Amazon Earnings: Good Kindle Sales Are Bad for Earnings

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Amazon earnings are on tap—and it is perhaps the highest-flying big tech stock out there, trading at more than 10 times revenue and a nosebleed P/E ratio.

Wall Street's looking for Amazon to report revenue of $22.3 billion and 28 cents earnings per share. Those expectations come despite the fact that Amazon actually guided to a loss at the midpoint of its range.

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Gene Munster over at Piper Jaffray sees good things coming from this report, though his own revenue and EPS estimates are below the Street — he points out that research firm Channel Advisor had holiday e-commerce numbers that suggested Amazon's revenue held up to expectations, and Channel Advisor seems to have predicted the direction of eBay's earnings pretty well two weeks ago.

Amazon: Good Kindle Sales Are Bad for Earnings
Amazon: Good Kindle Sales Bad for Earnings   

Two special wild cards here: One, guidance. Analysts' expectations for the March quarter are pretty bullish by historical standards, at $16.84 billion — so if Amazon guides to a midpoint below that, we'll see how the stock responds.

And then there are Kindles. Simply put, good Kindle sales are bad for earnings — so if Amazon sold a lot of them, it's likely to hurt operating income. Analysts seem to think Amazon shipped about 5 million of them last holiday quarter, so it seems a safe bet it moved quite a few more this season with a broader product lineup and the general excitement about tablets.

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Another angle on the Kindle question: Amazon has never actually given a hard number to Kindle sales, so if they do, that could excite traders. But even if they don't give a hard number, good color about sales growth could prove tantalizing enough to keep investors interested.

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