Next week, Amazon will present the results for the third quarter of the fiscal year. Positive data is likely to be expected.
Let’s take a small step back.
The second quarter of Amazon’s fiscal year 2024 recorded a 10% year-over-year revenue growth to $148 billion. This result fell within the company’s expected range but missed analyst forecasts by $780 million.
Overall, however, the quarter was decidedly positive. Earnings per share grew by 39% to $1.26. The level reached was nearly double that of the previous year and better than analysts’ consensus.
In particular, the result was driven by the strong performance of AWS. The year-over-year revenue growth of 18% to $26.3 billion and a 74% increase in operating income to $9.3 billion, driven by the growing interest in generative AI services, demonstrates the strong contribution of this division. It is highly likely that AWS will remain a powerhouse in the third quarter as well.
To confirm the need to move away from dependence solely on marketplace revenues, it can also be noted that e-commerce store sales are increasing but in single digits, thus highlighting the importance of diversifying Amazon’s revenue sources.
What to Expect from Amazon’s Third Quarter
Looking ahead to the third quarter, whose data will be published in a few days, the consensus estimates for earnings per share have decreased by 4% over the last three months. Those for the entire year 2024 have decreased by 1.4%. For 2025, consensus estimates for earnings per share have decreased by 1% over the past three months. They reflect a broader trend of downward earnings revisions, a trend that should stabilize by the end of the year.
But what does all this mean?
The first reflection is that the market is already pricing in a slowdown in Amazon’s growth. Thus, a realignment is underway regarding short-term actual potentials.
Moreover, analysts’ stance is not surprising. Amazon’s management itself has decided to play it safe by warning about risks regarding EBIT pressure, even as margins continue to grow and cash flows recover, doubling compared to 2021 and returning to the same level as three years ago.
The second point is that it will be easier for Amazon to exceed market expectations (this is certainly not the first time). This would have positive effects on its ability to reinvigorate its appeal in the regulated market.
However, it will be even more interesting to understand how Amazon will seek to outline the guidelines for its future. In particular, whether it will continue to adopt a cautious attitude.
We will see, after publication, what the results will be and what news awaits sellers for Q4.
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