While many other tech giants have surged to new highs during the last six months, Amazon.com (AMZN) is trading about 10% below its mid-2018 and mid-2019 highs.
That might spell relatively subdued expectations for Jeff Bezos' firm heading into its report for seasonally big Q4. Currently, the consensus among analysts polled by FactSet is for Q4 revenue of $86.03 billion (up 19% annually) and GAAP EPS of $4.05 (down 33% amid heavy spending).
For Q1 -- Amazon provides quarterly revenue and operating income guidance in its reports -- the consensus is for revenue of $71.61 billion (up 20%) and GAAP operating income of $4 billion.
I'll be live-blogging Amazon's report, which is due after the bell on Thursday, along with an earnings call set for 5:30 P.M. Eastern Time. Here are a few things to watch.
1. E-Commerce Growth Rates
With the help of its 1-day Prime shipping initiative, Amazon's North American and International segments saw their revenue growth accelerate to 24% and 18%, respectively, in Q3. For Q4, the consensus is for North American revenue to be up 19% to $52.61 billion, and for International revenue to be up 12% to $23.43 billion.
Also keep an eye on the growth rates that Amazon reports for its online stores (direct e-commerce) and third-party seller services revenue, and for its total paid unit sales. In Q3, online stores revenue rose 21%, seller services revenue rose 27% and paid units rose 22%.
2. AWS Growth
Amazon Web Services (AWS) is still the 800-pound gorilla of the public cloud services space, and is coming off a Q3 in which its revenue rose 35% to $9 billion. But between some 2019 growth deceleration, recent AWS management changes and the publicity that Microsoft's (MSFT) public cloud momentum has obtained as of late, AWS' performance might get more scrutiny than usual this time around.
Currently, the consensus is for AWS' revenue to be up 32% in Q4 to $9.82 billion, and for its operating income (pressured by strong capex growth) to be up 13% to $2.45 billion.
3. Shipping Costs and Gross Margin
Thanks to the 1-day Prime effort and the giant investments that Amazon has concurrently made in its own delivery operations, Amazon's shipping costs rose 46% in Q3, after having grown 36% in Q2 and 21% in Q1. This in turn was a big reason why Amazon's GAAP gross margin (GM), which had been steadily rising in recent years thanks to a revenue mix shift towards services, fell 0.7 percentage points annually to 41%.
For Q4 (a seasonally weaker quarter for margins), the consensus is for Amazon's GM to be down 0.5 points to 37.7%.
4. Subscription and Advertising Revenue
The consensus is for Amazon's subscription services revenue, which covers Prime membership fees as well as digital content services such as Music Unlimited and Prime Video Channels, to be up 31% to $5.17 billion, after having risen 34% in Q3. And the consensus is for Amazon's "Other" revenue, which is dominated by its booming ad business, to be up 36% to $4.62 billion, after having grown 44% in Q3.
While Prime fees are believed to still account for a majority of subscription services revenue, content subscriptions now appear to be a meaningful contributor as well. Amazon recently disclosed that its Music Unlimited subs rose more than 50% in 2019, and (though this number includes some users of free services) that more than 55 million people now use its music services.
5. Comments About 2020 Spending Plans
Following a 2019 in which Amazon aggressively dialed up its spending, does the company plan to do the same in 2020? CFO Brian Olsavsky could provide some color on the earnings call about how Amazon plans to invest in 2020 -- both in terms of its total spending, and which major spending areas (i.e., warehouses, logistics, R&D, data centers, video content) are likely to see the biggest increases.