Amazon (AMZN.US) is set to release its Q3 earnings, with AWS growth and retail margins in focus.
1min read Amazon (AMZN.US) will report its third-quarter earnings after the market closes on October 31, and J.P. Morgan analysts are closely watching the strong performance of Amazon Web Services (AWS), but also mentioned the uncertainty of retail margins. The firm expects Amazon's third-quarter revenue to be $157bn, which is very close to the consensus estimate of $157.3bn on Wall Street.In contrast, the analyst is more optimistic about the company's operating profit, expecting $15bn, 2.1% higher than the consensus estimate of $14.7bn on Wall Street.AWS, which is Amazon's biggest profit source, is highly focused on, and J.P. Morgan analysts wrote that "AWS continues to show strong growth momentum, with data suggesting a possible 20% YoY growth." The analyst said this could translate into "significant" quarter-on-quarter growth.The firm expects AWS to contribute 9.5% to the overall operating margin, up from 4.2% in the previous quarter. However, retail remains challenged, and the shift in consumer demand has affected Amazon's own business profits, third-party services, and advertising revenue.J.P. Morgan expects Amazon's fourth-quarter revenue to be between $179.5bn and $186.5bn, slightly below the consensus estimate of $186.4bn on Wall Street. The firm also expects operating profit to be between $12bn and $16bn, while Visible Alpha's forecast is $17.4bn.J.P. Morgan analysts wrote: "Given the recent wage increase for Amazon's warehouse workers, we slightly lowered our EPS estimates for Q4 and 2025. We now expect Q4 EPS of $1.65bn, down from our previous estimate of $1.74bn." Analysts also warned that Wall Street may have overestimated the fourth-quarter guidance based on Amazon's historical guidance trends.Despite recent concerns about retail margins and earnings guidance, J.P. Morgan remains optimistic about Amazon's medium-term outlook, especially its exposure to AI-driven cloud demand.They wrote: "The growth of AWS and its margin opportunities are key reasons to hold Amazon stock." "We also believe that retail margins could re-accelerate in the second half of 2025 if the shift in consumer demand normalizes."J.P. Morgan rates Amazon stock as Buy, and its target price for Amazon is $210, currently trading around $184.71.Earlier, Amazon expected its third-quarter revenue to be between $154bn and $158bn, which would grow 9.5% at the midpoint. However, this expectation is still slightly lower than the market's expectation of double-digit growth. The company has been unable to meet its double-digit growth expectations due to revenue and capital expenditure challenges.
