Amazon is rapidly evolving from the Everything Store to become the Everything Company, and analysts will be watching for growth across its diversified businesses in its third-quarter earnings. Analysts expect Amazon to report year-over-year growth of 21 percent on revenue of $24.9 billion and minus 12 cents earnings per share.
The company is far and away outperforming its peers. The stock is up more than 80 percent this year versus an average of about 9 percent among the top 10 biggest tech companies by market cap. The stock is up around 20 percent since the prior quarter, and expectations are high going into Thursday's earnings report.
Analysts point to several factors, but consistently highlight increasing Amazon Web Services adoption and Amazon Prime traction as driving forces.
Amazon began breaking out the AWS segment at the start of the year, revealing the strength of its business, and analysts will be watching growth rate and margins very closely. Bank of America Merrill Lynch is forecasting a growth rate of 78 percent year over year and $2.08 billion in revenue for the segment. "We view AWS as a transformational business and expect optimism on enterprise adoption to support the Amazon bull thesis," wrote analyst Justin Post.
Post expects AWS Q3 margins of 22 percent and points to the absence of a price cut to suggest upside to the fourth quarter continuing into next year. "Increasing customer traction and a less competitive pricing environment should support strong top line and enthusiastic investor sentiment (a $200 billion-plus long-term valuation potential)."
Following the AWS re:invent conference this month, where Amazon unveiled a slew of new products, most analysts are similarly bullish on AWS' potential. "We are confident that the AWS segment will be a significant contributor to Amazon's profitability going forward," wrote Nomura's Robert Drbul.
Of course, AWS currently makes up a small slice of the company's total pie. Post expects Amazon to report North American revenue of $14 billion and international revenue of $8.2 billion.