investors are anxious to evaluate performance in the higher-margin AWS and advertising segments. Here’s why:

Amazon has invested in AWS and its AI capabilities recently. Investors will want to see higher growth rates as a result.
Amazon has generated leading growth in its advertising business over the past year. That business now contributes more than $10 billion to the company’s net revenue.

Longer term, there are looming factors to consider before paying a steep premium to own AMZN, including:

Ongoing high interest rates: Amazon has blamed the slowdown in AWS growth on macroeconomic factors, saying its customers were cutting costs. The economy also affects e-commerce spending for Amazon. As is true for all the best consumer discretionary stocks, revenues rise in strong economies and shrink in weak ones.
Restart of student loan payments: After a hiatus related to the pandemic, federal student loan payments are resuming this month. This could impact spending power amongst younger shoppers, a key demographic for Amazon.
FTC lawsuit: The FTC filed an antitrust lawsuit against Amazon in September 2023.

Does Amazon Usually Go Up After Earnings?

Amazon’s stock price has declined within 24 hours of its earnings release in three of the last four quarters. Those declines align more with year-over-year earnings declines rather than missing EPS expectations.

Amazon fell short of Wall Street’s EPS expectations only in the fourth quarter of 2022, earning $0.03 vs. a $0.17 consensus. This result was 98% lower than the prior-year quarter. The stock immediately fell more than 8% and things got worse from there. AMZN didn’t recoup those losses for three months.

The next quarter tells a different story. Amazon earned $0.31 vs. the expected $0.21, logging a 182% year-over-year EPS increase. The stock price fell by nearly 4% one day after the release. The decline didn’t stick, however. Within two weeks, AMZN had recovered and made a rocky climb from about $105 per share to today’s price of about $131.

That type of volatility is typical of tech stocks. To learn more, see How to Invest in Tech Stocks. If you prefer assets with more stability, top consumer staple stocks may be a better fit.

Bottom Line

Amazon delivered a strong second quarter. Signs point to more of the same in the third quarter. The stock is already trading at a high multiple, though, and that may limit how high the stock price can go. Still, investors could push AMZN to a higher multiple if they see improved growth in AWS revenue, continued growth in advertising and very strong operating income.

AMZN Earnings FAQs

When Does Amazon Report Its Upcoming Earnings?

Amazon will report earnings for the third quarter of 2023 on Thursday, October 26, after the market closes at 4:00 p.m. ET. The release will be followed by a live webcast at 5:30 p.m. ET.

Where Does Amazon Release Its Earnings?

Amazon will publish its third quarter earnings overview on its Investor Relations website.

Can You Listen Or Watch Amazon’s Earnings Call?

You can listen to Amazon’s third quarter earnings call live or on replay. The live call will be accessible here at 5:30 p.m. ET on October 26. A replay plus the supporting presentation will be available at the same URL until January 26, 2024.

What is AMZN Stock’s Current Price Target?

As of October 13, the Wall Street Journal reports a consensus price target of $172.82 for Amazon. That equates to about 31% upside from AMZN’s current stock price of $132.33.