Amazon’s Q4 Earnings: Strong Holiday Season, AWS Growth, and Expanding Advertising Segment

Amazon.com, the global e-commerce giant, is set to release its fourth-quarter financial results on Thursday, February 1, 2024. The anticipation surrounding Amazon’s earnings report is high, as investors closely watch three key areas: the results from the holiday selling season, progress in the Amazon Web Services (AWS) cloud business, and the continued expansion of the rapidly growing advertising segment.

The holiday season, a crucial period for retailers, is expected to have been strong for Amazon. Analysts project that the company had a successful holiday selling season, with sales ranging between $160 billion and $167 billion, representing a 7% to 12% increase from the previous year. The consensus among analysts, as tracked by FactSet, is for revenue of $166.2 billion, profits of 79 cents a share, and $10.3 billion in operating income.

Amazon’s cloud business, AWS, is another area of focus. The consensus forecast calls for revenue of $24.2 billion, up 13.4% from the previous quarter. Analysts anticipate a one-point acceleration from the 12.3% growth in the September quarter. The growth in the cloud business is expected to be driven by both AI workloads and easier comparisons.

The third area of interest is the expansion of Amazon’s advertising segment. The consensus expects revenue from third-party seller services to reach $42.1 billion, up 16%. Subscription services are projected to rise 12.3% to $10.3 billion, and advertising revenue is forecast to grow 21% to $14 billion.

Amazon’s management has predicted December quarter sales of between $160 billion and $167 billion, with operating income of between $7 billion and $11 billion. The strong numbers in all three areas could lead to a higher stock price when Amazon reports after the close of trading on Thursday.

CFRA analyst Arun Sundaram believes that Amazon is likely to report more revenue than Wall Street expects. He sees 13% growth, with the consensus forecast at 11%. Sundaram’s view is that the focus will be on AWS, and he expects growth in the cloud business to reaccelerate this year. He also contends that Amazon probably had a strong holiday season, gaining e-commerce market share due to its faster delivery speeds and expanded assortment of everyday essentials.

Mizuho analyst James Lee is also optimistic about Amazon’s earnings report. He is bullish on the company’s e-commerce business and argues that the Street seems cautious about the outlook for AWS. Lee also believes that some investors are overly concerned about competition from the Chinese online retailer Temu. He anticipates that results from Amazon’s ad business will come in above Street estimates.

Lee considers Amazon his top pick in the internet sector and rates the stock at Buy, with a target price of $220. The stock was trading at $156.87 in midday Wednesday trading.

Amazon.com Inc.
AMZN (U.S.: Nasdaq)
$155.20 USD
-3.80
-2.39%

In conclusion, Amazon’s Q4 earnings report is highly anticipated, as investors closely watch the results from the holiday selling season, progress in the AWS cloud business, and the continued expansion of the advertising segment. Strong numbers in all three areas could lead to a higher stock price for Amazon. CFRA analyst Arun Sundaram and Mizuho analyst James Lee are both optimistic about the report and have positive outlooks for the company’s future growth.