Amazon’s (AMZN Quick QuoteAMZN - Free Report) fourth-quarter 2024 results, scheduled to be released on Feb. 6, are likely to reflect gains from its strengthening cloud service offerings.

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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 to-be-reported quarter.

AWS’ revenues were $27.4 billion, accounting for 17.3% of net sales in third-quarter 2024, rising 19.1% year over year. We further note that its operating income was $10.4 billion, up 48.6% year over year.

The Zacks Consensus Estimate for fourth-quarter 2024 AWS sales is pegged at $28.83 billion, indicating an improvement of 19% from the year-ago quarter’s reported figure.

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

Factors to Note

A strong cloud services portfolio and expanding generative AI capabilities are expected to have aided the performance of AWS in the fourth quarter.

AWS continued to strengthen its market leadership position in cloud computing through fourth-quarter 2024, with significant developments expected to have positively impacted Amazon's upcoming quarterly results. The cloud division demonstrated robust innovation across artificial intelligence, analytics and infrastructure services, which are likely to have driven customer adoption and revenue growth.

A major highlight was AWS' aggressive expansion in generative AI capabilities through Amazon Bedrock. The platform integrated Anthropic's upgraded Claude 3.5 Sonnet model and Meta's Llama 3.1 models, significantly enhancing its AI offerings for enterprise customers. The launch of Amazon Bedrock Flows, Agents and Knowledge Bases features, combined with improved RAG capabilities and multimodal data processing support, positioned AWS strongly in the competitive AI infrastructure market.

Infrastructure innovations remained a key focus, with AWS introducing new instance types, including EC2 P5en instances optimized for generative AI workloads, and EC2 Trn2 instances for machine learning training. The company also expanded its regional presence, launching new services across multiple regions, including Asia Pacific (Malaysia) and Middle East (UAE). This is likely to have contributed to international revenue growth.

Database and analytics services saw notable enhancements, with Amazon Redshift launching significant features, including serverless capabilities with AI-driven scaling and optimization. The introduction of Amazon Aurora DSQL and zero-ETL integrations with various services demonstrated AWS' commitment to simplifying data management for enterprises, potentially driving increased adoption among existing customers.

Security and compliance capabilities were strengthened through various initiatives. The launch of AWS Security Incident Response, enhanced HIPAA eligibility for key services, and improved networking security features are likely to have resonated with enterprise customers, particularly in regulated industries. The introduction of Amazon CloudWatch Database Insights and enhanced observability solutions suggested a strong focus on operational excellence.

Cost optimization remained a priority, with AWS introducing features like flexible reserved nodes for Amazon ElastiCache and improved cost allocation capabilities. These developments, combined with new pricing optimizations for services like Amazon Bedrock Guardrails, indicated AWS' focus on helping customers manage cloud spending efficiently while maintaining strong margins.

Looking ahead, AWS' fourth-quarter 2024 revenue is likely to have shown healthy growth, driven by enterprise migration to the cloud, increased AI workloads and strong uptake of new services. The division's continuous innovation and strategic focus on high-growth areas like AI and data analytics position it well for sustained momentum in the competitive cloud market.

We note that the strengthening customer base, which includes the likes of Lee Enterprises (LEE Quick QuoteLEE - Free Report) , Lumen Technologies and Box, is likely to have driven AWS' top-line growth in the fourth quarter. It is also expected to have aided Amazon, which currently carries a Zacks Rank #2 (Buy), in sustaining its cloud dominance against its strong contenders like Microsoft (MSFT Quick QuoteMSFT - Free Report) and Alphabet (GOOGL Quick QuoteGOOGL - Free Report) . You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.