Amazon.com (NASDAQ: AMZN) will be among the many popular tech companies reporting its financial results this month. The company has scheduled its second-quarter earnings release for after the market closes on Thursday, July 25.
The e-commerce platform and cloud computing specialist generated better-than-expected results in the first quarter, growing revenue by 17% year over year and delivering a significant boost to its profits, with net income and earnings per share more than doubling compared to the prior-year quarter. Investor fears about the company's slowing revenue growth held the stock back, however, as it lost about 1% on the trading day following the release.
In advance of the company's earnings report, here's a preview of a few things that investors will be watching.
While Amazon's sales are still massive by any measure, the company's revenue growth has been slowing in recent quarters. During Q1, revenue grew to nearly $60 billion, up 17% year over year, a dramatic deceleration from the 43% growth in generated in the prior-year quarter, continuing a trend that was evident in each quarter over the past year. The company's slowing growth rate isn't entirely unexpected, however, given the e-commerce provider's gargantuan size, but it's still an area that bears watching.
For the upcoming second quarter, Amazon guided for revenue in a range of $59.5 billion to $63.5 billion, which would represent growth of between 13% and 20% year over year. To put that into the context of Wall Street expectations, analysts' consensus estimates are calling for revenue of $62.46 billion, up 18% year over year, and near the high end of management's guidance.
As sales growth has become harder to come by, Amazon has lately been focusing on increasing its profit margins. In the first quarter, the company expanded margins in each of its operating segments, providing a significant boost to its bottom line.
In the North American segment, operating margins expanded from 3.7% in the year-ago period to 6.4% last quarter. In its international markets, the company's operating loss margin improved from -4% to -0.5%. Amazon Web Services also improved, with margins increasing from 25.7% of sales to 28.9%. This helps the company drive more of every sales dollar to the bottom line.
It's important to note that there's been a big change over the past three months that could send some of those metrics in the other direction. During Amazon's first-quarter conference call, CFO Brian Olsavsky dropped a bombshell, saying that the company was "currently working on evolving our Prime free two-day shipping program to be a free one-day shipping program." Olsavsky said the company planned to spend an estimated $800 million in the second quarter alone to fund the new, faster shipping initiative.
This will no doubt hit Amazon's bottom line, but by just how much remains to be seen.
Prime Day insight
Amazon just completed its annual Prime Day member shopping event, boasting that the two-day sale "surpassed Black Friday and Cyber Monday combined." The company has historically kept many of its most meaningful metrics close to the vest, preferring to release impressive-sounding tidbits with no basis for comparison.
While Amazon isn't likely to change its ways, the company could provide additional insight into the success of the sale. It's important to note, however, that since the event was held after the close of Q2, any impact wouldn't be seen until the third quarter.
Amazon will report its second-quarter earnings after the market close on July 25.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.