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Amazon will report its second-quarter earnings after the market closes on Thursday, and analysts expect revenue from its cloud computing business to surge.
According to consensus among Visible Alpha analysts, Amazon's total revenue is expected to grow 9.5% year-on-year to $162.2 billion. This falls at the mid-range point of Amazon's own guidance of $159-$164 billion. Operating income is forecast at $16.7 billion, marking a 13.8% jump from the same period last year, according to IG analysts. Amazon's own guidance for its operating income ranges from $13.0-17.5 billion.
Analysts also project earnings per share to increase to $1.33, according to Investopedia, a year-on-year increase of around 6%.
Off a positive outlook for expected revenue, all 25 analysts tracked by Visible Alpha give Amazon's stock a "buy" or equivalent rating, with an average price target of $249. This would surpass Amazon's previous record close of $242 in February. Shares in Amazon currently trade around $232, up nearly 6% year-to-date.
Analysts expect robust growth from the company's online retail business and cloud service, Amazon Web Services (AWS).
The generative artificial intelligence boom is a windfall for AWS, as it provides cloud computing for AI companies like Meta and Anthropic. Last quarter, AWS sales accounted for about half of net income. Powered by "AI infrastructure demands and AI adaptation," IG analysts expect AWS and the company's advertising segments "will continue as the growth engine for Amazon's business." Echoing this, AWS revenue is expected to be around $30.7 billion, a year-over-year increase of 17%, according to Visible Alpha consensus.
Advertising segments are expected to grow by the same amount according to IG. "The company's vast customer database provides rich material for improving advertising algorithms and targeting, which could drive higher margins through better conversion rates and increased advertiser spending," wrote IG analyst Fabien Yip.
Meanwhile, Amazon's online marketplaces, which account for one-third of total revenue, are forecast to grow at a more modest 6%, according to Visible Alpha analysts, with tariffs on U.S. imports weighing on the retail outlook. Nonetheless, North America retail operating margin has increased significantly from a meager 1.1% at the beginning of last year to an estimated 5.98% for Q2.
"Market participants will closely monitor e-commerce sales for clues about consumer sentiment amid the current global environment of heightened uncertainties," Yip said.
Indeed, management noted that the range in its forecasting is because the figures anticipate a range of uncertainties such as "foreign exchange rates, changes in global economic and geopolitical conditions, tariff and trade policies, and customer demand and spending (including the impact of recessionary fears)." Its revenue projection, for example, accounts for an "unfavorable impact" of approximately 10 basis points from foreign exchange rates, in light of the U.S. dollar's continued decline this year, having fallen almost 11% in the first half of the year, against a basket of currencies.
