Amazon.com Inc. (NASDAQ/AMZN) is due to report earnings after the closing bell on Thursday July 23rd. Here are several things to watch for in the report.
According to Amazon’s own outlook, the company expects revenue to be between $20.6 billion and $22.8 billion for the second quarter. As for net income (or loss), the company expects the range to be between a loss of $500 million and a profit of $50.0 million.
According to analysts polled by Reuters, the expected revenue is $22.2 billion, with a net loss of $0.16 per share.
The market loved the company’s previous earnings report. After the news release, Amazon’s stock price went up more than 12%.
The market for cloud computing has been growing at an incredible speed and Amazon has taken part in the rapid growth with the Amazon Web Service (AWS)—the company’s cloud computing service. In the first quarter of 2015, AWS net sales came in at a record $1.57 billion, a 49.1% increase year-over-year. AWS also announced new offerings a few months ago, including Amazon Machine Learning, AWS Marketplace for Desktop Apps, and AWS Lambda.
According to Global Industry Analysts Inc., the market for global cloud computing services is expected to grow to $127 billion by 2017. (Source: Openview, last accessed July 21, 2015.) Analysts expect continued strong growth for AWS in the second quarter earnings report.
Investors should know that currency headwinds would continue to affect results in Amazon’s international business. In the previous earnings report, Amazon’s international revenue declined two percent year-over-year to $7.75 billion. However, if you exclude exchange rate impact, international revenue would show a 14% increase. With the U.S. dollar still strong, international results in the second quarter are likely to be toned down.
The company’s performance in China is another interesting number to look at. Although Amazon has entered China more than a decade ago, the company is yet to show significant growth in the country. In 2014, Amazon only captured 1.3% market share of business-to-consumer (B2C) online shopping in China. This is a tiny amount compared to the 61.4% captured by the dominant Tmall.com owned by Alibaba Group Holding Limited (NYSE/BABA) and the 18.6% captured by JD.com, Inc. (NASDAQ/JD). (Source: Statista, last accessed July 21, 2015.)
Amazon realized the difficulty in its expansion in China and decided to use the country’s largest B2C platform, Tmall.com, instead of its own. The company opened an Amazon international brand flagship store on Tmall.com, focusing on directly imported products. Financial results from this strategy will be worth looking at, too.