Wall Street waits from Amazon
AMZN
publication of third quarter results with optimism. The tech giant’s previous earnings release was a surprising outperformance and investors are keen to know more.
Read on to find out when Amazon will report earnings and what quarterly details could potentially move the company’s stock price.
Key Amazon Stock Metrics
Key metrics to watch in Amazon’s upcoming earnings release include revenue growth, AWS revenue, advertising revenue, operating profit, and diluted earnings per share (EPS).
Increase in income
Amazon is a growth stock, so Wall Street expects double-digit year-over-year revenue increases. Without this continued growth, investors will be less willing to spend the premium required to purchase AMZN.
Note that the stock is currently trading 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 experienced rapid and highly profitable growth.
A year and a half ago, in the first quarter of 2022, Amazon book Quarterly AWS revenue growth of 37%, excluding currency effects. Unfortunately, since then, growth has declined every quarter. Last quarter, AWS revenue grew just 12%. Investors are yearning for a return to AWS’s former growth rates.
Advertising revenue
Advertising is a promising growth engine for Amazon. In recent quarters, Amazon’s advertising revenue growth has exceeded 20%. This exceeds advertising rivaling Google
GOOG
Operating profit
Amazon’s operating profit saw a steady decline from the first quarter of 2021 to the fourth quarter of 2022. The company recently reversed this trend, recording large increases in operating profit during the first two quarters of this year. Cost reduction efforts have been essential. Investors expect efficiency gains to continue.
Diluted EPS
Diluted EPS is always a priority for investors, especially for established companies. Amazon is no exception. While Wall Street showed patience with Amazon in its early days, when profits were elusive, that patience has run out. Case in point: Investors gave AMZN a hard time in October 2022, when the company beat analyst expectations but reported an 8% quarter-over-quarter EPS decline.
From healthcare to retail, finance to education… AI is the catalyst for innovation across major industries. Light up your wallet—get the names of the leading companies driving the AI revolution in this exclusive report from Forbes, 12 Best AI Stocks to Buy Now.
What were Amazon’s previous profits
Amazon’s performance in the second quarter of 2023 was strong. Key indicators included:
- Revenue growth of 11%, from $121.2 billion in the second quarter of last year to $134.4 billion.
- AWS revenue of $22.1 billion, up 12% quarter over quarter
- Advertising revenue of $10.7 billion, up 22% quarter over quarter
- Operating profit of $7.7 billion, more than double the $3.3 billion earned in the year-ago quarter
- Diluted EPS of $0.65, almost double the consensus estimate of $0.35.
In prepared remarks, Amazon CEO Andy Jassy highlighted the effectiveness of continued cost savings, record delivery speeds for Prime members, stabilizing AWS growth, and AWS investments that position the unit for increased growth in the future.
What day and time will Amazon report earnings next?
Amazon will report its third quarter 2023 results on Thursday, October 26. A summary of the results will be posted on 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 quarterly results and answer questions from analysts and institutional investors.
Amazon Stock Profit Forecast
Amazon previously announced a third-quarter net revenue outlook of between $138 billion and $143 billion, including a favorable foreign exchange impact. These figures translate into revenue growth of 9% to 13% compared to the third quarter of 2022.
The company also provided operating profit guidance of $5.5 billion to $8.5 billion, which could triple the $2.5 billion earned in the third quarter of last year.
Wall Street’s expectations largely align with the company’s official guidance. On average, analysts expect Amazon’s quarterly revenue of $141 billion, along with diluted EPS of $0.58. This per EPS figure would more than double the $0.28 AMZN earned in Q3 2022.
Given the effectiveness of Jassy’s cost cuts, the previous quarter’s stellar results, and Amazon’s optimism, it’s hard not to be bullish on AMZN in the near term. Although the company is likely to post impressive third-quarter earnings per share, investors are eager to gauge performance in the higher-margin AWS and advertising segments. Here’s why:
- Amazon has recently invested in AWS and its AI capabilities. As a result, investors will want to see higher growth rates.
- Amazon has generated significant growth in its advertising business over the past year. This business now contributes more than $10 billion to the company’s net revenue.
Longer term, there are imminent factors to consider before paying a high premium to own AMZN, including:
- Interest rates still high: Amazon blamed AWS’ slowing growth on macroeconomic factors, saying its customers were cutting costs. The economy is also affecting Amazon’s e-commerce spending. As is the case with all the best consumer discretionary stocks, earnings rise in strong economies and fall in weak economies.
- Resumption of student loan payments: After a pandemic-related hiatus, federal student loan payments resume this month. This could impact the purchasing power of younger shoppers, a key demographic for Amazon.
- FTC Lawsuit: The FTC filed an antitrust complaint against Amazon in September 2023.
From healthcare to retail, finance to education… AI is the catalyst for innovation across major industries. Light up your wallet—get the names of the leading companies driving the AI revolution in this exclusive report from Forbes, 12 Best AI Stocks to Buy Now.
Does Amazon usually grow after earnings?
Amazon’s stock price fell within 24 hours of its earnings release in three of the last four quarters. These declines are more consistent with a year-over-year decline in earnings rather than EPS missing expectations.
Amazon missed Wall Street’s EPS expectations only in Q4 2022, earning $0.03 versus consensus of $0.17. This result is 98% lower than the previous year’s quarter. The stock immediately fell more than 8% and it got worse from there. AMZN did not recover these losses for three months.
The next quarter tells a different story. Amazon gained $0.31 versus $0.21 expected, reporting a 182% year-over-year EPS increase. The stock price fell nearly 4% a day after the release. The decline, however, did not persist. In two weeks, AMZN recovered and made an uphill climb from around $105 per share to the current price of around $131.
This type of volatility is typical of technology stocks. To learn more, see How to Invest in Tech Stocks. If you prefer more stable assets, major consumer staples stocks might be a better fit.
Conclusion
Amazon had a strong second quarter. The signs point to a similar situation in the third trimester. However, the stock is already trading at a high multiple, which may limit the possible upside in the stock price. Still, investors could push AMZN toward a higher multiple if they see better revenue growth from AWS, continued advertising growth, and very strong operating profit.
AMZN Profits FAQ
When does Amazon report its next earnings?
Amazon will report its third quarter 2023 results on Thursday, October 26, after the market closes at 4 p.m. ET. The release will be followed by a live webcast at 5:30 p.m. ET.
Where does Amazon report its profits?
Amazon will release its third-quarter earnings preview on its Investor Relations Site.
Can you listen to or watch Amazon’s earnings call?
You can listen to Amazon’s third quarter earnings call live or in replay. The live call will be accessible here at 5:30 p.m. ET on October 26. A replay as well as the supporting presentation will be available at the same URL until January 26, 2024.
What is the current price target for AMZN stock?
As of October 13, THE Wall Street Journal reports a consensus price target of $172.82 for Amazon. This equates to an upside of approximately 31% from AMZN’s current stock price of $132.33.
Read next
From healthcare to retail, finance to education… AI is the catalyst for innovation across major industries. Light up your wallet—get the names of the leading companies driving the AI revolution in this exclusive report from Forbes, 12 Best AI Stocks to Buy Now.