Amazon Earnings: What to Look For

Key Takeaways

  • Analysts estimate EPS of $7.29 vs. $4.23 in Q3 FY 2019.
  • Amazon Web Services revenue is expected to rise YOY.
  • Strong revenue growth is expected amid COVID-19 and economic slowdown.

Amazon.com Inc. (AMZN) has seen a surge in e-commerce and cloud services sales amid the COVID-19 pandemic. Shopping online has soared as consumers order more goods and services while sheltering at home, and demand for cloud services has spiked as the work-at-home economy has ballooned in size.

Investors will watch to see whether these positive trends continue when Amazon reports earnings on October 29, 2020 for Q3 FY 2020. Analysts expect strong growth in both earnings per share (EPS) and revenue.

Investors will also be focused on another key metric, which is Amazon Web Services (AWS) revenue. AWS is Amazon's cloud-computing platform, which has grown rapidly in recent years and is also benefitting from the pandemic-induced growth of the work-from-home economy. Analysts expect AWS revenue to rise year over year (YOY).

Amazon's shares were keeping pace with the rest of the market in the few months leading up to the market crash triggered in the second half of February as fears over the spread of the coronavirus mounted. But the stock, which avoided the worst of the crash, has dramatically outperformed ever since. Amazon's shares have provided a total return of 81.8% over the past 12 months, well above the S&P 500's total return of 15.3%, as of October 23, 2020.

Amazon surprised analysts with earnings beating expectations by more than 600% in Q2 2020. EPS rose 97.4% YOY, the fastest pace since Q1 FY 2019. Revenue grew 40.2%, the fastest pace since Q1 FY 2018. In its Q2 earnings report issued on July 30, the company said that it added 175,000 new jobs since March due to rising demand and sales.

The boost in sales growth began in Q1 FY 2020. Revenue rose 26.4% YOY, above roughly 20% average growth for the four quarters in 2019. However, total operating expenses grew even faster, at a rate of 29.3%. EPS fell 29.4% compared to the same quarter a year ago.

Analysts expect EPS to rise 72.1% in Q3 FY 2020, a slower pace than Q2 but still relatively strong. Revenue is estimated to grow 32.3% compared to the year-ago quarter. For full-year 2020, analysts expect EPS to rise 38.1% and revenue by 31.6%, the fastest revenue pace in at least the past seven years.

Amazon Key Metrics
 Q3 2020 (FY)Q3 2019 (FY)Q3 2018 (FY)
Earnings Per Share ($)7.294.235.75
Revenue ($B)92.670.056.6
Amazon Web Services Revenue ($B)11.59.06.7

Source: Visible Alpha

Investors also will focus on revenue generated by AWS, Amazon's cloud-computing platform. The AWS segment provides global compute, storage, database, and other services to start-ups, enterprises, governments and their agencies, and academic institutions. AWS generated just 12.5% of Amazon's total revenue in 2019. However, because it has much higher profit margins than its e-commerce business, AWS accounted for 63.3% of the company's consolidated operating income. While the rise in the work-from-home economy is helping to maintain demand for cloud-computing services, Amazon still faces competition from Microsoft Corp.'s (MSFT) Azure and Alphabet Inc.'s (GOOGL) Google Cloud Platform.

At Amazon, growth in AWS revenue has decelerated since 2018, when YOY quarterly growth averaged around 47%. AWS revenue growth ranged between 34-41% in 2019 and slowed to 32.8% in Q1 FY 2020. It slowed further to 29.0% in Q2 FY 2020. Analysts currently expect AWS revenue to rise 28.2% in Q3 FY 2020, significantly slower than the 16 quarters through Q1 FY 2020.

Article Sources

  1. Amazon.com Inc. "Amazon.com to Webcast Third Quarter 2020 Financial Results Conference Call." Accessed Oct. 22, 2020.

  2. Visible Alpha. "Financial Data." Accessed Oct. 25, 2020.

  3. Yahoo! Finance. "Amazon.com, Inc. (AMZN): Analysis." Accessed Oct. 25, 2020.

  4. Amazon.com Inc. "Amazon.com Announces Second Quarter Results." Accessed Oct. 25, 2020.

  5. Amazon.com Inc. "AMAZON.COM ANNOUNCES FIRST QUARTER RESULTS," Page 9. Accessed Oct. 25, 2020.

  6. Amazon.com Inc. "Form 10-K for the fiscal year ended December 31, 2019," Page 67. Accessed Oct. 25, 2020.

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