Amazon is scheduled to announce its first quarter results after the U.S. market closes on April 30th. The e-commerce giant is expected to showcase AI-powered cloud his business advances.
advertisementThe US earnings season has revolved around AI advances at big tech companies. Microsoft, Alphabet, and Meta are all showing that their heavy investments in AI are starting to pay off, as evidenced by their strong quarterly revenues. As a result, the focus of Amazon's upcoming earnings report will likely be on its AI-powered business, AWS, and its rapidly expanding advertising division.
AWS has the potential to continue stable growth in the future
Amazon's Web Services (AWS) is considered a vital core business for the company, with it having the top market share in the cloud business behind Microsoft's Azure and Google Cloud. AWS contributes about 14% of Amazon's overall revenue, but is its most profitable segment, with an operating margin of 30%. In contrast, Amazon's main source of revenue, its online store, has a profit margin of only about 6%. However, the sector has seen slower growth over the past three quarters due to weak cloud demand.
The AI race among major technology companies highlights the critical role cloud businesses play in driving corporate growth. Amazon, which competes with Microsoft's ChatGPT and Google's Bard, offers a similar chatbot tool Q integrated into AWS, and as CFO Brian Olsavsky said on its last earnings call, it's seeing “a lot of interest.” ” are collected. CEO Andy Jassy said the company's generative AI services could generate tens of billions of dollars in revenue over the next few years.
Amazon's advertising department is strong
In general, online advertising is likely to recover from the second half of 2023, driven by the proliferation of AI and improving global macroeconomic conditions. Amazon's advertising services have been gaining momentum recently, with year-over-year revenue up 26% in the final quarter of 2023, the fastest growth since the final quarter of 2022. Amazon's advertising business remains in third place in market share and is set to follow suit. Google and meta. The advertising industry's upward trajectory is likely to continue, especially with the huge potential of Amazon Prime Video. The company started advertising on Prime Video and introduced ad-supported plans earlier this year.
Significant headcount reduction
Another factor in Amazon's recovery from a difficult 2022 will be significant layoffs of 27,000 employees in 2022 and 2023. The tech giant recently announced plans to cut hundreds of jobs in its cloud computing division as AWS revenue growth slows. The company said it needed to focus its efforts on key strategic areas that would have the greatest impact.
Review of Amazon's 4th quarter financial results
In the final quarter of 2023, Amazon beat market expectations on all major forecasts, with net income soaring to $10.6 billion from $278 million a year earlier. This equates to earnings of $1.00 per share on sales of $170 billion, beating estimates of $0.80 billion and $166.2 billion, respectively. Revenue across several core segments including online stores, third-party seller services, advertising services, and AWS all showed growth, increasing 8%, 19%, 26%, and 13%, respectively, year over year. The company expects first-quarter sales to be in the range of $138 billion to $143.5 billion, reflecting year-over-year growth of 8% to 13%.
Revenue Forecast for Q1 2024
According to Wall Street forecasts, the company is expected to deliver earnings of 82 cents per share on revenue of $142.6 billion (133.2 billion euros), up 17% and 265%, respectively, from the same quarter in 2023. . AWS revenue is expected to reach his $24.1 billion (€22.5 billion), up 13% year-on-year, while the advertising business is expected to reach $11.8 billion (€11.2 billion) in revenue, reflecting a 24% annual increase. may produce. Online stores, which are the biggest contributor to Amazon's net sales, are expected to bring in $54.8 billion (€51.2 billion) in revenue, representing a year-on-year growth of 7%.
