Daily Brief - Amazon Earnings Insight

TLDR: Fresh off significant reveals from Microsoft and Alphabet, can Amazon deliver a performance to match or even outshine its Big Tech brethren?

Amazon is projected to unveil $142.6 billion in revenue for the fiscal fourth quarter, marking a sharp increase from last year, driven largely by its dominant cloud segment, Amazon Web Services (AWS), expected to contribute $24.1 billion.

The firm's expansion into AI and digital advertising also plays a pivotal role, with substantial growth anticipated in these sectors.

Amidst its ambitious strides in artificial intelligence, including a substantial investment in AI startup Anthropic, Amazon is defining its future path. This move, alongside the launch of Amazon Bedrock, is poised to reshape how businesses and consumers leverage technology.

However, the road ahead isn't without hurdles. Recent job cuts within AWS signal potential challenges in Amazon’s most lucrative division. Moreover, intensified competition in both cloud services and e-commerce, from emerging players like Temu and Shein, adds layers of complexity.

Given the prospect of prolonged higher interest rates, the market is banking on Amazon to surpass earnings expectations to sustain the current rebound.

Scenario Spotlight: If Amazon beats earnings estimates

The chart above show the historical 1-month response from Amazon stock post the past 20 episodes when the company beat earnings estimates.

Market Movers: Response from tech peers

Here is the historical 1-month response from Amazon's peers, when the company beats earnings estimates:

1. Netflix: 4.50%
2. Alphabet A: 3.59%
3. Shopify: 2.49%
4. Microsoft: 1.89%
5. Oracle: 1.17%
6. Best Buy: 1.09%
7. eBay: 0.24%
8. Disney: -0.20%
9. META: -1.38%
10. Walmart: -1.40%

Earnings Spotlight: AMD reports tonight

As AMD prepares to release its first-quarter earnings on Tuesday, investors are focused on its data center segment's performance amidst the AI surge.

Analysts expect revenues of $5.46 billion and net income of $333.23 million or 20 cents per share, reflecting improvements from the previous year despite a quarter-over-quarter dip. The data center revenues are anticipated to be $2.32 billion, driven by demand for AMD's new AI chip, the MI300.