What To Expect From AWS In Q4?

Earnings Chart

It’s that time of the month again! Or quarter, rather. Amazon is all set to report earning after market close on February 1, and AWS performance will squarely be in the spotlight.

For this fourth quarter, analyst expect earnings of $1.84 per share on sales of $59.8 billion.

Wall Street is expecting operating income margin of 25% and revenue growth in the low 40%, but then again, AWS has traditionally beaten the Street in terms of growth. So, it will be interesting to see what kind of numbers the company puts up later this week.

That’s because, even though the ecommerce giant is one of the most followed companies in the world, there is a bit of uncertainty this time around, as to whether Amazon will miss or beat its numbers.

And a large part of that is due to the major developments that have happened in the cloud world recently, with competition putting up a solid show. Amazon draws a large chunk of its value from its cloud division, and needless to say, investors are closely watching the numbers.

As far as expectations for this segment are concerned, Wall Street is very much keeping past AWS performances in mind.

For example, in the previous quarters, Amazon Web Services reported sales rising 43% year-over-year in Q1, 42% in Q2, 42% again in Q3. While the operating income of $1.17 billion on sales of $4.58 billion in Q3 was also par for course, giving the cloud arm an operating income margin of 25.5%.

Anything around this mark will please analysts.

Then again, there is a bit of a dread that AWS could actually miss the mark.

Although the market remains huge and growth is everywhere, one factor that could slow down AWS growth and potentially cause a dip in numbers is the fact that retailers are starting to shift away from the Amazon cloud platform.

Walmart purportedly told some of its suppliers not to use AWS, while Target also announced a scale back in use of AWS cloud services.

Forget retail, Amazon is also rumored to be considering entering markets like logistics, pharmacy, and healthcare. And if the company’s potential competitors start leaving AWS due to these moves, its growth could slow down considerably.

February 1 will paint the first real picture here.

Save the date.