Amazon is scheduled to post quarterly earnings after the bell on Tuesday, continuing a wave of Big Tech results that have so far wowed Wall Street but also flashed a warning of some impatience with heavy AI spending. The company is expected to offer updates on the progress of its AI development, the state of its lucrative cloud business, and the growth of its advertising segment.
Amazon’s report will arrive a week after its cloud rival and AI competitor Microsoft (MSFT) posted an impressive quarter, beating expectations on the strength of its cloud computing business. The market cheered even louder for Google parent Alphabet’s (GOOG, GOOGL) results, which outperformed on the top and bottom lines and came with an announcement of a new dividend, the latest in a trend among tech giants.
Here’s what Wall Street is expecting for some of Amazon’s most significant metrics in the company’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: $0.82 expected ($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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Advertising: $11.8 billion expected ($9.5 billion in Q1 2023)
Amazon sees the potential for AI initiatives to generate tens of billions of dollars for its cloud business. CEO Andy Jassy said in an annual letter to shareholders earlier this month, “Generative AI may be the largest technology transformation since the cloud (which itself, is still in the early stages), and perhaps since the Internet.”
Amazon, which has positioned itself as an AI leader, is another player in the race to claim market share and launch new consumer services. In March, Amazon increased its investment in the AI startup Anthropic, pouring in another $2.75 billion to bring its investment total to $4 billion.
Like its competitors Microsoft and Alphabet, Amazon is wielding its heft in its cloud computing business to gain an edge in the nascent AI market. AI tools require huge amounts of data and processing power to train and run large language models and their applications, relying on cloud providers to supply vital infrastructure.
Similar to other deals between tech giants and AI-focused companies, Amazon’s partnership with Anthropic comes with a commitment to use its cloud computing services — highlighting an advantage of trillion-dollar companies as they attempt to dominate the coming AI era.
Amazon is the biggest player in the cloud industry. Amazon Web Services claims about 30% of market share, followed by Microsoft Azure and Google Cloud. The trio collectively account for roughly two-thirds of the market.
In September, Amazon launched its AI service, called Amazon Bedrock, allowing customers to build generative AI applications through existing models offered by Anthropic, Stability AI, and Amazon itself.
But Amazon’s commitment to AI progress has also come amid downsizing.
Amazon said earlier this month it’s cutting hundreds of jobs in AWS as its most profitable business shows signs of slowing sales.
The latest round of cuts arrived as the company dealt with other setbacks. Amazon moved to end its cashier-less checkout systems at its Amazon Fresh supermarkets in the US.
The retail giant is also drawing increasing competition on its home turf. E-commerce companies Temu and Shein pose growing threats to Amazon’s empire of online shopping.
Analysts point to other areas of growth as bright spots for Amazon. At nearly 15% market share, the company’s advertising business claims the No. 3 spot behind longtime digital ad leaders Google and Meta (META).
The company’s nascent Prime Video ads business has major potential for growth, Evercore ISI analysts wrote in a preview note Sunday. They pointed to Amazon’s vast resources, troves of consumer data, and Prime Video’s broad reach as factors that could drive the new ad platform’s expansion. Amazon rolled out an ad-supported plan to audiences in January.
Amazon’s earnings report will arrive just before the conclusion of the Fed’s May policy meeting. The market widely expects the central bank to hold interest rates steady. But new hints at when the Fed might start easing rates, if at all, will have an impact on Amazon and other major tech stocks that have powered this month’s equity rally.
The company’s stock, which joined the Dow Jones Industrial Average (^DJI) in February, is up about 20% for the year.
Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on Twitter @hshaban.
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