Amazon is slated to report fourth-quarter earnings Thursday after the closing bell.
Here’s what analysts are projecting:
- Earnings per share: 80 cents, according to LSEG, formerly known as Refinitiv
- Revenue: $166.2 billion, according to LSEG
- Amazon Web Services: $24.2 billion, according to StreetAccount
- Advertising: $14.2 billion, according to StreetAccount
Amazon is expected to report a sizable spike in profits compared to last year’s holiday quarter, when the company was contending with higher costs tied to inflation, the war in Ukraine and supply chain constraints. At that time, Amazon was finishing up its slowest year of growth in the company’s history, with sales for the year increasing just 9.4%.
Since then, growth has reaccelerated and profits have rebounded, as Amazon CEO Andy Jassy has slashed costs dramatically and consumer spending has proven resilient. The company laid off more than 27,000 employees between late 2022 and mid-2023, and it has continued to cut roles this year. In January, Amazon said it would let go of employees across units like Prime Video, MGM Studios, Twitch, Audible and Buy with Prime.
“This may be a signal that, similar to Meta, Amazon is continuing its Years of Efficiency into ’24,” analysts at Evercore wrote in a Monday note. The firm has an outperform rating on Amazon’s stock.
Shares of Amazon rallied 77% in 2023, as Wall Street applauded Jassy’s belt-tightening efforts. The stock is up almost 4% so far this year, while the S&P 500 has gained about 2% over the same stretch.
Analysts expect net income of $8.4 billion, or 80 cents per share, for the period ended Dec. 31, compared to $278 million, or 3 cents per share, a year earlier. Revenue is projected to expand 11.4% during the quarter. Although that’s slower than the growth rate for the third quarter, it’s an acceleration from the year-ago period when sales climbed just over 8%.
The quarter will include results from the holiday shopping season and Amazon’s October Prime Day deals event. Holiday sales online and in brick-and-mortar stores rose 3.8% year over year to $964.4 billion, according to the National Retail Federation, coming in at the high end of its prior expectation of a rise between 3% and 4%.
Wall Street will be focusing on growth rates in Amazon’s cloud computing unit, where revenue is expected to increase roughly 13% year over year, which is slightly faster than the previous quarter, when it showed growth of 12%.
For the past year, growth in AWS has decelerated, as businesses trimmed their cloud spend. But Amazon executives signaled some improvement in last quarter’s earnings call, with CFO Brian Olsavsky telling reporters in October the company was “starting to see more and more new workloads come up.”
Analysts are optimistic that AWS will benefit from strong demand for generative artificial intelligence, as companies increasingly require more compute power and infrastructure to run AI models. In November, Amazon launched “Q,” an AI chatbot for businesses, as well as new Trainium chips for AI applications. It also operates Bedrock, a generative AI service for AWS customers.
Amazon’s other high-margin business, advertising, will also be a key area to watch, with revenue projected to grow 23% to $14.2 billion. This week, Amazon joined streaming peers like Netflix, Disney‘s Hulu and Warner Bros. Discovery‘s Max by introducing ads to Prime Video programming.
Analysts at Citi, who have a buy rating on Amazon shares, forecast Prime Video ads to generate at least $5 billion of “incremental revenue over time,” the firm wrote in a Tuesday note.
Amazon will discuss the report on a conference call with analysts at 5:30 p.m. ET.