Prime and Amazon Web Services' path to more profit will be in focus as Wall Street watches Amazon's earnings report after Thursday's closing bell.
Amazon is not known for always turning a profit, as CEO Jeff Bezos plows money into investments — but this time, the company is expected to post positive earnings for the fifth-straight quarter. Analysts expect Amazon to report earnings of $1.11 per share on revenue of $29.55 billion in the second fiscal quarter, according to a Thomson Reuters consensus estimate.
"What has always pressured the profitability has been the aggressive spending that Bezos has done," said Edward Jones analyst Josh Olson. "We see him continuing to invest in fulfillment centers, video content ... and then data centers. The one difference though is that we might have reached a tipping point in a long-term arc of the operating margins. The amount of spending isn't going to outweigh the profitability every other quarter."
Ronald Josey of JMP Securities concurred, citing Amazon's scale. The company has invested in delivery after high fulfillment costs weighed on gross margins in the holiday quarter last year.
"There's a lot of things that make it a more structurally profitable business," Josey said. "Yes, they're investing in Echo, in video series. But we believe they're at a scale, that it's inherently more profitable than it was even a year ago."