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What You Need To Know Ahead of Amazon’s Earnings Report Tuesday

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Key Takeaways

  • Amazon reports first-quarter results after the bell Tuesday, with analysts expecting jumps in net sales and profit.
  • CEO Andy Jassy published his annual letter to shareholders earlier this month, expressing his excitement about the future of artificial intelligence (AI) and outlining where Amazon’s different divisions could see growth in 2024.
  • Investors and analysts will be watching for updates on the rollout of ads on Prime Video, as well as insights into Amazon’s AI plans.

Amazon (AMZN) is set to report first-quarter earnings after markets close Tuesday, days after announcing a new grocery delivery subscription service and expansions to its artificial intelligence (AI) tools.

Analysts expect Amazon will significantly increase its revenue and profit year-over-year, with net income projected to rise to $8.98 billion, or 84 cents per share, more than double the $3.17 billion and 31 cents per share it reported in the first quarter of 2023, according to consensus estimated compiled by Visible Alpha. Total net sales of $142.59 billion are predicted, up from $127.36 billion a year ago.

The e-commerce and web hosting giant announced a pair of initiatives a week before the earnings report, a grocery delivery subscription service and new tools in its Amazon Bedrock product, which offers building blocks for customers to make personalized AI tools.

Bank of America Securities analysts wrote in a recent note that the subscription service could compete with Instacart for new customers in the grocery delivery space, as well as similar offerings from programs like Walmart+ and Target Circle.

  Analyst Estimates for Q1 2024 Q4 2023 Q1 2023
Revenue $142.59 billion $169.96 billion $127.36 billion
Diluted EPS 84 cents $1.00 31 cents
Net Income $8.98 billion $10.62 billion $3.17 billion

Key Metric: Advertising Revenue

One metric analysts have noted as a potential point of substantial growth for Tuesday’s report is Amazon’s advertising business, which could post billions of dollars in additional revenue over time as the company continues the rollout of ads on Prime Video that it started earlier this year.

Wedbush Securities analysts wrote in a Tuesday note that ads on Prime Video could generate about “$6.5B of incremental revenue” once it is fully in place across the world. They also wrote that in a recent survey, about 56% of respondents said they increased their ad spend on Amazon by at least 10% year-over-year in the first quarter, with a quarter saying they increased spend by more than 20%.

Nearly all the advertisers surveyed told Wedbush they planned to increase their budget for Amazon ads at some point this year, leading the analysts to project Amazon’s advertising revenue to grow 24.5% from the first quarter of 2023, and 23% by the end of the full fiscal year.

Amazon Chief Executive Officer (CEO) Andy Jassy said in his shareholder letter earlier this month that he has confidence that Prime Video can grow into a large and profitable business on its own, saying streaming advertising was “growing quickly and off to a strong start.”

Business Spotlight: Continued Rise of AI

Jassy and JPMorgan Chase CEO Jamie Dimon spent a significant portion of their annual letters to investors expressing their excitement about the future of AI and the impact it could have on their businesses. AI is also a central theme for quarterly reports this week, with earnings from Meta Platforms (META), Google parent Alphabet (GOOGL), and Microsoft (MSFT).

Jassy wrote that he thinks AI could be the “largest technology transformation since the cloud (which itself, is still in the early stages), and perhaps since the Internet.”

Jassy said in the shareholder letter that the AI boom across the market could benefit his company in a number of ways, from increased demand for Amazon Web Services (AWS) to Amazon’s Bedrock AI-platform building tool, as well as Amazon Q, its AI-powered coding assistant. Amazon has said previously that there are “tens of thousands” of customers using Bedrock currently, including Delta Air Lines (DAL), Intuit (INTU), and Pfizer (PFE).

Wedbush analysts said that they project AWS to be “a primary beneficiary of generative AI and the company is well positioned with solutions for all layers of the genAI stack.”

Amazon shares have gained 62% in the last 12 months amid a larger boom in AI-related tech stocks. However, Thursday afternoon Amazon, in line with other Big Tech decliners related to earnings news, was off 2% at $172.91 at 1:40 p.m. ET.

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