Amazon Set to Report Quarterly Results Amidst Tech Earnings Season and AI Market Disruption

Amazon (AMZN) is poised to release its quarterly earnings report post-market on Thursday, culminating a period of mixed earnings from Big Tech peers and market volatility spurred by the emergence of Chinese AI upstart DeepSeek.

Cloud Rivals Miss Expectations

Amazon's earnings follow disappointing cloud sales performances from rivals Microsoft (MSFT) and Google (GOOG, GOOGL). Microsoft reported $40 billion in cloud revenue, missing Wall Street's $41.1 billion estimate, while Google reported $11.9 billion, falling short of analysts' $12.1 billion expectations. Both companies attributed the misses to capacity constraints in meeting demand for their cloud and AI services.

Amazon's Cloud and AI Investments

Amazon, the world's leading cloud provider, has invested heavily in AI infrastructure to meet growing demand. In Q3, CEO Andy Jassy announced plans to spend $75 billion on capital expenditures in 2024 and anticipates even higher investments in 2025.

Q4 Expectations

Analysts expect Amazon to report earnings per share (EPS) of $1.50 on revenue of $187.3 billion for Q4, compared to $1.00 EPS and $169.9 billion revenue in the same period last year. Amazon Web Services (AWS) revenue is projected to reach $28.8 billion, up from $24.2 billion last year, while ad revenue is anticipated to climb to $17.3 billion from $14.6 billion in Q4 2023.

DeepSeek Disruption

Investors will also scrutinize Amazon executives' response to the success of DeepSeek's R1 model. DeepSeek's popularity has raised concerns among investors about the competitive landscape in the AI market.

Bright Spots

Amazon has integrated DeepSeek's AI model into its AI services platform, providing users with access to the software. The company reports that its AI business has generated billions for AWS and anticipates AWS revenue to exceed $105 billion for the year. Capex for AWS is estimated at over $14.5 billion for the quarter.

Analysts predict Amazon's advertising operations will remain a strong performer. Ad revenue is expected to rise nearly 20%, driven by Prime Video's monetization efforts.