Amazon is set to reveal its first-quarter results on Tuesday amid a surge in investor optimism, which has seen its shares shoot up almost 20 per cent since the start of the year.
The stock closed up 3.4 per cent on Friday at $179.62, with further gains in after-hours trading as anticipation builds for what is expected to be a strong quarter for Jeff Bezos’ company.
Analysts have forecast Amazon’s first-quarter sales to range between $138bn and $143.5bn, reflecting a year-on-year growth rate of 8 per cent to 13 per cent.
Operating profit is estimated to be between $8bn and $12bn, potentially more than doubling the $4.8bn achieved in the same period last year.
Earnings per share (EPS) are expected to reach $0.82 for the first quarter compared to $0.31 in 2023.
The company’s cloud business segment, Amazon Web Services (AWS), and its advancements in generative artificial intelligence (AI) are expected to be the major drivers of growth.
AJ Bell analysts said Amazon has got its mojo back recently after a loss in momentum over the last few years.
This is partly due to the perception that “Amazon is a winner in the race to lead, and monetise, the development of generative AI, thanks in particular to its cloud-service business AWS which makes far more money than the US and International retail arms and is the real heart of the business now,” the analysts explained in a note.
AWS continues to experience double-digit sales growth, while the Prime video subscription service is picking up traction in the media and content space.
Amazon generated $40.2bn in revenue through Prime membership in 2023, having added members and revenue steadily every year since 2016.
Morningstar technology analyst Dan Romanoff said: “Amazon Web Services continues to stabilise as optimisation efforts at customers wane and new workload migrations and other cloud initiatives like generative AI are driving new demand.
“Cloud optimisation efforts are over and large deals are coming back. Management believes generative AI can add tens of billions of dollars to revenue over the next several years, which seems possible given the vagueness of the comment,” he added.
Investors will also want to hear more about Amazon’s efforts to create a large language model, rumoured to rival OpenAI’s ChatGPT, and its AI-powered Rufus shopping assistant.
Amazon’s advertising division has performed well despite the soft market last year and a recovery in its retail business is also anticipated to drive near-term growth.
With a market cap nearing $2 trillion in April, Amazon ranks third among the Magnificent Seven companies, behind Meta, which posted earnings last week, and Nvidia, which is set to publish its latest trading update on 22 May.
