Amazon.com, Inc. (NASDAQ: AMZN) shares were up 0.59% on Thursday as investors positioned ahead of the company's third-quarter earnings report, scheduled for release after the closing bell. The stock has been in a rut in recent weeks, though its market capitalization still stands at roughly $2.7 trillion, a scale that keeps it among the largest companies in the market. Attention centers on cloud computing momentum, retail pacing, and an escalating capital spending program.

Wall Street expects Amazon to post revenue of about $202 billion, a 12% increase from a year earlier. Earnings per share estimates range from $1.97 to $2.01, compared with $1.95 in the year-ago quarter. That prior result was weighed down by $4.3 billion in one-time charges, which covered severance costs and a settlement with the U.S. Federal Trade Commission. Gains or losses on Amazon's stakes in OpenAI and Anthropic could also swing the bottom line this quarter, an input that sits outside the company's core retail and cloud operations.

Retail growth is expected to cool. Prime Day moved into the second quarter this year to avoid clashing with the FIFA World Cup in July, pulling one of Amazon's biggest promotional events out of the period now being reported. Retail sales grew 15% last quarter, and analysts forecast only about 5% growth this time around. Advertising revenue will feel a similar drag, because the unusually strong second quarter sets a tougher comparison. Taken together, the two quarters should still reflect growth near 10%.

AWS in the Spotlight

Most of the attention will center on Amazon Web Services, where sales growth has accelerated for five consecutive quarters. Analysts expect AWS revenue to rise about 37% to roughly $45 billion, a pace that would roughly match last quarter's growth rate rather than extend the acceleration streak. Last quarter, AWS revenue grew 37%, its fastest pace in 18 quarters.

The cloud unit is also projected to post a 38% operating margin, up from 35% a year ago. That would translate to about $17 billion in operating income, roughly two-thirds of the company total, a concentration that shows how much of Amazon's operating profit now comes from the cloud. 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 alliance's restricted workloads. Microsoft Azure is still narrowing the gap as the number-two player.

The Spending Question

Costs are what have investors on edge. Amazon spent $132 billion on capital expenditures last year and has projected about $220 billion for this year, leaving roughly $120 billion for the second half, an implied outlay of more than $4.5 billion a week through year-end. Capex has topped Amazon's record operating cash flow for the past two quarters, and analysts expect that trend to continue through next year.

Amazon also added $78 billion in debt in the nine months through June, plus about $30 billion in the third quarter. Unlike Alphabet and Meta Platforms, the company has not sold equity to fund its buildout. Depreciation costs are rising alongside the infrastructure expansion, but the AWS margin has held up so far.

Adding to the scrutiny, Anthropic filed its IPO prospectus on Monday, a document that named Amazon and AWS 166 times and placed the startup's cloud agreement in focus. That contract is worth $110 billion over 10 years, an average of $11 billion annually. Amazon is simultaneously a competitor, distributor, customer, and vendor to Anthropic, and will hold more than 5% of the company after the IPO.

On the analyst side, Morgan Stanley lifted its Amazon price target to $350 from $335 and named the stock a top pick. Results that match or beat estimates could push the company's market value higher. The report lands Thursday after the close, with the AWS growth rate, the capital spending trajectory, and any fresh detail on the Anthropic agreement among the items most likely to draw scrutiny.

Source: CoinCentral