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Will Amazon's (AMZN) Q2 Earnings Benefit From AWS Momentum?

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Amazon’s (AMZN - Free Report) second-quarter 2021 results, which are scheduled to be released on Jul 29, are likely to reflect the impacts of its strengthening cloud service offerings.

The company’s cloud computing arm, Amazon Web Services (“AWS”), holds the leading position in the cloud market, courtesy of solid momentum across customers on the back of its portfolio strength. This is likely to get reflected in the second-quarter results.

AWS has become an integral division of the company as it generates significantly high margins.

In the last reported quarter, AWS revenues were $13.5 billion, accounting for 12% of net sales. The figure also rose 32% year over year. AWS’s operating income improved 35% from the year-ago quarter to $4.2 billion.

The Zacks Consensus Estimate for second-quarter AWS net sales is pegged at $14.2 billion, indicating an improvement of 31% from the year-ago reported figure.

Click here to know how the company’s overall second-quarter performance is likely to have been., Inc. Revenue (TTM), Inc. Revenue (TTM), Inc. revenue-ttm |, Inc. Quote

Factors to Note

In the second quarter, Amazon expanded the cloud services portfolio by unveiling and making several AWS services generally available. Services like AWS App Runner, Amazon DevOps Guru, Amazon FinSpace, Amazon Nimble Studio and Amazon Location Service, to name a few, were made available generally. Impacts of these initiatives are likely to get reflected in AWS’ results for the quarter under review.

Portfolio strength is likely to have helped AWSto sustain its dominance in the cloud market, wherein competition has been intensifying, owing to the growing endeavors by Microsoft’s (MSFT - Free Report) Azure, Alphabet’s (GOOGL - Free Report) Google Cloud, Alibaba Cloud and International Business Machines’ (IBM - Free Report) cloud division, among others.

Partnerships and acquisitions are anticipated to have favored AWS in the quarter under review. Notably, the company extended relationships with Salesforce to make the combined offerings more accessible to customers.

AWS acquired Wickr, a provider of a highly secured, end-to-end encrypted messaging platform, in the quarter under review.

Impacts of these are expected to get reflected in the second-quarter results of AWS.

Strengthening data center network and increasing number of AWS regions are also likely to have acted as tailwinds.

Growing Clientele to Drive AWS Sales

In the second quarter, BMO Financial Group selected AWS as its preferred and strategic cloud provider. BMO will leverage AWS’s analytics, machine learning, serverless, compute, storage and database. It is migrating its workload, and its online and mobile banking applications to AWS.

Disney is leveraging AWS to support the expansion of Disney+. It has selected AWS as the preferred public cloud infrastructure provider for the same.

Ferrari selected AWS as its official cloud, Machine Learning, and AI provider to bring advancements across its road cars department, GT Competitions, the Ferrari Challenge, and the Scuderia Ferrari FORMULA 1.

AWS was picked by DISH Network as the preferred cloud provider. DISH is gearing up to buildits 5G network on AWS.

Continuous additions to the AWS customer base, driven by Amazon’s cloud portfolio strength, are likely to have driven growth in AWS sales in the second quarter.

Currently, Amazon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.