What We Expect from Amazon’s Earnings Report Today

Amazon Focuses on Cloud Services Ahead of Earnings Reports

When Amazon.com announces its financial results, Wall Street will closely monitor the performance of the company’s cloud business, after other tech giants disappointed with the results of their cloud divisions.

Amazon will release its fourth-quarter report after the market closes on Thursday. Analysts polled by FactSet predict that the e-commerce giant will report earnings of $1.49 per share, up from $1.00 per share for the same period last year. Revenue for the quarter is expected to be $187.3 billion, surpassing last year’s $170 billion.

AWS – A Key Segment in the Reports
The Amazon Web Services (AWS) cloud platform will be the primary focus, as it not only generates high operational income for the company but also serves as the center of its generative AI initiatives.

AWS is expected to report revenue of $28.8 billion for the fourth quarter, up from $24.2 billion a year earlier.

Results from competing companies have raised attention on AWS. On January 29, Microsoft announced that revenue from Azure and other cloud services grew by 31%, but the growth rate slowed from 33% in the previous quarter. A few days later, Alphabet (Google) reported cloud revenue that fell short of Wall Street’s expectations.

However, BofA Securities analyst Justin Post, who rates Amazon as “Buy” with a target price of $255, stated that demand for cloud services likely remained strong in Q4, and interest in AI will continue to rise in 2025.

Big Investments in AI
Like other tech giants, Amazon is making significant investments in artificial intelligence. In October, management announced that capital expenditures for 2024 would total $75 billion, primarily for expanding technological infrastructure.

Investors will closely watch whether Amazon updates its spending plans for the current year, as Meta, Microsoft, and Alphabet have already announced that they will continue spending billions on AI, despite shareholder concerns about excessive spending.

Chinese DeepSeek Challenges Tech Giants
Last week, the tech sector was shaken by reports on social media that the Chinese startup DeepSeek had developed a model similar to ChatGPT but at much lower costs.

Despite the uncertainty, some analysts believe that such innovations could reduce AI costs in the future and benefit companies like Amazon.

“Over time, Amazon may find itself among the beneficiaries of DeepSeek’s emergence, as its AI platform is designed to support open models, which could lead to lower integration costs and improve margins in the long term,” analysts from Canaccord Genuity stated on January 30.

In addition to cloud services, Wall Street will also closely monitor Amazon’s online sales, which generate the largest portion of the company’s revenue.

Analysts expect online commerce revenue of $74.7 billion for the fourth quarter, up from $70.5 billion in the same period last year.

Although Amazon may surpass sales forecasts, it remains unclear how tariffs will affect its financial outlook.

Tariffs and Their Potential Effect
Over the weekend, President Donald Trump announced that he would impose a 10% tariff on imports from China and 25% on goods from Canada and Mexico. On Monday, the White House temporarily froze tariffs for Canada and Mexico, but those on China went into effect.

In its latest 10-K filing, Amazon stated that Chinese traders represent a significant portion of its revenue from services for third-party sellers and advertising, meaning regulatory and trade restrictions could have a negative impact on its financial results.

How Are Amazon’s Stocks Performing?
So far, Amazon’s shares have risen by 7.7% since the beginning of the year, outperforming the S&P 500, which has gained 3% over the same period.

Currently, Amazon’s shares are trading at a price-to-earnings ratio of 37.8, based on expected earnings for the next 12 months.