Amazon Web Services: Why Cloud Growth Is Key for AMZN's Q2 Earnings
Many investors and competitors know Amazon AMZN as an e-commerce power helping reshape the retail world. Meanwhile, tech companies from Microsoft MSFT to Google GOOGL have struggled against Amazon’s AWS cloud computing business for years. But, just how important is AWS to Amazon and how much will it grow in the second quarter?
Amazon is expected to see its Q2 revenues climb by approximately 41% to hit $53.45 billion, based on our current Zacks Consensus Estimates. At the other end of the income statement, AMZN’s adjusted quarterly earnings are expected to skyrocket 522% from $0.40 per share to $2.49 per share. Much of this top and bottom line growth is set to come from Amazon’s core retail business.
Yet, in order for Amazon to remain the attractive growth company that it is today, it must continue to prove that it can expand in new growth areas—with cloud being one of the most crucial at the moment. Amazon was one of the first companies to push heavily into cloud computing. “AWS had the unusual advantage of a seven-year head start before facing like-minded competition, and the team has never slowed down,” CEO Jeff Bezos said in a statement last quarter.
Amazon’s AWS business had claimed roughly 33% of the worldwide cloud market over the last 12 months, according to a Synergy Research Group study published in April. Investors should note that Amazon was able to maintain its top spot even as the overall cloud computing market nearly tripled in size. The e-commerce giant’s closest rivals, including Microsoft, IBM IBM, Alibaba BABA, and Google, have all expanded as well.
Therefore, investors need to understand how much Amazon’s AWS business is expected to grow in the second quarter. Luckily, we can turn to our exclusive non-financial metrics consensus estimate file to gain a better understanding.
The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.
Last quarter, Amazon’s AWS unit saw its revenues skyrocket 49% from $3.66 billion to touch $5.44 billion. Looking ahead, the firm’s cloud computing revenues are projected to hit $5.99 billion in Q2, based on our NFM estimate. This would mark a roughly 46% surge from the year-ago period’s $4.10 billion. Furthermore, our estimate would represent an impressive 10% sequential climb.
Amazon is currently a Zack Rank #2 (Buy) that has seen its Q2 earnings outlook turn more positive recently. Make sure to check back here for our full analysis of Amazon’s actual Q2 results after market close on Thursday!
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