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What to Expect from Amazon (AMZN) Q4 Earnings, Revenue, AWS & More

Benjamin Rains
Post the sale of CytoSport, the Evolve and Muscle Milk brands are no longer part of Hormel Foods' (HRL) business.

Amazon AMZN saw its stock price jump nearly 5% during regular trading hours Wednesday, just one day before it is set to release its fourth-quarter earnings. The question is does this climb mean investors expect big things from Amazon’s Q4 financial results, or did it simply get a boost from Apple AAPL, Alibaba BABA, Boeing BA, and other giants who climbed following their quarterly earnings releases?

Top & Bottom Line Outlook

Amazon, unlike Apple, Alibaba, and others, doesn’t have as much exposure to the slowing Chinese economy. Still, Amazon is coming off a third-quarter that saw its revenues slow, which led to AMZN’s significant decline in the last quarter of 2018. In fact, Amazon’s third-quarter revenues climbed only 29%, compared to Q2’s 39% surge, Q1’s 43% climb, and Q4 2017’s 38% jump.

With that said, our current Zacks Consensus Estimate calls for Amazon’s Q4 revenues to climb 18.65% from the year-ago period to reach $71.73 billion. Cleary, the fourth quarter looks as though it is set to be the e-commerce giant’s slowest in some time.

Meanwhile, Amazon’s adjusted Q4 earnings are projected to soar 156.94%. Plus, AMZN has earned some positive earnings estimate revisions over the last 30 days, which means at least some analyst are higher on Amazon’s bottom line than they were not too long ago. Amazon’s earnings might become more important going forward as the company’s size makes massive year over year revenue growth harder to achieve.

Investors also need to know what to expect from some of Amazon’s most important businesses Thursday because they could determine how AMZN stock trades, especially in the near-term.

Amazon Web Services

AMZN’s cloud computing business will remain a closely watched division on Wall Street. Our current NFM estimate calls for Amazon’s AWS revenues to jump 43% from $5.113 billion in the year-ago period to reach $7.306 billion. Last quarter, AWS revenues climbed 46% and they surged 44% in the year-ago period. So clearly, this would fall in line with AWS’ performance in recent periods.

Plus, Amazon captured 35% of the cloud infrastructure services market last quarter, to destroy second-place Microsoft’s MSFT 15% share, as well as IBM IBM and Google GOOGL.

Subscriptions

Investors will also want to pay close attention to Amazon’s subscription services segment. This unit’s revenues, which include fees associated with Amazon Prime memberships, audiobook, digital video, e-book, digital music, and other non-AWS subscription services, are projected to surge 35% to reach $4.283 billion. Our NFM projection would mark a slowdown from Q3’s 52% climb and Q4 2017’s 47% jump.

Amazon’s subscription business not only helps its core e-commerce business grow because of the shipping deals, but it will also become more important as it tries to challenge Netflix NFLX and soon enough Disney DIS, AT&T T, and others in the quickly growing streaming entertainment market.

Advertising

Lastly, we are going to check in on Amazon’s “other” revenue segment. This unit is primarily made up of Amazon’s growing advertising business, which hopes to take more market share from Facebook (FB) and Google for years to come. This segment’s revenues skyrocketed 122% last quarter and 129% in Q2, and are projected to surge over 97% in the fourth quarter to reach $3.425 billion.

Bottom Line

Amazon is a currently a Zacks Rank #2 (Buy) based on its recent positive earnings estimate revision activity. AMZN stock popped 4.80% during regular trading Wednesday to hit $1,670.43 a share, which marked an 18.5% downturn from its 52-week high.

Despite its projected top-line slowdown, which might delight the likes of Walmart WMT and Target TGT, Wall Street will be watching closely when Jeff Bezos’ company reports its Q4 2018 financial after the closing bell Thursday.

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