Amazon is expected to reveal strong sales growth when it reports earnings on Thursday after the market closes, at a time in which the Seattle company is starting to see pay-off from the aggressive investments it has made over the past decade.
After a string of strong results in recent quarters and a bout of optimism from analysts, Amazon’s share price reached a new high earlier this month, hitting $754 earlier in July. Here’s what to watch for when Amazon announces
Amazon’s annual revenue growth has been more than 20 per cent during each of the past four quarters, and early signs suggest that the second quarter will continue that trend.
Analysts expect that revenues for the company will be up 27 per cent from the previous year, to reach $29.6bn. Amazon has said it expects revenues to be between $28bn and
Amazon Web Services
AWS has been the fastest-growing part of the company and is expected to be so again this quarter. Analysts expect AWS revenues to be between $2.8bn (Deutsche Bank) and $3bn
(Wedbush), compared with $1.8bn during the same period a year ago. It is also the most profitable part of Amazon, accounting for a third of the company’s operating income during the second quarter last year.
Founded 10 years ago, Amazon Web Services offers cloud computing services that allow engineers to rent computing power on A WS servers.
The UK is Amazon’s second-biggest market outside the US, behind Germany. Amazon has not yet commented on how the uncertainty resulting fron1 the Brexit vote will affect its business in the UK. But it has certainly not stopped investing there, either. The company recently rolled out its one-hour delivery service in Scotland, as well as signing a landmark agreement with the UK government for drone testing
The company’s capital expenditure and research budgets have hit record highs in recent quarters, with projects like Amazon Web Services and the voice-activated Amazon Echo devices, to ambitious new projects in logistics, transportation and drones.
Thursday’s earnings call may shed some light on how the secretive company is planning to further develop those areas, and analysts will be listening keenly for signs that Amazon plans to continue increasing its capital expenditure budget.
Amazon never says much about Prime, the membership programme that founder Jeff Bezos identified as one of the key pillars. The company has not revealed how many Prime members it has, and typically gives vague updates on Prin1e membership growth only at the end of each year.
But that will not stop analysts from asking about Prime on Thursday’s call and trying to read the tea leaves of Amazon’s response.
Earlier this month the company held its second annual “Prime Day” a manufactured shopping event that offers discounts for Prime members, and recorded its biggest day of sales ever as a result.
Under the programme, Prime 1nembers pay an annual fee ($99 in the US, £79 in the UK) and in return get free access to music, movies and expedited shipping.
“What Prime enables them to do is to lock in future customer share of wallet,” said Jared Wiesel, partner at Revenue Analytics, a consultancy. “Amazon is basically locking in that loyalty for an extended period of time.”
Deutsche Bank recently esti1nated that some 60 per cent of Amazon’s total sales through its website (or gross merchandising volume) are to Prime members. Analysts at the bank believe that Amazon had 1nore than 6am Priine members at the end of last year.