Amazon: What To Expect For AWS In Q4

Amazon (AMZN) reports fourth quarter results on February 1 after market closures with analysts expecting $ 1.84 per share on $ 59.8 billion. Although the e-commerce leader is one of the most respected companies in the world, there is some uncertainty about whether Amazon will miss or beat the numbers. The options market is about 7-8% compared to the historical 5% movement in the past.

As a number of major cloud developments have recently occurred and much of Amazon's value comes from its cloud division, Amazon Web Services (AWS), investors will closely track segment numbers:

Expectations for AWS

With regard to Wall Street estimates, Wall Street generally expects AWS to grow in the low year-on-year reach of 40% in sales and sports of around 25%. % of the operating margin in the fourth quarter.

This is about the past performance of AWS. In previous quarters, Amazon Web Services reported an annual sales increase of 43 percent in the first quarter, 42 percent in the second quarter and 42 percent in the third quarter. In addition, the division earned an operating profit of $ 1.17 billion in the third quarter for sales of $ 4.58 billion, giving it an operating margin of $ 25 million. 5%.

These figures reflect the growth of the industry as a whole, with analysts expecting sector revenue to increase by 43% year-on-year to $ 54 billion.

Why AWS might miss

Although the market is huge and growth is ubiquitous, one factor may slow the growth of AWS and possibly lead to failure. More specifically, Amazon's physical store ambitions, caused by the purchase of Whole Foods, have pushed retailers away from AWS. According to CNBC at the end of June, Wal-Mart (WMT) told some of its suppliers not to use Amazon Web Services. If Wal-Mart is expected to tell its suppliers not to use AWS, the retail giant is also avoiding AWS.

Wal-Mart is not the only one. According to CNBC at the end of August, Target also "reduced the use of Amazon Web Services". Although Wal-Mart and Target are not exactly the largest cloud users in the world, both deviations can be a symptom of a bigger problem: since Amazon seems to want to do everything, more companies could leave AWS. them in the future. Amazon does not just focus on selling bricks and mortar.

Rumor has it that the company is planning to introduce logistics, pharmacy, healthcare, etc. If even half of Amazon's potential competitors were to leave, AWS's growth could slow considerably. If the growth of AWS slows down, the value of Amazon will not be that great.