Will Amazon's (AMZN) Q2 Earnings Benefit From AWS Momentum?

Amazon’s AMZN second-quarter 2022 results, which are scheduled to be released on Jul 28, are likely to reflect gains from its strengthening cloud service offerings.

The cloud computing division, Amazon Web Services (“AWS”), dominates the cloud market on the back of its growing adoption and popularity. This is anticipated to get reflected in the company’s second-quarter results.

We note that the solid momentum across AWS has been aiding Amazon in generating high margins from the cloud business. The trend is expected to have continued in the to-be-reported quarter.

AWS revenues were $18.4 billion, accounting for 16% of net sales in first-quarter 2022, rising 37% year over year. We further note that AWS’s operating income improved 56.6% from the year-ago quarter to $6.5 billion.

An expanding customer base and a strong discount offering for long-term deals are likely to have driven AWS’s top line in the quarter under review.

The Zacks Consensus Estimate for second-quarter 2022 AWS net sales is pegged at $19.5 billion, indicating an improvement of 31.6% from the year-ago quarter’s reported figure.

Click here to know how the company’s overall second-quarter results are likely to be.

Amazon.com, Inc. Price and EPS Surprise

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Factors to Note

In the second quarter, Amazon expanded the cloud services portfolio by unveiling and making several AWS services generally available.

The company announced the general availability of AWS IoT TwinMaker, AWS Amplify Studio, Amazon Aurora Serverless v2, AWS Mainframe Modernization, and Graviton3 processor-backed Amazon Elastic Compute Cloud C7g instances.

Notably, solid portfolio strength is likely to have helped AWS sustain its dominance in the cloud market by aiding it in sustaining momentum among existing customers as well as attracting new ones.

In the quarter under review, AWS was picked by Boeing as the strategic cloud provider. In a bid to bring advancement in aerospace design and manufacturing, Boeing will migrate its applications from on-premise data centers to AWS. Boeing will leverage AWS’s scalable, robust, and high-performing infrastructure and cloud services, including high-performance computing.

Apart from portfolio strength, strengthening the data center network and increasing the number of AWS regions across the world are likely to have aided AWS’s second-quarter performance in the global cloud computing market.

Zacks Rank & Stocks to Consider

Currently, Amazon has a Zacks Rank #3 (Hold).

Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Aspen Technology AZPN, Analog Devices ADI and Agilent Technologies A, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Aspen technology has returned 16.8% in the year-to-date period. The long-term earnings growth rate for AZPN is currently projected at 18.4%.

Analog Devices has lost 11% in the year-to-date period. The long-term earnings growth rate for the company is currently projected at 12.3%.

Agilent Technologies has lost 27.9% in the year-to-date period. The long-term earnings growth rate for the company is currently projected at 10%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.