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Amazon set to report earnings amid recession fears

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Amazon (AMZN) is set to report its Q2 2022 earnings after the closing bell on Thursday.

It’s a dicey time for tech, and earnings season has only continued to bear that out. On Wednesday, Facebook-owner Meta Platforms (META) reported its first-ever year-over-year revenue drop and, earlier this week, both Google parent Alphabet (GOOG, GOOGL) and Microsoft (MSFT) reported earnings that didn’t meet Wall Street’s expectations. Although both Microsoft and Google particularly have their bright spots, this round of earnings season has been relatively brutal for the tech sector.

So, where does that leave Amazon? Here are the most significant numbers Wall Street’s anticipating for Amazon’s upcoming earnings report, as compiled by Bloomberg:

Revenue: $119.53 billion expected versus $113.08 billion last year

Adjusted EPS: $0.52 expected versus $15.12 last year (prior to a stock split)

AWS revenue: $19.4 billion expected versus $14.81 billion last year

What experts are watching for
The future of Amazon’s cloud business is key. For instance, analysts at Mizuho Securities — James Lee and Wei Fang — worry that recession fears will cause corporate spending on cloud services to decline, negatively affecting Amazon Web Services, or AWS, according to a July 20 note.

Data from the Commerce Department showed Thursday that the economy contracted for the second straight quarter in Q2, a development that will likely further stoke recession concerns.

“Our recent industry call with a leading IT services firm indicates that enterprise CIOs are anticipating a shallow recessionary scenario and planning to reduce cloud spending growth by about 10 points in FY23,” the note reads.

Still, Lee and Fang are notably optimistic about Amazon in the long-term.

“While the valuation is attractive, and we remain constructive on Amazon longer-term, we believe the stock lacks catalysts in the short-term due to a likely downward revision cycle,” the analysts wrote. “Amazon remains a Buy in our universe, as we see potential EBITDA upside in 2024 from products such as advertising, expanding Prime products, and AWS up-sells.”

Moreover, cloud competitor Microsoft (MSFT) saw revenue for its Azure cloud computing service, Azure, jump 40% year over year when it reported earnings earlier this week, as my colleague, Dan Howley, reported.

Amid the tech rout, Amazon’s been in a moment of profound transition internally. CEO Andy Jassy took on the company’s top job just last year, while long-serving consumer head Dave Clark recently stepped down to join logistics company Flexport.