Here’s what Wall Street is saying about Amazon ahead of earnings

Amazon (AMZN) is scheduled to report results of its fourth quarter after the market close on Thursday, February 1, with a conference call scheduled for 5:30 pm ET. Here’s what to watch for:

EXPECTATIONS: For the fourth quarter, Amazon has said net sales are expected to be between $160B and $167B, or to grow between 7% and 12% compared with the same quarter of last year. The company expects to see anywhere from $7B to $11B in operating income for Q4, compared with $2.7B in the same quarter of last year.

Along with the company’s last report, Amazon CEO Andy Jassy said: “We had a strong third quarter as our cost to serve and speed of delivery in our Stores business took another step forward, our AWS growth continued to stabilize, our Advertising revenue grew robustly, and overall operating income and free cash flow rose significantly. The benefits of moving from a single national fulfillment network in the U.S. to eight distinct regions are exceeding our optimistic expectations, and perhaps most importantly, putting us on pace to deliver the fastest delivery speeds for Prime customers in our 29-year history.”

Current consensus EPS and revenue forecasts for Amazon’s December-end quarter stand at 80c and $166.21B, respectively, according to data from Refinitiv.

‘RECORD-BREAKING’ BLACK FRIDAY, DOMINANT HOLIDAY SEASON: On November 6, Jefferies noted that third-party estimates suggested that total U.S. holiday sales growth was set to decelerate to 4% from 6% in 2022, but that e-commerce growth was seen accelerating to 9% from 7% last year. The firm’s survey of about 1,000 U.S. consumers also supported slower retail sales growth with accelerating e-commerce sales, noted the analyst, who said the survey work supported the view that Amazon would be “a key holiday beneficiary” and “appears to be a clear winner in holiday ecommerce sales.” The firm has a Buy rating on Amazon shares.

Then, on November 28, Amazon announced that its extended Black Friday and Cyber Monday holiday shopping event, which kicked off November 17 and continued through November 27, was its “biggest ever” compared to the same 11-day period ending on Cyber Monday in previous years. “Customers around the world purchased more than one billion items on Amazon, with shoppers saving nearly 70% more on Amazon during the 11 days of deals compared to the same period last year,” Amazon stated.

Subsequently, on January 5, Spencer Soper of Bloomberg reported that Amazon’s share of online orders spiked in the final days of the holiday shopping season, demonstrating how its focus on delivery speed paid off as last minute shoppers looked for products. Amazon captured 29% of global order volume for online orders in the two weeks prior to Christmas, Bloomberg reported, citing Route.

CLOUD AND AI: Last quarter, Amazon reported Amazon Web Services net sales of $23.06B, which was up from $20.54B in the same quarter of the prior year. AWS operating income rose to $6.98B from $5.4B in the prior year period.

Along with that report, Amazon CEO Andy Jassy said: “The AWS team continues to innovate and deliver at a rapid clip, particularly in generative AI, where the combination of our custom AI chips, Amazon Bedrock being the easiest and most flexible way to build and deploy generative AI applications, and our coding companion – CodeWhisperer – allowing enterprises to have the equivalent of an experienced engineer who understands all of their proprietary code is driving momentum with customers, including adidas, Booking.com, GoDaddy, LexisNexis, Merck, Royal Philips, and United Airlines, all of whom are starting to run generative AI workloads on AWS. Between AWS re:Invent and our 29th holiday shopping season, this is a particularly action-packed time of year at Amazon and we’re excited for what’s to come.”

On November 28, Amazon Web Services and Nvidia (NVDA) announced an expansion of their strategic collaboration to deliver the most advanced infrastructure, software, and services to power customers’ generative artificial intelligence innovations. “AWS and NVIDIA have collaborated for more than 13 years, beginning with the world’s first GPU cloud instance. Today, we offer the widest range of NVIDIA GPU solutions for workloads including graphics, gaming, high performance computing, machine learning, and now, generative AI,” said Adam Selipsky, CEO at AWS. “We continue to innovate with NVIDIA to make AWS the best place to run GPUs, combining next-gen NVIDIA Grace Hopper Superchips with AWS’s EFA powerful networking, EC2 UltraClusters’ hyper-scale clustering, and Nitro’s advanced virtualization capabilities.”

At AWS re:Invent, Amazon Web Services also announced the next generation of two AWS-designed chip families-AWS Graviton4 and AWS Trainium2. “Graviton4 and Trainium2 mark the latest innovations in chip design from AWS. With each successive generation of chip, AWS delivers better price performance and energy efficiency, giving customers even more options – in addition to chip/instance combinations featuring the latest chips from third parties like AMD (AMD), Intel (INTC), and NVIDIA – to run virtually any application or workload on Amazon Elastic Compute Cloud,” the company stated.

IROBOT DEAL DIDN’T GET DONE: On January 29, Amazon and iRobot (IRBT) announced that they have entered into a mutual agreement to terminate their previously announced agreement, under which Amazon would have acquired iRobot for cash consideration. Under the terms of the merger agreement, Amazon will pay iRobot a $94M termination fee.

“We’re disappointed that Amazon’s acquisition of iRobot could not proceed. We’re believers in the future of consumer robotics in the home and have always been fans of iRobot’s products, which delight consumers and solve problems in ways that improve their lives. Amazon and iRobot were excited to see what our teams could build together, and we’re deeply grateful to everyone who worked tirelessly to try and make this collaboration a reality. This outcome will deny consumers faster innovation and more competitive prices, which we’re confident would have made their lives easier and more enjoyable,” said David Zapolsky, Amazon SVP and General Counsel.

SOME OTHER DEALS DID: On November 10, Spencer Soper and Aisha Counts of Bloomberg reported that Amazon and Meta Platforms (META) are testing a feature that would allow shoppers to buy Amazon products through ads on Instagram and Facebook. Consumers will be able to link their Amazon accounts to their social media profiles. This move is expected to make Meta more attractive to advertisers and allow Amazon to attract shoppers outside of its store. U.S. shoppers will be able to see pricing, delivery estimates, and product details in the ads run on Facebook and Instagram, an Amazon spokesperson told Bloomberg.

A few days later, The Information’s Sylvia Varnham O’Regan and Theo Wayt (SNAP) that will let people buy Amazon products directly from ads on the Snapchat app. An Amazon spokesperson confirmed the deal.

On November 16, Amazon (AMZN) and Hyundai Motor Company (HYMTF) announced a broad strategic partnership at the 2023 Los Angeles Auto Show. The strategic collaboration includes Amazon launching online sale of Hyundai vehicles in the U.S. in 2024, Hyundai naming AWS as its preferred cloud provider to help facilitate digital transformation, and the Alexa Built-in experience coming to Hyundai’s next-generation vehicles. “Hyundai is a very innovative company that shares Amazon’s passion for trying to make customers’ lives better and easier every day. Our broad, strategic partnership should do just that, from changing the ease with which customers can buy vehicles online, to making it simple to use Alexa in Hyundai vehicles for entertainment, shopping, smart home adjustments, and calendar checks, to enabling Hyundai to transform their customer experiences and business operations by moving to AWS. We look forward to inventing together for many years,” said Amazon CEO Andy Jassy.

SENTIMENT: Check out recent Media Buzz Sentiment on Amazon as measured by TipRanks.