Will Amazon surprise Wall Street with Q1 earnings? 📌

The next BigTech company to report results this week is Amazon (AMZN.US), whose report will be announced after the session. After positive reports from Microsoft (MSFT.US), Google (GOOGL.US) and yesterday's - Meta Platforms (META.US), the market expects Amazon to meet expectations as well. The market will turn its attention to the e-commerce, cloud computing (AWS) and streaming Prime segments. Investors will pay attention to margins - the company has been cutting jobs in recent months, trying to reduce costs. Shareholders want to see if this has materially translated into higher EPS in the end.

Revenue:$124.55 bln (Bloomberg) (7% y/y growth)

Earnings per share (EPS): $0.21 (Bloobmerg) (43% decrease y/y)

• The company had previously forecast a profit of $0 to $4 billion on revenue in the range of $121 to $126 in Q1. It seems that the lack of net profit could be a very negative factor for the stock's valuation;
• Online retailing will account for the majority of revenue, with analysts forecasting e-commerce revenue of around $51.12 billion. They also expect service revenue to grow at a 10% year-on-year rate, to $27.9 billion, and Amazon Prime revenue to also increase 10% to $9.25 billion;
• Analysts had expected the advertising sector to grow at a 15% y/y rate to $9.06 billion, but this was before Meta Platforms' excellent report. If Amazon matches the momentum of Zuckerberg's company, results in this ad segment could be better;
• A broader slowdown in new technology spending and inflation could make profits driven by AWS' high margins limited. In Q4, AWS revenues grew 20% y/y vs. 40% y/y in Q4 2021. However, it is worth highlighting the role of economies of scale - maintaining a 40% y/y growth rate in any year is almost impossible. Analysts expect a significant slowdown in this regard - thus leaving ample room for a possible positive surprise;

AWS and future indicators

• Key to the net result will be Amazon Web Services. Google's and Microsoft's cloud computing results were above expectations. In view of this, an AWS result below expectations could suggest that Amazon will lose its dominant position in the cloud computing market;
• Amazon CEO Andrew Jassy spoke very positively and with full confidence in the future about business development and the long-term direction of the US economy. At one time, the company made record layoffs (27,000 employees, 8% of the workforce) this year, citing economic uncertainty about the economy in the second half of the year as the reason.
• The market will therefore be expecting optimistic commentary on anticipated consumer trends in the second half of the year. News of an expected slowdown could make the market perceive situations negatively. At the same time, analysts expect that higher investment in AI increased Amazon's costs in Q1, and that in the second half of the year the US economy, according to forecasts, could enter a (possibly) shallow recession

Because of relatively stable growth in retail sales,  margins and net income that will be mainly watched by investors. The AWS result will play the biggest role in it. Regarding forecasts - the market expects a positive update of forecasts, which could weaken the view according to which the macro situation may no longer support Amazon's growth.

Amazon (AMZN.US) stock chart, D1 interval. The stock is maintaining its uptrend and is trading above the SMA200 and SMA200. In addition, the bears have been stopped at the level of $102.6 - where we see the 23.6 Fibonacci abolition of the upward wave started in December 2022. Source: xStation5