Can AWS Aid Amazon's (AMZN) Q3 Earnings Despite Competition?
Zacks Investment Research | Oct 21, 2019 10:21PM ET
Amazon (NASDAQ:AMZN) is set to report third-quarter 2019 results on Oct 24.
The cloud computing division, Amazon Web Services (AWS), is dominating the cloud market on growing adoption and popularity. This trend is anticipated to get reflected in the third-quarter performance.
We note that solid momentum across AWS has been aiding Amazon in generating higher margins from its cloud business compared with the traditional retail business.
Notably, AWS revenues came in at $8.38 billion, accounting for 13.2% of the net sales in the last reported quarter and surged 37.3% year over year. We further note that AWS operating income improved 29.2% from the year-ago quarter to $2.12 billion, a trend that is likely to have continued in the third quarter.
Notably, all the abovementioned factors are anticipated to have contributed to the top line of AWS in the third quarter.
The Zacks Consensus Estimate for third-quarter 2019 AWS net sales is projected at $9.12 billion, indicating an improvement of 99.1% from the year-ago reported figure.
However, Amazon has been facing stiff competition in the cloud computing space from the likes of Microsoft (NASDAQ:MSFT) , Alphabet’s (NASDAQ:GOOGL) Google, International Business Machines (NYSE:IBM) and Alibaba (NYSE:BABA) among others, which is anticipated to get reflected in the third-quarter results.
Amazon.com, Inc. Quote
Portfolio Strength Aiding Clientele Growth
During the third quarter, AWS was selected by The Globe and Mail as the preferred cloud provider. Notably, the latter leverages AWS to run its popular recommendation engine and proprietary Sophi predictive analytics platform.
Moreover, The Globe and Mail’s reporters and editors have been utilizing Amazon SageMaker, Amazon Comprehend, Amazon Rekognition, and Amazon Textract.
Further, AWS added another customer namely Pro Football Focus. Notably, the latter selected AWS as its official cloud and ML provider and has transitioned its entire infrastructure to AWS.
Hence, the company has witnessed expanding customer base during the quarter under review, which can be attributed to portfolio strength. We note that AWS announced general availability of Amazon Quantum Ledger Database, AWS IQ and Amazon EC2 G4 instances to name a few.
Strengthening services portfolio and clientele are likely to have contributed to the net sales of AWS in the third quarter.
Currently, Amazon carries a Zacks Rank #4 (Sell).
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