What You Need to Know Ahead of Amazon Earnings Thursday

Key Takeaways

• Amazon reports earnings after the bell Thursday, with analysts expecting 11% revenue growth and a 65% bump in net profits.
• Advertising and AWS are expected to be sources of growth for the tech and retail giant.
• The company could also provide updates on Prime Day, and how the sales event could impact third-quarter results.

Amazon (AMZN) reports earnings after the bell Thursday, with investors watching the results after a tech-industry selloff dragged heavyweights like the Magnificent Seven lower this week after earnings from Google parent Alphabet (GOOGL) and Tesla (TSLA) disappointed.

Analysts expect total revenue for the tech and online retail giant to rise about 11% from the second quarter last year to $148.68 billion from $134.38 billion last year. Net income is projected to jump 65% year-over-year to $11.13 billion from $6.75 billion in the year-ago quarter. Amazon has worked to reduce costs by making its delivery network more efficient over the past year.

Key Metrics: AI, Advertising Revenue

In Amazon's last earnings report in April, growth from the company's advertising segment and revenue from Amazon Web Services (AWS) and the company's efforts in artificial intelligence (AI) boosted Amazon's earnings.

Bank of America analysts wrote Friday that they believe growth in AWS demand could power its revenue above estimates, as Amazon has expanded the range of products available through its Bedrock platform.

Amazon's advertising revenue is likely to grow in the quarter and the second half of the year as the rollout of ads on Prime Video continues, analysts said. Wedbush analysts said 87% of advertisers who advertise on Amazon said in a recent survey that they increased spending in the second quarter compared to last year, and 91% said they plan to increase their ad spend in the third quarter.

Business Spotlight: Prime Day

While the financial performance of Prime Day will impact Amazon's third-quarter earnings, investors may be looking for additional clues about how successful this year's 48-hour sales event was. Data from Adobe Analytics found that the event generated an estimated $14 billion in online spending across U.S. retailers, split almost evenly over the two days.

Bank of America analysts said their estimates put Prime Day's gross merchandise value around $13.4 billion, up 10% from last year and better than their projections of a 7% bump, also noting that a record number of Prime signups could help Amazon continue to gain market share in online retail.

Amazon stock rose 1.5% on Friday, leaving it up about 20% for the year so far.

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