Andy Jassy, CEO of Amazon, speaks at the ceremonial ribbon cutting prior to tomorrow’s opening night for the NHL’s newest hockey franchise the Seattle Kraken at the Climate Pledge Arena on October 22, 2021, in Seattle.
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Amazon is scheduled to report first-quarter earnings after market close Thursday.
Here’s what Wall Street is expecting:
- Earnings: 21 cents per share, according to analysts surveyed by Refinitiv
- Revenue: $124.5 billion, according to analysts surveyed by Refinitiv
Here’s how other key Amazon segments are expected to report:
- Amazon Web Services: $21.22 billion, according to StreetAccount
- Advertising: $9.08 billion, according to StreetAccount
Amazon’s report will round out a busy week of earnings for the mega-cap tech companies. Meta on Wednesday posted its first sales increase in four quarters. On Tuesday, Microsoft beat analysts’ expectations, while Alphabet topped estimates and said its cloud business turned profitable. Apple is scheduled to report fiscal second-quarter results on May 4.
The key focus for Amazon will be on its cloud computing division, which is facing slowing growth as businesses trim their cloud spending amid a challenging economic environment. Last quarter, Amazon Web Services missed estimates, growing 20% in the period, down from 27.5% in the third quarter.
“On the Q4 earnings call, management stated that AWS grew mid-teens [year-over-year] in January, which represents a further deceleration from the 20% growth in 4Q22,” Jefferies analysts, who maintain a buy rating on Amazon shares, wrote in a note to clients Tuesday. They said AWS growth is likely to come in at 13% in the first quarter.
CEO Andy Jassy has been aggressively cutting costs in an effort to bolster profitability. The company is in the middle of layoffs that are expected to lead to 9,000 job cuts across Amazon’s AWS, advertising, human resources, video games and Twitch livestreaming units. Combined with the 18,000 people it let go in recent months, the cuts amount to the biggest downsizing in Amazon’s 29-year history.
Jassy has been winding down some of Amazon’s more unproven bets and slowing warehouse expansion. On Wednesday, Amazon announced it would stop selling its line of Halo health and fitness devices and disband the team working on the effort, which resulted in some layoffs.
Amazon is also contending with decelerating growth in its core retail segment. The Covid pandemic-fueled e-commerce boom has fizzled as consumers have increasingly returned to physical stores. Shoppers have also been more cautious with their discretionary spending amid rising food and gas prices.
Jassy told CNBC’s “Squawk Box” earlier this month that Amazon has observed consumers being more careful about their spending, and trading down to more affordable products when making purchases.
Even amid the cost cuts, Jassy said Amazon is investing in areas like grocery, health care, its Kuiper internet satellite service and generative artificial intelligence. AWS recently jumped into the generative AI race with the launch of Bedrock, a service that lets developers use large language models developed by Amazon and others to create their own tools.