Amazon Q1 Earnings: High Expectations Amid Cost-Cutting

• Amazon’s Q1 results are expected to beat on the top and bottom lines. 
• AMZN shares are up roughly 3% in pre-market trading. 
• Big Tech has reported impressive Q1 results so far. 

In what is shaping to up to be a big week for Big Tech, Amazon is on deck to report its first-quarter earnings after the bell on Thursday. AMZN stock is up by approximately 3% in pre-market trading as investors celebrate tech results so far, including Meta and Microsoft.  

Amazon stock has participated in the growth-stock rally in 2023, rising 28% year-to-date. 

Analysts widely anticipate that Amazon will beat estimates on the top and bottom lines, if only slightly. Consensus estimates are for Amazon to report revenue of $124.5 billion on EPS of $0.21 per share. Trefis is even more bullish, predicting revenue of $125.9 billion on EPS of $0.22. 

All eyes will be on Amazon Web Services cloud business, where rivals Microsoft and Alphabet have been gaining strength, their latest quarterly results show. Nevertheless, businesses have reportedly been slowing their spending in this area due to the slowing economy. 

Last year, Amazon’s AWS was growing at a 20% clip, but that same pace is not expected this year. Jefferies analysts, which have a buy rating on AMZN stock, predict that AWS revenue increased 13% in Q1. Estimates according to StreetAccount target $21.2 billion and $9.08 billion for AWS and ad sales, respectively. 

The economy is another headwind, taking aim at Amazon’s core retail business. Analysts are cautious about Amazon’s outlook for the remainder of 2023 when a recession could potentially rear its head. Amazon Prime subscriptions and ad revenue are other areas to watch. 

Cost-Cutting in Focus

Amazon’s earning report will come on the heels of Meta’s, which managed to impress Wall Street with better-than-expected results, sending the stock of Facebook’s parent company up by a double-digit percentage. 

One of the catalysts for Meta’s beat was its cost-cutting initiatives via layoffs. Amazon has similarly announced layoffs in cloud computing and its HR departments. 

It’s part of Amazon’s broader cost-cutting plan to implement 9,000 job cuts put in motion by CEO Andy Jassy. Whether or not that will lead to further cost-cutting initiatives remains to be seen.