Amazon will report quarterly earnings after the bell on Tuesday, continuing a wave of Big Tech results that have so far stunned Wall Street but also signaled a warning against any impatience with heavy AI spending. The company is expected to provide 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 comes a week after its cloud rival and AI competitor Microsoft (MSFT) posted an impressive quarter, exceeding expectations for the strength of its cloud computing business. The market cheered even louder due to the results of Google parent Alphabet (GOOG, GOOGL), which outperformed at both the top and bottom levels and announced a new dividend, the latest in a trend among tech giants.
Here’s what Wall Street expects for some of Amazon’s key numbers in the company’s fourth fiscal 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 could be the biggest technology transformation since the cloud (which is still in its 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 AI startup Anthropic, pouring in another $2.75 billion, bringing its investment total to $4 billion.
Like its competitors Microsoft and Alphabet, Amazon is wielding its power in its cloud computing business to gain an edge in the emerging AI market. AI tools require enormous amounts of data and processing power to train and run large language models and their applications, relying on cloud providers to provide essential infrastructure.
As with 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 seeking to dominate the coming AI era.
Amazon is the largest player in the cloud industry. Amazon Web Services claims about 30% of the market share, followed by Microsoft Azure and Google Cloud. Together the trio accounts for roughly two-thirds of the market.
In September, Amazon launched its AI service, called Amazon Bedrock, which allows customers to build generative AI applications via existing models offered by Anthropic, Stability AI and Amazon itself.
But Amazon’s commitment to AI advancements has also come amid a downsizing.
Amazon said earlier this month it is cutting hundreds of jobs at AWS as its most profitable company shows signs of slowing sales.
The latest round of cuts came as the company faced other setbacks. Amazon has decided to end its cashierless checkout systems at its Amazon Fresh supermarkets in the US.
The retail giant is also facing increasing competition on its own territory. E-commerce companies Temu and Shein pose a growing threat to Amazon’s online shopping empire.
Analysts point to other growth areas as bright spots for Amazon. With a market share of almost 15%, the company’s advertising arm claims third place behind legacy digital advertising leaders Google and Meta (META).
The company’s emerging Prime Video advertising business has strong growth potential, Evercore ISI analysts wrote in a preview note on Sunday. They pointed to Amazon’s vast resources, vast amount of consumer data and Prime Video’s broad reach as factors that could fuel the new advertising platform’s expansion. Amazon rolled out an ad-supported plan to the public in January.
Amazon’s earnings report will be released just before the close of the Fed’s May policy meeting. The market generally expects the central bank to keep interest rates stable. But new clues about when the Fed could start easing rates, if at all, will impact Amazon and other big tech stocks that have driven this month’s stock rally.
The company’s shares, which joined the Dow Jones Industrial Average (^DJI) in February, are up about 20% this year.
Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on Twitter @hshaban.
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