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Key Takeaways
- Investors will be focused on Amazon’s cloud business and AI investments when the e-commerce giant reports third-quarter earnings after the closing bell on Thursday.
- Amazon’s second-quarter cloud growth disappointed Wall Street after big beats from competitors Alphabet and Microsoft, both of which reported strong results on Wednesday.
- Options pricing suggests some traders expect Amazon stock to set its first record high since early February if Wall Street likes Thursday’s results.
Amazon is scheduled to report third-quarter earnings after markets close on Thursday, and all eyes are likely to be on the e-commerce giant’s cloud business.
Amazon is expected to report third-quarter revenue of about $178 billion, a 12% increase from last year, according to analyst estimates compiled by Visible Alpha. Adjusted earnings are expected to hold steady at $1.95 a share.
While Amazon’s e-commerce operation makes up the bulk of its business, investors will be most focused on its AI efforts, represented by cloud revenue and capital expenditures. Amazon’s cloud growth of 17.5% in the second quarter exceeded official expectations, but disappointed Wall Street after two blowout reports from competitors Microsoft (MSFT) and Alphabet (GOOG). On Wednesday, both of those companies again posted cloud revenue well ahead of Wall Street’s estimates, setting another high bar for Amazon to clear.
Why This Is Important
Amazon’s array of businesses spans e-commerce, logistics, advertising, cloud computing and more, making its results a partial reflection of the financial health of U.S. consumers and businesses. Its market capitalization—well over $2 trillion as of midday Thursday—makes its stock one of the most influential in the stock market.
Investors may also be primed for Amazon to increase its capital expenditures guidance after Alphabet and Meta Platforms (META) did so with their reports Wednesday. Amazon’s second-quarter capex of $32.2 billion was about 25% higher than analysts expected. Wedbush analysts expect Amazon’s full-year capex to total $119 billion, implying growth of about 10% between the first and second halves of this year.
“We are constructive on the setup leading into the report given positive commentary around [Amazon Web Services] growth, healthy trends for the core retail business, and strong advertiser demand,” wrote Wedbush analysts in a note late last week.
What Earnings Could Mean For Amazon Stock
Amazon stock has been the laggard of the Magnificent Seven recently, with shares up just 3% since the start of the year. Concerns about tariffs and lagging cloud growth have weighed on the stock.
Some investors see the potential for shares to close the gap with the rest of the Mag 7 after earnings. Options prices on Thursday morning suggest traders expect Amazon stock to move about 6.3% in either direction by end of the week. A move higher off of Wednesday’s closing price would put shares around $244.75, which would be their first all-time high since early February, while an equivalent decline would put the stock at about $216.
Wall Street is generally bullish on the outlook for Amazon stock, with all 22 of the analysts with current ratings tracked by Visible Alpha assigning it a “Buy” rating. Their median price target of $270 is nearly 20% above the stock’s intraday price on Thursday.
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