TLDR
- Amazon reports Q3 earnings Thursday after the close, with analysts expecting about $202 billion in revenue, up 12%.
- AWS is the focus, with sales forecast to grow about 37% to roughly $45 billion.
- Amazon projects about $220 billion in capex this year, up from $132 billion last year.
- Anthropicās IPO prospectus mentioned Amazon and AWS 166 times, putting its $110 billion AWS contract in focus.
- Morgan Stanley raised its price target to $350 from $335 and named Amazon a top pick.
Amazon (AMZN) stock was up 0.59% on Thursday ahead of its third-quarter report. The market cap sits near $2.7 trillion, and results are due after the closing bell.
Wall Street expects revenue of $202 billion, up 12% from a year ago. Earnings per share forecasts range from $1.97 to $2.01, against $1.95 last year.
That year-ago figure carried $4.3 billion in one-time charges. They covered severance costs and a settlement with the U.S. Federal Trade Commission.
Gains or losses on Amazonās stakes in OpenAI and Anthropic could also move this quarterās number. Those are hard to predict, so expect some noise.
Retail growth is forecast to cool to 5%, after 15% last quarter. Prime Day moved into the second quarter to avoid a clash with the FIFA World Cup in July.
Ad revenue will feel the shift too, after an unusually strong second quarter. Across both quarters, revenue growth should still land near 10%.
AWS in the Spotlight
Most eyes will be on Amazon Web Services. Its sales growth has sped up for five straight quarters.
Analysts expect AWS revenue to rise about 37% to roughly $45 billion. Last quarterās 37% jump was its fastest pace in 18 quarters.
The unit is also expected to post a 38% operating margin, up from 35% a year ago. That would mean about $17 billion in operating income, close to two-thirds of the company total.
AWS Chief Financial Officer John Felton said earlier this month that AI spending is paying off. AWS also became the first cloud provider to win NATO-wide approval to handle the allianceās restricted workloads.
Microsoft Azure is still narrowing the gap. AWS remains the largest cloud business.
The Spending Question
Costs are what have investors on edge. Amazon spent $132 billion on capex last year and has projected about $220 billion for this year.
That leaves about $120 billion for the second half. Capex has topped Amazonās record operating cash flow for two quarters, and analysts expect that to last through next year.
Amazon added $78 billion in debt in the nine months to June, plus about $30 billion in the third quarter. Unlike Alphabet and Meta Platforms, it has not sold equity.
Anthropicās IPO prospectus, released Monday, mentioned Amazon and AWS 166 times. Its AWS contract is worth $110 billion over 10 years.
Amazon is a competitor, distributor, customer and vendor to Anthropic, and will hold more than 5% after the IPO. Morgan Stanley lifted its Amazon price target to $350 from $335 and made it a top pick.
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