Amazon (AMZN.US) is another US mega-cap tech company that will show its third quarter financials this week. Company is scheduled to report Q3 2023 earnings today after the close of the Wall Street session today. Attention in the report will be primarily on AWS performance, given a mixed picture for cloud painted by earnings reports from other major US tech companies.
Amazon is a dominant US cloud company
Amazon is considered one of US three cloud giants, with Microsoft and Alphabet being the two other ones. However, Amazon is the dominant player here with its Azure Web Services (AWS) being the world's biggest cloud provider. It is also a key profit driver for the company. Deceleration in Alphabet's cloud sales growth from 28% in Q2 2023 to 22% in Q3 2023 boosted uncertainty over the outlook for the whole cloud business and triggered an almost 6% drop in Amazon shares yesterday. Failure to show strong cloud results by Amazon would likely be a trigger for another sell-off of the company's stock as well as other cloud-related shares.
What does the market expect?
- Net sales: $141.56 billion
- Online stores: $56.82 billion
- Physical Stores: $4.99 billion
- Third-Party Seller Services: $33.4 billion
- Subscription Services: $10.13 billion
- AWS: $23.13 billion
- North America net sales: $87.12 billion
- International net sales: $32.08 billion
- EPS: $0.58
- Operating Income: $7.71 billion
- Operating margin: 5.46%
- Fulfillment expense: $22.14 billion
- Seller unit mix: 58.6%
Key themes to watch in Amazon report today
- Cloud business growth
- AI outlook following $4 billion investment in Anthropic, the OpenAi rival
- Growth in its e-commerce business in a high-inflation environment
A look at the chart
Taking a look at Amazon chart (AMZN.US) at D1 interval, we can see that the stock has broken below the $125 support zone yesterday. A point to note is that this zone is a neckline of a head and shoulders pattern, and a break below it may signal that a deeper drop is looming. Textbook range of the downside breakout from this pattern suggests a possibility of a drop to as low as $102 per share - a level not seen since early-May 2023. However, a break below the 200-session moving average (purple line) would be needed first and this moving average proved to be an important swing area in the past.
Source: xStation5
