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Amazon (AMZN) Q4 Earnings Preview: Revenue, AWS, Advertising & Prime

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Shares of Amazon (AMZN - Free Report) still hover roughly 18% below their 52-week high despite AMZN’s massive post-Christmas surge. Now, as investors prepare for Amazon’s Q4 earnings, its AWS, subscriptions, and growing digital advertising businesses are likely to be the stars of the show as its overall revenues slow.

Quick Top-Line Outlook  

Amazon is coming off its worst quarter on the stock market since 2008. But we know that Jeff Bezos’ firm was not alone in its decline, as the likes of Apple (AAPL - Free Report) and other giants all plummeted to close 2018. With that said, Amazon’s slowing Q3 revenues were likely a company-specific catalyst for its selloff.  

AMZN’s third-quarter revenues did surge 29% to hit $56.6 billion, but this marked a major slowdown compared to Q2’s 39% surge, Q1’s 43% climb, and Q4 2017’s 38% jump. Looking ahead, Amazon’s Q4 revenues are projected to climb 18.5% from the year-ago period to reach $71.61 billion, based on our current Zacks Consensus Estimate.

Meanwhile, the firm’s full-year revenues are projected to pop roughly 31% to reach $232.69 billion. This would fall in line with last year’s 31% overall top-line expansion. Peeking further ahead, Amazon’s fiscal 2019 revenues are projected to climb 20.5% above our current-year estimate to reach $280.36 billion.


The e-commerce giant might have reached a point, at least for now, where it has grown so large that massive year over year gains on a percentage basis just aren’t possible. Therefore, investors will likely turn to individual business units for reasons to remain bullish on Amazon.

Amazon’s cloud computing business is likely to remain a key focus for Wall Street. The firm’s Q4 AWS revenues are projected to surge roughly 43% from $5.11 billion in the year-ago period to reach $7.30 billion, based on our NFM estimates. This would compare relatively well to Q4 2017’s 44% surge and last quarter’s 46% climb.

Investors should also note that Amazon grabbed 35% of the cloud infrastructure services market last quarter. This helped AMZN crush second-place Microsoft’s (MSFT - Free Report) roughly 15% share, as well as IBM (IBM - Free Report) , Google (GOOGL - Free Report) , and Alibaba (BABA - Free Report) .

Advertising & Subscriptions

Moving on, AMZN’s “Other” revenue segment is projected to skyrocket over 97% to reach $3.43 billion. Investors should note that this unit is primarily made up of Amazon’s growing advertising business. This segment surged 60% in the prior-year quarter and 122% last quarter. Amazon is now the third largest digital advertiser in the U.S. behind only Google and Facebook (FB - Free Report) and is expected to continue to expand its digital ad business as more consumers begin their product searches on Amazon platforms.

On top of that, Amazon’s subscription services unit is expected to climb roughly 35% to $4.28 billion. Amazon’s subscription segment includes annual and monthly fees associated with Amazon Prime memberships, as well as audiobook, digital video, e-book, digital music, and other non-AWS subscription services. Investors should note that our NFM growth projection would mark a slowdown from Q3’s 52% climb and Q4 2017’s 47% jump.


Bottom Line

Amazon’s revenues are expected to slow from past quarters. But the company could always surprise investors when it reports its Q4 financial results, which are projected to come out early next month. Despite the projected top-line slowdown, Amazon will remain a retail powerhouse that continues to force the likes of Walmart (WMT - Free Report) , Target (TGT - Free Report) , and others to adapt.

The firm has also positioned itself well for a strong streaming TV future against Netflix (NFLX - Free Report) and soon enough Disney (DIS - Free Report) , Apple, and AT&T (T - Free Report) . Bezos’ firm is also set on expansion in the pharmacy business, among others. Plus, Amazon’s adjusted Q4 earnings are projected to soar over 154% and AMZN’s full-year earnings are expected to skyrocket roughly 329%.

Amazon is a Zacks Rank #2 (Buy) at the moment based, in large part, on its recent positive earnings estimate revisions. And AMZN stock rested at around $1,686 a share through morning trading Thursday, which marked a roughly 18% downturn from its 52-week high.

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