Amazon is set to release its first-quarter earnings report after the closing bell on Tuesday. According to LSEG, analysts are expecting earnings per share of 83 cents and revenue of $142.5 billion. This report will provide insight into several key areas, including:
– Amazon Web Services revenue of $24.5 billion
– Advertising revenue of $11.7 billion
Analysts predict a 12% revenue growth for Amazon in the first quarter. This would mark the fourth consecutive quarter of double-digit expansion, showing a slight increase from the previous year. The rapid growth in earnings can be attributed to cost-cutting initiatives, improvements in fulfillment operations, and stabilization in cloud spending. StreetAccount estimates an operating income of $11.2 billion, up more than 130% from the same period last year.
Strategic Changes Under CEO Andy Jassy
Under the leadership of CEO Andy Jassy, Amazon has implemented more disciplined spending practices while focusing on profitable ventures such as advertising, cloud computing, Prime memberships, and the third-party marketplace. The company has downsized its workforce by more than 27,000 employees since late 2022, with additional layoffs occurring in the first quarter of this year. These strategic shifts have resulted in significant stock price growth, with Amazon shares rising 75% in the previous year and gaining 19% year-to-date.
Amazon Web Services Growth
Analysts anticipate a 12% increase in Amazon Web Services revenue, slightly slower than the previous quarter but a notable improvement from the same period in 2023. The company’s executives have expressed optimism about the demand for generative artificial intelligence technology, which is expected to drive growth in AWS. This sentiment was reinforced in Jassy’s recent letter to shareholders.
Advertising is another area of interest, with expected revenue growth of over 23% to reach $11.7 billion. Recent earnings reports from digital advertising competitors like Meta, Google, and Snap have exceeded analysts’ expectations. Wedbush analysts foresee strong growth in Amazon’s advertising business for the first quarter and anticipate sustained spending throughout 2024. They believe Amazon has significant untapped potential in the digital ad market, including off-platform advertising, Prime Video ad monetization, and sponsored product growth driven by the ongoing shift to e-commerce.
Potential for Dividend Announcement
There is speculation about whether Amazon will follow its tech counterparts in declaring its first-ever dividend. Google’s parent company Alphabet recently issued its inaugural dividend, and Meta authorized its first dividend in February. Amazon closed 2023 with $73.4 billion in cash and equivalents, raising the possibility of a dividend announcement. Investors will be keen to hear more about this during the conference call scheduled for 5:30 p.m. ET following the earnings report release.
Amazon’s first-quarter earnings report is highly anticipated by investors and analysts alike. The company’s strategic shifts, revenue growth projections, and the possibility of a dividend announcement will be closely scrutinized to gauge Amazon’s financial performance and future prospects.
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