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Amazon (AMZN) is set to release its fourth-quarter (Q4) earnings on Thursday, Feb. 6, after market close. Thanks to consistently strong financial performance and presence in high-growth sectors such as cloud computing, digital advertising, e-commerce, and artificial intelligence (AI), AMZN stock has gained about 20% over the past three months.
Amazon’s cloud business, Amazon Web Services (AWS), continues to dominate the cloud market, contributing significantly to revenue growth. Its advertising business is also thriving, adding a steady stream of high-margin revenue. These factors have driven AMZN stock higher. Furthermore, Amazon’s investments in AI technology provide a strong foundation for long-term growth.
Earlier, Amazon delivered stellar third-quarter (Q3) financials. The tech giant earned $1.43 per share, surpassing analysts’ expectations of $1.14 per share. Amazon reported revenue of $158.9 billion, beating Wall Street’s estimate of $157.3 billion.
Beyond these positive financial numbers, Amazon’s focus on key growth areas presents promising opportunities for continued stock gains. Let’s look at the catalysts that could drive Amazon’s financials in Q4 and beyond.
Amazon: Q4 Expectations
Wall Street expects the technology company to report earnings of $1.52 per share, a stellar 50.5% increase from the $1.01 reported during the same quarter last year. Impressively, Amazon has exceeded earnings expectations for the past four quarters, including a solid 25.4% beat in its most recent report.
On the revenue side, Amazon’s management forecasts net sales between $181.5 billion and $188.5 billion, representing a growth range of 7% to 11% compared to Q4 2023. Several factors are likely to contribute to this revenue boost. One major driver is AWS, which continues to perform exceptionally well. Additionally, the momentum in Amazon’s advertising business offers further upside. E-commerce sales are also expected to remain robust, thanks to Amazon’s extensive product offerings, competitive pricing, and fast delivery network.
However, despite these promising projections, Amazon faces some headwinds. One notable concern is the strengthening U.S. dollar, which could dampen international revenue growth in the coming quarters. Given Amazon’s significant global presence, currency fluctuations remain a potential drag on performance.
Amazon’s Path to Continued Growth: What Investors Should Know
Amazon is setting itself up for another strong quarterly performance and finishing 2024 on a higher note, driven by growth in several key areas. The company’s cloud computing division saw impressive growth in its last earnings report, with revenue reaching $27.5 billion in Q3, marking a 19.1% increase from the previous year. This growth continues to outpace expectations and solidifies AWS’s position as a key driver of Amazon’s business, with an annualized revenue run rate now exceeding $110 billion.
Amazon’s AWS segment will benefit from its expanding suite of cloud services and AI offerings. With more companies shifting to the cloud and leveraging generative AI, AWS is well-positioned to capitalize on this trend. Additionally, Amazon’s collaboration with Nvidia (NVDA) and the development of its own custom chips, such as Trainium and Inferentia, further strengthen AWS’s position in the AI space.
But AMZN’s growth story doesn’t stop with cloud services. Its digital advertising segment is also delivering solid growth. As businesses increasingly turn to Amazon’s platform to reach consumers, advertising revenue has become a significant contributor to the company’s overall financial health. In Q3, Amazon reported $14.3 billion in advertising revenue, reflecting an 18.8% growth from the previous year. The success of Amazon’s sponsored product ads has been a key driver. Moreover, the company is also pushing into new advertising territory such as ads on Prime Video, which augurs well for growth.
On the operational side, Amazon is taking strategic initiatives to improve efficiency and reduce costs. A shift toward the regional fulfillment network is helping to streamline delivery operations, cut costs, and speed up delivery. These factors will likely support its margins and support e-commerce sales.
The Bottom Line for Investors
Amazon’s fourth-quarter earnings are expected to exceed analysts’ forecasts, reflecting strong growth across its diverse business segments. The company is well-positioned to continue capitalizing on its cloud expansion, digital advertising growth, AI advancements, and operational efficiencies.
Analysts are optimistic about AMZN stock ahead of earnings. Amazon stock sports a “Strong Buy” consensus rating.
Amazon’s fundamentals remain solid, making it a solid long-term bet. Even if the stock drops following the Q4 earnings release, the dip presents a solid buying opportunity.
