Amazon is scheduled to report quarterly results after the bell on Tuesday, continuing a wave of Big Tech earnings that have so far surprised Wall Street, but also warning of some impatience with big AI spending. ing. The company is expected to provide updates on the progress of its AI development, the status of its profitable cloud business, and the growth of its advertising segment.
Amazon's report will be released a week after cloud rival and AI competitor Microsoft (MSFT) had a stellar quarter, beating expectations on strong cloud computing business. The market cheered even louder at Google's parent company Alphabet's (GOOG, GOOGL) earnings results. The results, which included higher sales and bottom line profits, also announced a new dividend, the latest trend among tech giants.
Here's what Wall Street is expecting on some of the most important metrics for Amazon's fiscal fourth quarter.
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Revenue: $142.6 billion expected ($127.4 billion in Q1 2023)
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Adjusted earnings per share: Forecast $0.82 ($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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Advertisement: Expected $11.8 billion ($9.5 billion in Q1 2023)
Amazon sees its AI efforts as potentially generating tens of billions of dollars for its cloud business. “Generative AI may be the biggest technology transformation since the cloud (which itself is still in its infancy) and perhaps since the Internet,” CEO Andy Jassy said in his annual letter to shareholders earlier this month. I can't do it.''
Amazon, which has established itself as a leader in AI, is another player in the race to gain market share and launch new consumer services. In March, Amazon increased its investment in AI startup Anthropic with an additional $2.75 billion, bringing its total investment to $4 billion.
Like its rivals Microsoft and Alphabet, Amazon has become a dominant force in the cloud computing business, giving it an edge in the nascent AI market. AI tools require large amounts of data and processing power to train and run large language models and their applications, and rely on cloud providers to supply critical infrastructure.
Like other deals between tech giants and AI-focused companies, Amazon and Anthropic's partnership includes the promise of access to the company's cloud computing services as they seek to dominate the coming AI era. The superiority of trillion-dollar companies has become clear.
Amazon is the largest player in the cloud industry. Amazon Web Services accounts for about 30% of the market share, followed by Microsoft Azure and Google Cloud. Together, these three companies account for approximately two-thirds of the market.
In September, Amazon launched an AI service called Amazon Bedrock. This will allow customers to build generative AI applications through existing models provided by his Anthropic, Stability AI, and Amazon itself.
But Amazon's efforts to advance AI also come amid downsizing.
Amazon announced earlier this month that it would cut hundreds of jobs at AWS as it showed signs of slowing sales in its most profitable business.
The latest job cuts come as the company deals with other setbacks. Amazon has moved to abolish the cashier-less checkout system at its Amazon Fresh supermarkets in the United States.
The retail giant is facing increasing competition in its home territory. E-commerce companies Temu and Shein pose a growing threat to Amazon's online shopping empire.
Analysts point to other areas of growth as bright spots for Amazon. The company's advertising business has a market share of about 15%, ranking it third behind long-time digital advertising leaders Google and Meta (META).
Evercore ISI analysts said in a preview note Sunday that the company's nascent Prime Video advertising business has significant growth potential. They cited Amazon's vast resources, trove of consumer data, and Prime Video's broad reach as factors that could drive the expansion of new advertising platforms. Amazon rolled out ad-supported plans to viewers in January.
Amazon's earnings report is expected to be released just before the end of the Fed's May policy meeting. Markets widely expect the central bank to keep interest rates unchanged. But new hints about when the Fed will start cutting rates, if they do at all, will have an impact on Amazon and other major tech stocks that have been driving this month's rally.
The company's stock, which joined the Dow Jones Industrial Average (^DJI) in February, is up about 20% for the year. It was little changed in premarket trading Tuesday.
Hamza Shaban is a reporter for Yahoo Finance, covering markets and economics. Follow Hamza on Twitter @hshaban.
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