After the solid results from Microsoft - the world's largest company whose market cap is now flirting with $3 trillion - investors have been incrementally more positive on the Amazon's AWS cloud setup into today's earnings, with the investment thesis driven by ecommerce share, margin expansion and the potential for AWS growth recovery through the year.
Of course, since everyone is well-aware of this thesis, UBS trader Kelsey Perselay notes that "the amount of debate/dialogue has really died down."
Not surprisingly, everyone and their kitchen sink, is long the stock: according to Goldman, client positioning is a 9 on the bank's 1-10 scale, and "most investors feel relaxed/confident into this quarter."
Goldman thinks that people expect a beat and further acceleration on AWS (vs cons ~13% y/y and ~13% y/y last qtr), a slight beat on online sales (vs cons 7%) and a solid beat on EBIT vs cons ~$11bn (for ref, AMZN been beating by $2-4bn last few qtrs). Looking ahead, investors looking for high-end of guide to land near street numbers for Revs (cons ~$150 bn) / OI (~$12.5 bn).
Summarized, here are the top bogeys for the quarter:
Key questions for the 1Q call include:
overall EBIT for 2Q as they are expected to show ongoing efficiency this year;
cadence of enterprise cloud optimization efforts and signs of growth acceleration for AWS in 2Q;
pace of retail margin improvement and medium-term targets for retail;
capex outlook for 1Q and for 2024;
impact of Amazon Bedrock and any disclosures around growth contribution from GenAI workloads;
margin improvements from regionalization of fulfilment operations and broader cost control efforts;
the outlook and incremental margins associated with video advertising in Prime content and advertising more generally; and
competitive dynamics from Shein, Temu, TikTok, etc.
Catch-Up or Catch-Down...
