Amazon’s massive earnings-growth story is about to be on display once again

Meanwhile, full-year EPS growth is expected to log a big positive swing to $2.70, whereas the company lost 27 cents a share during 2022.

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Job cuts have something to do with it. Amazon, like Big Tech peers Meta Platforms Inc.

META

and Alphabet Inc.

GOOG


GOOGL,

got bloated with staff during the pandemic and slashed its workforce by a sizable amount roughly a year ago. The company has made smaller cuts more recently.

Read: Amazon’s Twitch plans to slash 500 jobs, in latest tech layoffs

“Recent layoffs signal to us that AMZN is committed to ‘Harvest Mode’ as they continue to optimize the cost structure,” Jefferies analyst Brent Thill wrote recently.

But Wall Street also will be looking in Amazon’s report Thursday afternoon for signs of continued progress when it comes to profit-drivers that are set to have a more lasting effect. One part of Amazon’s story lately has been the company’s move to make its retail fulfillment network more efficient, and analysts have been upbeat about the profit potential of that business.

“Overall, we continue to see strong support for North America retail margin expansion, as Amazon continues to clip away at fulfillment and shipping costs — driven by ongoing capacity utilization recovery and scaling up regionalized fulfillment & shipping operations,” Evercore ISI analyst Mark Mahaney wrote late last year.

BofA Securities analyst Justin Post added that he expects fourth-quarter retail margins to come in at 3.8% for the fourth quarter, which would mark a sequential contraction of just over 1 percentage point. While the margin number typically drops sequentially in the fourth quarter, Post anticipates that it will be up 4 points on a year-over-year basis.

“We think the best case for the quarter is a retail revenue and margin beat, with in-line [Amazon Web Services cloud-computing] revenues and management commentary suggesting AWS is accelerating in 1Q and margins still have significant improvement ahead,” he wrote.

Amazon’s growing advertising business also gives it a margin lift, and analysts are increasingly upbeat about that business now that the company is making a greater push for ads within its Prime Video business. Ads will be a big part of the 2024 narrative and could garner some attention on the earnings call.

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“Amazon’s monetization strategy for Prime Video is yet another data point, in a string of recent corporate decisions, that increases our conviction on profitability upside for Amazon’s business in 2024,” MoffettNathanson analyst Michael Morton wrote in a note to clients.

Yet while the margin progress stands out, Piper Sandler analyst Thomas Champion noted that about 70% of investor questions that he gets are about the cloud.

“If we were to boil it down to one number, ~13% [year-over-year. growth] would be the AWS growth ‘bogey’ and determine the outcome for the stock,” he wrote.