Amazon Q3 preview: Consumer spending trend, cloud business in focus
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When Amazon.com (NASDAQ:AMZN) reports quarterly results on Thursday, investors will keep an eye on consumer spending trends, at a time when the e-commerce giant’s retail business is experiencing slugging growth.
Wall Street expects the Seattle-based company to post EPS of $1.14, while revenue is expected to rise 9.9% to $157.28 billion during the quarter.
Amazon, in August, reported slowing online sales growth and said consumer are being careful with their spending. Finance chief Brian Olsavsky added that customers continue to trade down on price, leading to lower average selling prices, and warned that the trend is expected to continue in the third quarter.
The company also faces intense competition for its retail business from rivals including Walmart and Target, while its dominance in the e-commerce space is threatened by Chinese upstarts like Temu and Shein that are selling discounted, low-priced products to consumers.
However, analysts are positive on its cloud unit and advertising sales. Amazon Web Services grew 19% in the second quarter.
“We are forecasting a fifth straight quarter of accelerating AWS revenue growth as the business continues to benefit from growing AI workloads and increasing adoption of new gen AI capabilities like SageMaker and Bedrock,” said Canaccord Genuity analyst Maria Ripps.
When it comes to advertising, Ripps added that the brokerage expects continued high-teens y/y growth for the balance of the year but sees the potential for accelerating ad sales growth in FY25.
Over the last three months, EPS estimates have seen nine upward revisions, compared to 22 downward revisions, while revenue estimates have been revised upward eight times versus 30 downward moves.
Seeking Alpha analysts and Wall Street are bullish and rated the stock a Buy and above. However, Seeking Alpha’s Quant rating is cautious and consider it a Hold.
The stock has gained over 28% so far this year, outperforming the 22% rise in the broader S&P500 Index.