Andy Jassy, CEO of Amazon, speaks at the ceremonial ribbon cutting prior to tomorrow’s opening night for the NHL’s newest hockey franchise the Seattle Kraken at the Climate Pledge Arena on October 22, 2021, in Seattle.
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Amazon will report fourth-quarter earnings after the market close on Thursday. Here’s what analysts are expecting:
- Earnings: 18 cents per share, according to Refinitiv estimates
- Revenue: $145.42 billion, according to Refinitiv estimates
- Amazon Web Services: $21.87 billion, according to StreetAccount
- Advertising: $11.38 billion, according to StreetAccount
Amazon likely closed out its worst year for revenue growth in its quarter century as a public company, and another quarter of single-digit sales expansion is expected, as the company grapples with waning consumer demand from inflation and a deceleration in its cloud business.
The company warned in its most recent earnings report that fourth-quarter revenue would rise just 2% to 8% from a year earlier.
Amazon shares lost half their value in 2022, when higher costs tied to inflation, the war in Ukraine and supply chain constraints forced the company to recalibrate after its pandemic-fueled growth. Meanwhile, consumers continued their return to in-person shopping and pulled back on discretionary spending, adding to Amazon’s pain.
Even the holiday season was seen as fairly lackluster. Amazon’s online stores segment is expected to show a revenue decline of 1.4% year over year, according to FactSet estimates.
“While there was an expected boost to consumer spend in late November around the Cyber Five period (the Thanksgiving holiday shopping weekend was Amazon’s biggest ever), this uplift was likely short-lived, with December retail sales declining 1.1% [month over month], the steepest decrease in 2022,” analysts from Canaccord Genuity, who maintain a Buy rating on Amazon’s stock, wrote in a note to clients earlier this week.
CEO Andy Jassy’s efforts to reel in costs will be a major area of focus. In January, Amazon said it’s eliminating 18,000 jobs among its corporate workforce, after cutting a number of employees last November. The company has also instituted a hiring freeze in its corporate ranks, cut some projects and paused warehouse expansion in an effort to tame rising expenses.
Amazon Web Services is expected to show slowing growth during the fourth quarter as businesses softened their spending in an effort to cut costs. Cloud-computing rival Microsoft last week reported slowing expansion in its Azure unit.
AWS CEO Adam Selipsky said in an interview late last year at the company’s annual Reinvent customer conference that “we do see some customers who are doing some belt-tightening now.”
One bright spot could be Amazon’s advertising business, which is expected to post solid revenue growth during the quarter. Online advertising has come under pressure as inflation pushed some brands to recalibrate their budgets.
But Amazon’s ad business is poised to grow “at a mid-teen percentage range” in 2023, even against a tough macro backdrop, as sellers and vendors continue to buy targeted product ads, according to analysts at CFRA Research, which has a buy rating on Amazon shares.
Apple and Alphabet also report results after the bell on Thursday, wrapping up earnings season among the highest-valued tech companies.