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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 2023 results, scheduled to be released on Feb 1, are likely to reflect gains from its strengthening cloud service offerings.
AMZN’s cloud computing division, Amazon Web Services (“AWS”), dominates the cloud market on the back of its growing adoption and popularity. This is anticipated to be reflected in the company’s fourth-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 yet-to-be-reported quarter.
AWS’ revenues were $23.06 billion, accounting for 12.3% of net sales in third-quarter 2023, rising 16.1% year over year. We further note that its operating income was $6.98 billion, up 29.1% year over year.
An expanding customer base and a strong discount offering for long-term deals are likely to have driven AWS’ top line in the quarter under review.
The Zacks Consensus Estimate for fourth-quarter 2023 AWS net sales is pegged at $24.32 billion, indicating an improvement of 13.8% from the year-ago quarter’s reported figure.
Click here to know how the company’s overall fourth-quarter results are likely to be.
The strengthening cloud services portfolio on the back of generative AI technology and expanding data center networks are likely to have benefited the performance of AWS during the fourth quarter.
The increasing number of AWS regions and availability zones might have remained a positive. In the quarter under review, AWS launched its second infrastructure region in Canada, located in Calgary.
All these factors are expected to have aided Amazon in sustaining momentum among existing cloud customers and attracting new ones.
In the fourth quarter, Trip.com (TCOM - Free Report) selected AWS as its strategic cloud provider. Trip.com is leveraging AWS’ robust infrastructure and cloud services to support its global expansion and deliver an enhanced travel experience by offering cost-effective travel booking services and hassle-free on-the-go customer service support.
Additionally, Hyundai, Mitsubishi UFJ Financial Group, SCAYLE and BYD selected AWS as the preferred cloud provider.
AWS was also picked by Axiata Group Berhad as the primary cloud provider.
Aerodyne, a drone solution provider, went all-in on AWS to solve complex industrial issues with drone data.
Cathay selected AWS as its strategic cloud partner to establish the Cathay Machine Learning Innovation Hub.
The Bank of Ayudhya Public Company Limited (Krungsri) also picked AWS to boost its digital transformation and accelerate the financial inclusion drive in Thailand.
Apart from these, Amgen (AMGN - Free Report) partnered with AWS to expand the usage of the latter’s cloud solutions. Amgen is developing generative AI-based solutions to accelerate advanced therapies and boost the manufacturing throughput of medicines on the back of AWS’ robust generative AI and Machine Learning capabilities.
We note that the strengthening customer base is likely to have driven AWS's top-line growth in the fourth quarter.
Image: Bigstock
Will Amazon's (AMZN) Q4 Earnings Benefit From AWS Momentum?
Amazon’s (AMZN - Free Report) fourth-quarter 2023 results, scheduled to be released on Feb 1, are likely to reflect gains from its strengthening cloud service offerings.
AMZN’s cloud computing division, Amazon Web Services (“AWS”), dominates the cloud market on the back of its growing adoption and popularity. This is anticipated to be reflected in the company’s fourth-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 yet-to-be-reported quarter.
AWS’ revenues were $23.06 billion, accounting for 12.3% of net sales in third-quarter 2023, rising 16.1% year over year. We further note that its operating income was $6.98 billion, up 29.1% year over year.
An expanding customer base and a strong discount offering for long-term deals are likely to have driven AWS’ top line in the quarter under review.
The Zacks Consensus Estimate for fourth-quarter 2023 AWS net sales is pegged at $24.32 billion, indicating an improvement of 13.8% from the year-ago quarter’s reported figure.
Click here to know how the company’s overall fourth-quarter results are likely to be.
Amazon.com, Inc. Price and Consensus
Amazon.com, Inc. price-consensus-chart | Amazon.com, Inc. Quote
Factors to Note
The strengthening cloud services portfolio on the back of generative AI technology and expanding data center networks are likely to have benefited the performance of AWS during the fourth quarter.
The increasing number of AWS regions and availability zones might have remained a positive. In the quarter under review, AWS launched its second infrastructure region in Canada, located in Calgary.
All these factors are expected to have aided Amazon in sustaining momentum among existing cloud customers and attracting new ones.
In the fourth quarter, Trip.com (TCOM - Free Report) selected AWS as its strategic cloud provider. Trip.com is leveraging AWS’ robust infrastructure and cloud services to support its global expansion and deliver an enhanced travel experience by offering cost-effective travel booking services and hassle-free on-the-go customer service support.
Additionally, Hyundai, Mitsubishi UFJ Financial Group, SCAYLE and BYD selected AWS as the preferred cloud provider.
AWS was also picked by Axiata Group Berhad as the primary cloud provider.
Aerodyne, a drone solution provider, went all-in on AWS to solve complex industrial issues with drone data.
Cathay selected AWS as its strategic cloud partner to establish the Cathay Machine Learning Innovation Hub.
The Bank of Ayudhya Public Company Limited (Krungsri) also picked AWS to boost its digital transformation and accelerate the financial inclusion drive in Thailand.
Apart from these, Amgen (AMGN - Free Report) partnered with AWS to expand the usage of the latter’s cloud solutions. Amgen is developing generative AI-based solutions to accelerate advanced therapies and boost the manufacturing throughput of medicines on the back of AWS’ robust generative AI and Machine Learning capabilities.
We note that the strengthening customer base is likely to have driven AWS's top-line growth in the fourth quarter.
Zacks Rank & Another Stock to Consider
Currently, Amazon has a Zacks Rank #2 (Buy).
Another top-ranked stock in the broader technology sector is Arista Networks (ANET - Free Report) , sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arista Networks shares have returned 116.5% over the past year. The long-term earnings growth rate for ANET is pegged at 19.77%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.