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Will Amazon's (AMZN) Q4 Earnings Benefit From AWS Momentum?
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Amazon’s (AMZN - Free Report) fourth-quarter 2021 results, which are scheduled to be released on Feb 3, are expected 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 its solid customer momentum on the back of its portfolio strength. This is likely to get reflected in the fourth-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 $16.1 billion, accounting for 15% of net sales. The figure also rose 39% year over year. AWS’s operating income improved 38% from the year-ago quarter to $4.9 billion.
The Zacks Consensus Estimate for fourth-quarter AWS net sales is pegged at $17.3 billion, indicating an improvement of 73.9% from the year-ago reported figure.
Click here to know how the company’s overall fourth-quarter performance is likely to have been.
In the fourth quarter, Amazon expanded the cloud services portfolio by unveiling and making several AWS services generally available. The company unveiled a managed wide area network (WAN) service, namely AWS Cloud WAN, which aids in the seamless development, management, operation and monitoring of a global network with the help of a central dashboard.
It also announced the general availability of Babelfish for Amazon Aurora PostgreSQL-Compatible Edition, which helps run Microsoft SQL Server applications on Amazon Aurora seamlessly. Also, AWS made Amazon EC2 DL1 instances and AWS Panorama Appliance generally available.
The company rolled out AWS Mainframe Modernization, which aids in the quick migration of mainframe and legacy workloads to the cloud.
It introduced serverless options for Amazon Redshift, Amazon Managed Streaming for Apache Kafka, and Amazon EMR. Also, the company unveiled three database capabilities — Amazon RDS Custom, Amazon DynamoDB Standard-Infrequent Access and Amazon DevOps Guru for RDS.
The impacts of these are likely to get reflected in AWS’ results for the quarter under review.
Apart from portfolio strength, strengthening data center network and increasing number of AWS regions are likely to have acted as tailwinds. In the fourth quarter, Amazon opened a region in Indonesia’s Jakarta.
Growing Clientele to Drive AWS Sales
In the fourth quarter, AWS was picked by the largest social media platform, Meta, as the strategic cloud provider.
Aurora selected AWS as its preferred cloud provider for machine learning training and cloud-based simulation workloads.
Nasdaq signed a multi-year agreement with AWS in a bid to accelerate the development of advanced cloud-enabled infrastructure for the world's capital markets.
AWS was selected by United Airlines, Rivian, American International Group, Qualtrics and Gilead Sciences as the preferred cloud provider.
Also, adidas picked AWS as its preferred cloud provider for SAP workloads
Richemont, which is shifting its enterprise IT infrastructure to AWS, selected the latter as its preferred cloud provider.
Under Armour chose AWS as the preferred cloud provider for SAP. NXP Semiconductors also picked AWS as its preferred cloud provider and shifted its electronic design automation workloads to AWS to bolster its throughput across its design centers.
Apart from these, India-based Apollo Tyres went all-in on AWS. It is migrating its IT infrastructure to the latter’s cloud platform.
Discovery expanded its relationship with AWS to drive its transformation in the cloud. The Federal National Mortgage Association — Fannie Mae — picked AWS to shift IT workloads from on-premise data centers to AWS.
Pfizer picked AWS to leverage its capabilities in analytics, machine learning, compute, storage, security, and cloud data warehousing for its laboratory, clinical manufacturing, and clinical supply chain efforts.
Roche Group utilizes AWS for its majority of cloud workloads.
Notably, 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 fourth quarter.
Image: Bigstock
Will Amazon's (AMZN) Q4 Earnings Benefit From AWS Momentum?
Amazon’s (AMZN - Free Report) fourth-quarter 2021 results, which are scheduled to be released on Feb 3, are expected 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 its solid customer momentum on the back of its portfolio strength. This is likely to get reflected in the fourth-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 $16.1 billion, accounting for 15% of net sales. The figure also rose 39% year over year. AWS’s operating income improved 38% from the year-ago quarter to $4.9 billion.
The Zacks Consensus Estimate for fourth-quarter AWS net sales is pegged at $17.3 billion, indicating an improvement of 73.9% from the year-ago reported figure.
Click here to know how the company’s overall fourth-quarter performance is likely to have been.
Amazon.com, Inc. Price and Consensus
Amazon.com, Inc. price-consensus-chart | Amazon.com, Inc. Quote
Factors to Note
In the fourth quarter, Amazon expanded the cloud services portfolio by unveiling and making several AWS services generally available. The company unveiled a managed wide area network (WAN) service, namely AWS Cloud WAN, which aids in the seamless development, management, operation and monitoring of a global network with the help of a central dashboard.
It also announced the general availability of Babelfish for Amazon Aurora PostgreSQL-Compatible Edition, which helps run Microsoft SQL Server applications on Amazon Aurora seamlessly. Also, AWS made Amazon EC2 DL1 instances and AWS Panorama Appliance generally available.
The company rolled out AWS Mainframe Modernization, which aids in the quick migration of mainframe and legacy workloads to the cloud.
It introduced serverless options for Amazon Redshift, Amazon Managed Streaming for Apache Kafka, and Amazon EMR. Also, the company unveiled three database capabilities — Amazon RDS Custom, Amazon DynamoDB Standard-Infrequent Access and Amazon DevOps Guru for RDS.
The impacts of these are likely to get reflected in AWS’ results for the quarter under review.
Apart from portfolio strength, strengthening data center network and increasing number of AWS regions are likely to have acted as tailwinds. In the fourth quarter, Amazon opened a region in Indonesia’s Jakarta.
Growing Clientele to Drive AWS Sales
In the fourth quarter, AWS was picked by the largest social media platform, Meta, as the strategic cloud provider.
Aurora selected AWS as its preferred cloud provider for machine learning training and cloud-based simulation workloads.
Nasdaq signed a multi-year agreement with AWS in a bid to accelerate the development of advanced cloud-enabled infrastructure for the world's capital markets.
AWS was selected by United Airlines, Rivian, American International Group, Qualtrics and Gilead Sciences as the preferred cloud provider.
Also, adidas picked AWS as its preferred cloud provider for SAP workloads
Richemont, which is shifting its enterprise IT infrastructure to AWS, selected the latter as its preferred cloud provider.
Under Armour chose AWS as the preferred cloud provider for SAP. NXP Semiconductors also picked AWS as its preferred cloud provider and shifted its electronic design automation workloads to AWS to bolster its throughput across its design centers.
Apart from these, India-based Apollo Tyres went all-in on AWS. It is migrating its IT infrastructure to the latter’s cloud platform.
Discovery expanded its relationship with AWS to drive its transformation in the cloud. The Federal National Mortgage Association — Fannie Mae — picked AWS to shift IT workloads from on-premise data centers to AWS.
Pfizer picked AWS to leverage its capabilities in analytics, machine learning, compute, storage, security, and cloud data warehousing for its laboratory, clinical manufacturing, and clinical supply chain efforts.
Roche Group utilizes AWS for its majority of cloud workloads.
Notably, 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 fourth quarter.
Zacks Rank and Stocks to Consider
Currently, Amazon carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader technology sector are Broadcom (AVGO - Free Report) , AMETEK (AME - Free Report) and Advanced Micro Devices (AMD - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Broadcom has gained 27.4% over a year. The long-term earnings growth rate for AVGO is currently projected at 14.52%.
AMETEK has gained 17.6% over a year. The long-term earnings growth rate for AME is currently projected at 10.42%.
Advanced Micro Devices has gained 31.5% over a year. The long-term earnings growth rate for AMD is currently projected at 46.2%.