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WHAT YOU NEED TO KNOW AHEAD OF AMAZON'S EARNINGS THURSDAY


By
Aaron McDade

Full Bio
 * 
 * 

Aaron McDade is a breaking news reporter for Investopedia. He is an experienced
journalist who has covered everything from the latest in business and tech news
to sports and international news like the war in Ukraine for respected outlets
like Business Insider and Newsweek.
Learn about our editorial policies
Published October 28, 2024
05:00 AM EDT
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Bloomberg / Contributor / Getty Images


KEY TAKEAWAYS

 * Amazon reports earnings after the market closes Thursday, with analysts
   expecting profits to fall from the prior quarter but rise from a year ago.
 * Investors will likely be watching the tech giant's margins amid concerns
   consumer weakness, growing labor costs, and higher spending on artificial
   intelligence could squeeze profits.
 * Analysts have suggested Amazon's high-margin advertising revenue and AWS
   growth could help offset the costs.

Amazon (AMZN) reports earnings after the bell Thursday, with investors likely to
be watching the tech giant's margins amid concerns consumer weakness, growing
labor costs, and higher spending on artificial intelligence (AI) could squeeze
profits.1



Amazon shares took a hit after the company released its second-quarter report in
July, as its quarterly sales and outlook missed expectations. Since then, shares
have largely recovered to their level before the report, leaving them about 24%
higher for the year so far at $187.83 as of Friday's close.



Analysts expect Amazon's third-quarter revenue to come in at $157.24 billion, up
from the prior quarter and year-ago period. However, profits are projected to
fall sequentially to $12.32 billion as expenses climb, despite rising roughly
25% year-over-year.2



Analyst Estimates for Q3 2024 Q2 2024 Q3 2023 Revenue $157.24 billion $147.98
billion $143.08 billion Earnings Per Share $1.15 $1.26 94 cents Net Income
$12.32 billion $13.49 billion $9.88 billion




KEY METRICS: AWS, ADVERTISING REVENUE

Amazon Web Services (AWS) and a growing advertising business for showing ads on
Prime Video have been key sources of revenue growth so far this year. A
migration to cloud storage and growing use of AI products have helped boost AWS
revenue. Jefferies analysts said recently their checks suggest growing AWS
revenue in the third quarter.3



The analysts also said they have seen "solid & improving" demand for ad spending
with Amazon. Wedbush analysts said they believe high-margin ad revenue could
help offset big spending from Amazon to fuel its AI efforts, along with things
like Project Kuiper, its planned satellite broadband project.4




BUSINESS SPOTLIGHT: RETURNS ON AI SPENDING

A number of big tech companies including Amazon face pressure from investors to
show that their spending on AI is paying off. Amazon CEO Andy Jassy said in the
company's first-quarter earnings call that it wouldn't be spending so much on AI
if it didn't see "very clear signals" that Amazon could monetize it.



JPMorgan analysts told clients earlier this month it will be important for
Amazon, along with Google parent Alphabet (GOOGL) and Meta Platforms (META) to
"highlight their early returns on AI spending" in their coming earnings calls.5

Do you have a news tip for Investopedia reporters? Please email us at
tips@investopedia.com
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Article Sources

Investopedia requires writers to use primary sources to support their work.
These include white papers, government data, original reporting, and interviews
with industry experts. We also reference original research from other reputable
publishers where appropriate. You can learn more about the standards we follow
in producing accurate, unbiased content in our editorial policy.

 1. Amazon. "Amazon.com to Webcast Third Quarter 2024 Financial Results
    Conference Call."

 2. Amazon. "Amazon.com Announces Third Quarter Results."

 3. Jefferies. "Q3 Preview: Margin Compression on Everyone's Mind; Can AMZN
    Deliver?"

 4. Wedbush. "3Q24 Preview: Don't Lose The Forest For The Trees."

 5. JPMorgan. "3Q24 Preview: Solid Underlying Trends w/Support From Stable
    Macro; Focus on Continued Heavy Capex Spending, Gen AI Returns, & 2025
    Growth Outlook; AMZN, META, UBER Remain Top Picks."

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