Investing.com - Amazon.com Inc (NASDAQ:AMZN) is set to release its second-quarter earnings on Thursday. Investors are closely monitoring the performance of Amazon Web Services (AWS) and the profitability of its expansive e-commerce operations.
Ahead of this release, Amazon stock saw an increase on Wednesday closing 2.9% higher.
Although the stock has recently risen, it has experienced a decline in the past few weeks. After reaching a new high and surpassing a $2 trillion market cap late last month, Amazon shares have lost about 6% in July. Despite this, the stock is up 25% so far this year.
Amazon is expected to report earnings of $1.03 per share, which would be a 57% increase from the same quarter last year. Revenue is projected to grow by 10.6% year-over-year to $148.67 billion
Investors are paying particular attention to two key areas that could significantly impact the market's response to Amazon's earnings.
Investors are particularly focused on AWS, given that AI is expected to boost demand for cloud services. There is anticipation that Amazon will show renewed sales growth in AWS, which is a vital profit driver.
AWS sales are expected to grow by 17.6% year-over-year, reaching $26 billion. In the first quarter, AWS sales grew by 17.2%.
Amazon is the last of the major cloud computing providers to report its June-quarter earnings. Microsoft Corporation (NASDAQ:MSFT) recently reported a 30% growth in Azure cloud revenue for the quarter, slightly below the 31% expected by analysts. Despite an initial drop in Microsoft's stock, company leaders reassured investors of strong AI-related cloud demand.
Alphabet Inc (NASDAQ:GOOGL) also reported better-than-expected cloud revenue growth for its June quarter.
Analysts will also be watching for the costs associated with Amazon's AI initiatives. Increasing capital expenditures from tech giants are raising questions about the long-term returns on AI investments.
Investors are also interested in the profitability of Amazon's retail operations. CEO Andy Jassy, who took over three years ago, has focused on reducing costs and improving the efficiency of Amazon's extensive e-commerce business.
This strategy led to a significant increase in operating income for Amazon. In the first quarter, Amazon reported $15.3 billion in operating income, a 220% increase from the previous year. While AWS is the main contributor to this income, North American operations also generated $5 billion in operating income, up 450% year-over-year.
For the second quarter, analysts expect operating income to grow by 79% year-over-year to $13.7 billion. This includes an $8.5 billion operating profit from AWS and a $5.4 billion operating profit from North American retail. Analysts also forecast a modest $56 million profit from international operations.