What to Look For From AMZN

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Key Takeaways

  • Analysts estimate EPS of $9.56 vs. $5.01 for Q1 FY 2020.
  • Amazon’s cloud services business is expected to post healthy revenue growth, but slower than pre-pandemic levels.
  • Companywide revenue growth is expected to accelerate compared to a year earlier.

Amazon.com Inc. (AMZN) has posted dramatic increases in both profits and sales across multiple business lines over the past year as the COVID-19 pandemic has driven customers to the company’s e-commerce and cloud services offerings. The tech giant reported $125.5 billion in Q4 FY 2020 sales, a record, and the first time that quarterly revenue surpassed $100 billion.

Investors will watch to see if Amazon can keep up that torrid growth rate when it reports earnings after market close on April 29, 2021. Analysts expect earnings per share (EPS) to nearly double year-over-year (YOY) after declining a year earlier. Revenue is expected to climb at a significantly higher rate than Q1 FY 2020.

Investors will also look closely at another key metric, Amazon Web Services (AWS) revenue. AWS is Amazon’s cloud-computing service, which has grown quickly in recent years. Analysts predict that AWS revenue will climb at a robust pace in line with the prior three quarters, though slower than the same quarter a year earlier.

Amazon shares outperformed the broader market between June 2020 and February 2021 even though they traded largely sideways during that period. The company’s stock dropped in mid-February and has struggled to outpace the market even as it recovered in recent weeks. As of April 28, Amazon shares have slightly outperformed the S&P 500, with 1-year trailing total returns of 50.0% as compared with 46.4% for the S&P.


Source: TradingView.

Amazon Earnings History

Despite Amazon’s tepid stock performance, the company has posted robust earnings growth in recent quarters. After a decline of 29.4% in Q1 FY 2020, Amazon’s EPS rose 97.4% in Q2, 192.0% in Q3, and 117.7% in Q4. For Q1 FY 2021 analysts estimate EPS will jump 90.7%. This strong performance is a sharp departure from FY 2019, when Amazon reported weak earnings growth, or a decline, in three out of four quarters.

Amazon’s revenue growth has been much more consistent. The company has posted at least 16 straight quarters sales growth ranging from 17.0% to 43.6%, the latter occurring in Q4 FY 2020. Analysts predict a revenue increase of 38.6% YOY in Q1 FY 2021, a notably faster pace than Q1 FY 2020.

Amazon Key Stats
  Estimate for Q1 FY 2021 Q1 FY 2020 Q1 FY 2019
Earnings Per Share ($) 9.56 5.01 7.09
Revenue ($B) 104.5 75.5 59.7
Amazon Web Services Revenue ($B) 13.1 10.2 7.7

Source: Visible Alpha

The Key Metric

As mentioned, investors also will focus on another key metric: revenue generated by AWS, Amazon’s cloud-computing platform. The AWS segment provides global compute, storage, database, and other services to start-ups, enterprises, governments and their agencies, and academic institutions. AWS represented only 10.1% of Amazon’s total revenue for Q4 FY 2020. Still, because it has significantly higher profit margins than the company’s e-commerce business, AWS accounted for 51.9% of the company’s operating income during that period. Amazon faces stiff competition from Microsoft Corp.’s (MSFT) Azure and Alphabet Inc.’s (GOOGL) Google Cloud Platform, although the shift toward a work-from-home economy has continued to stimulate demand for cloud-services products.

AWS revenue has seen healthy growth in recent years, but it has decelerated in the past several quarters. In FY 2018, for example, AWS revenue grew by between roughly 45% and 49% YOY each quarter. Growth slowed into the mid-30s in FY 2019 and into the high 20s in FY 2020. It has hovered between 28% and 29% for the past three quarters. In Q1 FY 2021, analysts expect that trend to continue, with AWS revenue rising 28.7% YOY.

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