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Will Solid AWS Momentum Aid Amazon's (AMZN) Q1 Earnings?

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Amazon’s (AMZN - Free Report) first-quarter 2022 results, which are scheduled to be released on Apr 28, are likely to reflect gains from its strengthening cloud service offerings.

The cloud computing division, Amazon Web Services (“AWS”), dominates the cloud market on the back of its growing adoption and popularity. This is anticipated to get reflected in the company’s first-quarter results.

We note that the solid momentum across AWS has been aiding Amazon in generating high margins from the cloud business. The trend is expected to have continued in the to-be-reported quarter.

AWS revenues were $17.8 billion in fourth-quarter 2021, accounting for 13% of net sales, rising 40% year over year. AWS’s operating income improved 48.5% from the year-ago quarter to $5.3 billion.

We believe that an expanding customer base and a strong discount offering for long-term deals are likely to have driven the AWS top line in the quarter under review.

The Zacks Consensus Estimate for first-quarter 2022 AWS net sales is pegged at $18.5 billion, indicating an improvement of 37.2% from the year-ago quarter’s reported figure.

Click here to know how the company’s overall first-quarter performance is likely to have been.

Amazon.com, Inc. Price and EPS Surprise

 

Amazon.com, Inc. Price and EPS Surprise

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Factors to Consider

The expanding data center network, and an increasing number of AWS regions and availability zones are likely to have acted as tailwinds.

Strength across the AWS cloud services portfolio is expected to have continued benefiting the segment’s performance in the first quarter.

Both factors are expected to have aided Amazon in sustaining momentum among existing customers as well as attracting new ones.

In the first quarter, AWS got selected by Maple Leaf Sports & Entertainment as the official provider of AI, ML and deep learning cloud services. Maple Leaf will leverage AWS’s robust cloud capabilities to support its teams and lines of business.

Also, Best Buy picked AWS as its preferred cloud provider for cloud infrastructure services and its strategic partner for developing cloud engineering talent.

One of the existing clients, Bundesliga, the professional association football (soccer) league of Germany, debuted its two new AWS-powered match facts, Set Piece Threat and Skill.

Another client, National Hockey League (NHL), introduced its new ML-driven stat called Face-off Probability, backed by AWS.

The impacts of the strengthening customer base are likely to have driven AWS's top-line growth in the first quarter.

Zacks Rank & Stocks to Consider

Currently, Amazon carries a Zacks Rank #3 (Hold).

Investors interested in the broader technology sector can consider stocks like Jabil (JBL - Free Report) , Jack Henry & Associates (JKHY - Free Report) and Broadcom (AVGO - Free Report) . While Jabil currently sports a Zacks Rank #1 (Strong Buy), Broadcom and Jack Henry & Associates carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Jabil has gained 4.3% in the past year. The long-term earnings growth rate for JBL is currently projected at 12%.

Jack Henry & Associates has gained 18.4% in the past year. The long-term earnings growth rate for JKHY is currently projected at 17%.

Broadcom has gained 22% in the past year. AVGO’s long-term earnings growth rate is currently projected at 14.5%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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