Analysts expect Amazon's Q2 revenue to be $148.75 billion, adjusted net income to be $14.066 billion, and adjusted EPS to be $1.289, according to Bloomberg's unanimous expectations.

Big tech giant Amazon is scheduled to release its Q2 earnings on August 1, after the closing bell. The company ’ s positive momentum is expected to persist in Q2, driven by its shift to higher-margin services, advancements in AI, and AWS, its crown jewel.

Source: Bloomberg

Previous Quarter Review

Amazon reported better-than-expected earnings and revenue for the first quarter, driven by growth in advertising and cloud computing.

Here ’ s how the company did:

Earnings per share: 98 cents vs. 83 cents expected by LSEG

Revenue: $143.3 billion vs. $142.5 billion expected by LSEG

Wall Street is also looking at these key numbers:

Amazon Web Services: $25 billion vs. $24.5 billion in revenue, according to StreetAccount

Advertising: $11.8 billion vs. 11.7 billion in revenue, according to StreetAccount

What to Watch for Q2

It ’ s highly likely that analysts and investors will   focus heavily on AWS ’ s performance. Amazon has been significantly growing AWS in recent quarters, consistently beating expectations. The company ’ s plans to ramp up capital expenditures ( CapEx ) highlight the robust demand for generative AI within its cloud computing segment. In Q1 alone, Amazon spent $14 billion on CapEx, with total investments reaching $48.4 billion last year.

A key point of interest will be how AWS defends its market share against competitors like Microsoft ’ s Azure and Alphabet ’ s Google Cloud,   both of which   have been strong performers with proprietary models.

There ’ s also interest in whether enterprises   are favoring   open-source models, potentially benefiting AWS more than its competitors. CEO Andy Jassy emphasized that customers prefer to bring their models to their data instead of the other way around, differing from Azure and Google Cloud ’ s approach.

Two other critical areas for investor satisfaction will be demonstrating AI ’ s impact on revenue growth beyond AWS, particularly in Advertising, where last quarter saw a strong 24% year-over-year increase in ad sales.

Also, investors will closely watch Amazon ’ s ability to execute its strategy of fast and efficient deliveries for Prime members, which aims to improve consumer experience and drive higher margins.

Last quarter, Amazon   guided that   it expects operating income between $10 billion and $14 billion, up from $7.7 billion a year ago, including seasonal stock-based compensation expenses.

If Amazon delivers growth in AWS bolstered by AI, expands Advertising revenue, and improves operating income through efficient Prime deliveries, it should report a stable quarter. Historically, Amazon guides investors conservatively to avoid overpromising, suggesting little chance of disappointment this quarter. This also increases the likelihood of positive surprises. Looking back at the last five quarters, AMZN shares have typically shown a positive reaction the day after earnings results.

Analysts' opinions

Analysts at Bernstein and Truist each raised their price target for Amazon stock in separate notes to clients Monday.

Truist analyst Youssef Squali reiterated a buy rating and upped his price target for Amazon stock to 230 from 220.

Squali expects Amazon to report results ahead of expectations based on tracking North American sales using Truist credit card data. He also cited positive checks for Amazon's advertising business, with expectations for further revenue growth at the cloud-focused Amazon Web Services business, and improving unit economics and operating expense management.

Meanwhile, Bernstein reiterated a buy rating for Amazon and upped its price target for the stock to 215 from 210.

"We are buyers of Amazon's 2024-story marked by further operating income and free cash flow inflection, as the company should not only able to continue taking price ( gains ) but also remain efficient in their discretionary other bets projects," Bernstein analysts led by Nikhil Devnani wrote to clients Monday.

The analysts trimmed estimates for Amazon's cloud business revenue and e-commerce sales in the quarter, but increased estimates for advertising revenue in the back half of this year. The ad estimate increase is based "off of strong buyer demand for Prime Video ads at the Upfronts and Cannes," the client note said.