Can Amazon Sustain Impressive Growth In Its Q3 Earnings?

by Trefis Team
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Amazon (NASDAQ:AMZN) is scheduled to report its third quarter results on Thursday, October 25. The e-commerce giant has reported strong revenue growth in recent years, driven by Amazon Web Services (AWS) as well as its core commerce business. Amazon has consistently managed to generate high revenue growth despite the large base factor. We expect this trend to continue through the end of the year. We have summarized our forecasts and expectations in an interactive earnings preview dashboard for Amazon where you can change expected segment revenue and margin figures to gauge how it will impact the company’s expected results.

Key Growth Trends

We forecast Amazon North America revenue to be driven by consistent growth in e-commerce complemented by an increase in Prime subscription fees, sales of Amazon’s products such as Echo and an increase in grocery sales due to the addition of Whole Foods. Accordingly, North America revenues are forecast to be up by almost 35% on a y-o-y basis to $35 billion. Similarly, we forecast Amazon International revenues to increase over 20% over Q3’17 to $16.5 billion. Amazon Web Services revenues are likely to remain the fastest growing revenue stream, with a revenue increase of around 45% to nearly $6.5 billion for the quarter. These expectations are consistent with Amazon’s first half performance this year. In addition, Amazon’s margins have been significantly higher than 2017 levels. We expect the trend to continue in Q3 as well, with operating profit margin expanding from 0.8% in Q3’17 to 3.2% in Q3’18. Consensus estimates for Amazon’s earnings per share for the September quarter also range from $2.25 to $4.40 per share, compared to around 50 cents a share in the comparable prior year period.

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