Amazon is heading into its latest earnings report as the laggard of the Magnificent Seven this year, and investors are looking for some key updates that could spark new momentum.
Specifically, Wall Street wants to know more about its AI ambitions and how it plans to position itself against stiff competition from other Big Tech players like Microsoft and Alphabet. AWS, retail margins, and any lingering concerns over the impact of tariffs will also be on investors' radar.
The call with analysts is scheduled for 5 p.m. ET.
Amazon's layoffs raise a big question for Wall Street
Amazon said on Tuesday that it would cut 14,000 corporate jobs in one of the biggest rounds of layoffs in the company's history.
It raised a big question for Wall Street: Is the company cutting jobs because growth is stalling, or is the retail giant's big bet on AI making it more efficient? Business Insider's Alistair Barr wrote in Thursday's Tech Memo newsletter that Amazon's latest quarterly earnings report could answer that all-important question.
Amazon said on Tuesday that it would cut 14,000 corporate jobs in one of the biggest rounds of layoffs in the company's history.
It raised a big question for Wall Street: Is the company cutting jobs because growth is stalling, or is the retail giant's big bet on AI making it more efficient? Business Insider's Alistair Barr wrote in Thursday's Tech Memo newsletter that Amazon's latest quarterly earnings report could answer that all-important question.
Revenue growth for Amazon Web Services, the company's crucial cloud business, is the number to watch when Amazon reports this afternoon, Barr wrote.
For the third quarter, Wall Street expects AWS revenue to increase 18% year over year to $32.4 billion, according to Bloomberg.
UBS analysts are feeling optimistic heading into the report, although they anticipate some "noise" around operating income due to the company's recent $2.5 billion settlement with the FTC.
The bank recently raised its price target for Amazon stock from $271 to $279, maintaining its Buy rating. While analysts said that they are waiting to see investment proof points from AWS, they still see the area as a likely growth driver for Amazon, as they expect multiple headwinds to wane in the near future.
UBS analysts are feeling optimistic heading into the report, although they anticipate some "noise" around operating income due to the company's recent $2.5 billion settlement with the FTC.
The bank recently raised its price target for Amazon stock from $271 to $279, maintaining its Buy rating. While analysts said that they are waiting to see investment proof points from AWS, they still see the area as a likely growth driver for Amazon, as they expect multiple headwinds to wane in the near future.
"Overall, we continue to see the potential for upside across Amazon's business segments, including e-commerce, cloud, advertising, and Kuiper / low earth orbit satellites," analysts wrote in a recent earnings preview.
AWS, Amazon's growth engine, is facing AI challenges
Investors will want to hear more about AWS's latest AI strategy, including what it's doing to attract new customers.
Early-stage startups are skipping traditional cloud spending and heading straight to model-training tools and niche providers. These companies are Amazon's "blind spot," according to an internal document seen by Business Insider. Amazon has traditionally relied on venture capital firms to find startups that could be new clients.
Investors will want to hear more about AWS's latest AI strategy, including what it's doing to attract new customers.
Early-stage startups are skipping traditional cloud spending and heading straight to model-training tools and niche providers. These companies are Amazon's "blind spot," according to an internal document seen by Business Insider. Amazon has traditionally relied on venture capital firms to find startups that could be new clients.
AWS also hired a new vice president of security services and observability this month, a sign that the unit is trying to improve security around its AI products.
JPMorgan analysts said that while they believe Amazon has done a good job executing on retail sales and margin expansion, they're worried about its positioning in the booming generative AI space.
"There is concern around AMZN's GenAI positioning/strategy, relative gap to Azure/Google Cloud growth, & trajectory of 2H AWS growth pick-up," they said. "There is also concern around the impact of tariffs & changes to the de minimis exemption on demand & OI margins."
JPMorgan analysts said that while they believe Amazon has done a good job executing on retail sales and margin expansion, they're worried about its positioning in the booming generative AI space.
"There is concern around AMZN's GenAI positioning/strategy, relative gap to Azure/Google Cloud growth, & trajectory of 2H AWS growth pick-up," they said. "There is also concern around the impact of tariffs & changes to the de minimis exemption on demand & OI margins."
However, the analysts add that AWS growth acceleration will likely continue, and said that they expect AI supply chain gaps to ease, which they see as bullish for Amazon.
JPMorgan maintains an overweight rating and a $265 price target for Amazon stock.
Amazon ranks last among the Magnificent Seven tech companies — and the broader S&P 500 — when it comes to stock performance over the last five years, Business Insider's Joe Ciolli wrote in Thursday's First Trade newsletter.
Amazon's stock has returned 43% over that period, behind Meta's 168%, Alphabet's 253%, and Nvidia's mammoth 1,490%.
Amazon ranks last among the Magnificent Seven tech companies — and the broader S&P 500 — when it comes to stock performance over the last five years, Business Insider's Joe Ciolli wrote in Thursday's First Trade newsletter.
Amazon's stock has returned 43% over that period, behind Meta's 168%, Alphabet's 253%, and Nvidia's mammoth 1,490%.
On Wall Street, some interpret Amazon's position on that chart as a sign that its AI strategy is struggling to compete with rivals.
Bank of America is optimistic about progress in key areas
BofA analysts are upbeat heading into the report, even as doubts swirl around Amazon's AI strategy.
"Given healthy retail sales, strength in Online advertising, and July AWS layoffs, we see potential for operating income upside and are 4% above Street for GAAP operating profit at $20.4bn vs $19.7bn," the analysts wrote.
BofA analysts are upbeat heading into the report, even as doubts swirl around Amazon's AI strategy.
"Given healthy retail sales, strength in Online advertising, and July AWS layoffs, we see potential for operating income upside and are 4% above Street for GAAP operating profit at $20.4bn vs $19.7bn," the analysts wrote.
"We believe Street expectations are for around 1-2% beat on US retail, AWS growth at 18-18.5% based on 3P data, and op. profit slightly above the high end of Amazon's 3Q guidance range."
The bank maintains a Buy rating on Amazon stock and a $272 price target, implying 21% upside from Wednesday's price.
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