Amazon is set to report its first quarter earnings, with analysts keeping an eye on the company’s key profit drivers: advertising and cloud computing. Despite a drop in stock price throughout 2022, Amazon’s stock bounced back last year and continues to climb, trading at nearly $180/share. The company is coming off better-than-expected results in its holiday quarter, with analysts expecting double-digit growth in Amazon Web Services (AWS). Cloud providers are seeing increased demand for generative AI tools and services, with Amazon making an effort to appeal to AI application developers by offering access to a variety of AI models through its Bedrock managed services.
Amazon is expected to benefit significantly from generative AI cloud services in the coming years, with AWS seeing a rebound in profitability after a decline in mid-2022 to mid-2023. AWS reported profits of $7.2 billion on revenue of $24.2 billion in the fourth quarter, contributing significantly to Amazon’s overall business growth. Enterprise spending on cloud infrastructure was up 20% in the fourth quarter of last year, indicating continued growth in this area. Analysts are bullish about Amazon’s advertising business, citing growth in retail media advertising spend and the recent launch of Prime Video ads. The digital ad market is bouncing back after a difficult 2022, with advertising bringing in $14.6 billion in revenue in the fourth quarter, up 27%.
Amazon CFO Brian Olsavsky has emphasized the importance of advertising as a key part of the company’s business model. In addition to advertising and cloud computing, analysts will also be watching Amazon’s headcount, as the company laid off 27,000 employees last year and continues to cut from its corporate workforce. Amazon employed 1.52 million people as of September 30, down 1% year-over-year. Recent changes in U.S. third-party seller fees are expected to help drive substantial revenue for the company. Amazon is projected to report first quarter revenue of $142.7 billion and earnings per share of $0.83, compared to revenue of $127.4 billion and earnings per share of $0.31 in the year-ago quarter. Overall, analysts are optimistic about Amazon’s continued growth in its key profit drivers and expect a strong performance in the first quarter earnings report.
