What to expect from Amazon's earnings report
Amazon is set to announce third-quarter financial results after the market close on Thursday. Shares of Amazon fell 5.91% on Wednesday amid a steep sell-off on Wall Street.
Analysts polled by Bloomberg expect the company to report earnings of $5.62 per share on revenue of $57.07 billion. Amazon had a strong second quarter, when it hit $2.5 billion in profit, topping the $2 billion benchmark for the first time.
Earlier this week, Credit Suisse raised its price target from $2,100 to $2,400, citing better margins for its e-commerce segment, opportunity for faster-than-expected free cash flow growth because of its advertising segment and a bullish forecast for Amazon Web Services.
Online retail, which includes third-party sellers, private label brands, and Alexa products, makes up more than half of Amazon’s top-line revenue. But its higher-margin cloud service business had $1.6 billion in operating income last quarter, making up 55% of the total.
The company’s advertising unit has also been a boon for the business, eclipsing Oath and Microsoft to take third place behind Facebook and Google. U.S. advertisers will spend $4.61 billion on Amazon this year, accounting for 4.1% of all digital ad spending in the country, according to market research firm eMarketer.
“Comparisons have gotten a bit tougher since Amazon is now cycling the WFM acquisition and 2Q likely received some benefit from a late spring. Similar to the first half, advertising likely remained a driver to margin,” KeyBanc analysts wrote in a note to clients. “Finally, for AWS we remain confident that revenue is poised to double to $46 billion by 2020.”
Earlier this month, Amazon announced it will raise the minimum wage to $15 per hour, which will take effect in November. While it won’t impact Thursday’s report, the company will likely provide guidance for future quarters. Additionally, the proposed 9% to 12% USPS fee increase could cost Amazon more than $1 billion next year, according to Credit Suisse.
Melody Hahm is a senior writer at Yahoo Finance, covering entrepreneurship, technology and real estate. Follow her on Twitter @melodyhahm.
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