Amazon is expected to report its quarterly results after the bell on Tuesday, continuing a wave of Big Tech results that have so far thrilled Wall Street but also signaled a warning of some impatience over heavy AI spending. The company is expected to provide updates on the progress of its AI development, the status of its lucrative cloud business and the growth of its advertising segment.
Amazon’s report comes a week after its cloud rival and AI competitor Microsoft (MSFT) posted an impressive quarter, beating expectations on the strength of its cloud computing business. The market cheered even louder over Google parent Alphabet’s (GOOG, GOOGL) results, which beat both revenue and profit and were accompanied by the announcement of a new dividend, the latest trend among tech giants.
Here’s what Wall Street expects for some of Amazon’s key metrics in the company’s fourth fiscal quarter:
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Revenue: $142.6 billion expected ($127.4 billion in Q1 2023)
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Adjusted EPS: $0.82 expected ($0.31 in Q1 2023)
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Online stores: $54.8 billion expected ($51.1 billion in Q1 2023)
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Amazon Web Services: $24.1 billion expected ($21.4 billion in Q1 2023)
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Advertising: $11.8 billion expected ($9.5 billion in Q1 2023)
Amazon sees the potential for AI initiatives to generate tens of billions of dollars for its cloud business. CEO Andy Jassy said in an annual letter to shareholders earlier this month: “Generative AI could be the biggest technology transformation since the cloud (which itself is still in its infancy) and perhaps since the internet.”
Amazon, which has positioned itself as the AI leader, is another player in the race for market share and the launch of new consumer services. In March, Amazon increased its investment in AI startup Anthropic, investing an additional $2.75 billion, bringing its total investment to $4 billion.
Like its rivals Microsoft and Alphabet, Amazon is using its clout in the cloud computing business to gain an edge in the emerging AI market. AI tools require massive amounts of data and computing power to train and run large language models and their applications and rely on cloud providers to provide critical infrastructure.
Similar to other deals between tech giants and AI-focused companies, Amazon’s partnership with Anthropic comes with a commitment to use its cloud computing services – highlighting an advantage for trillion-dollar companies as they seek to capitalize on the coming AI to dominate the era.
Amazon is the largest player in the cloud industry. Amazon Web Services claims about 30% of the market share, followed by Microsoft Azure and Google Cloud. The trio together makes up around two thirds of the market.
In September, Amazon launched its AI service called Amazon Bedrock, which allows customers to build generative AI applications using existing models from Anthropic, Stability AI and Amazon itself.
But Amazon’s commitment to AI advancements also comes from downsizing.
Amazon announced earlier this month that it was cutting hundreds of jobs at AWS as its most profitable business showed signs of slowing sales.
The latest round of cuts came as the company faced other setbacks. Amazon has decided to eliminate its cashierless checkout systems at its Amazon Fresh supermarkets in the US.
The retail giant is also attracting increasing competition in its home country. E-commerce companies Temu and Shein pose a growing threat to Amazon’s online shopping empire.
Analysts see other growth areas as bright spots for Amazon. With a market share of nearly 15%, the company’s advertising business ranks third behind long-time digital advertising leaders Google and Meta (META).
The company’s emerging Prime Video advertising business has great growth potential, analysts at Evercore ISI wrote in a preview note on Sunday. They pointed to Amazon’s vast resources, wealth of consumer data and Prime Video’s wide reach as factors that could drive the new advertising platform’s expansion. Amazon launched an ad-supported plan for its audience in January.
Amazon’s earnings report will arrive shortly before the Fed’s policy meeting concludes in May. The market generally expects the central bank to keep interest rates stable. But new clues about when the Fed might start cutting interest rates, if ever, will have implications for Amazon and other big technology stocks that have driven this month’s stock rally.
The company’s stock, which was added to the Dow Jones Industrial Average (^DJI) in February, is up about 20% for the year.
Hamza Shaban is a reporter for Yahoo Finance covering markets and economics. Follow Hamza on Twitter @hshaban.
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