Amazon's biggest earnings question mark has nothing to do with its results

By Jon Swartz

Amazon reports first-quarter results on Tuesday afternoon

Amazon.com Inc. is heading into its first-quarter earnings report on Tuesday facing questions about whether it will announce its first-ever dividend, after Alphabet Inc. and Meta Platforms Inc. did so earlier this year.

Amazon (AMZN) is increasingly under pressure to follow suit, as it's the last of the Big Tech companies to not pay its shareholders a dividend. But that might change when the company announces results, offers guidance and fills in Wall Street on its progress in the generative-artificial-intelligence race on Tuesday afternoon.

Opinion: As Alphabet follows Meta with a dividend, the pressure is now on Amazon

Analysts polled by FactSet are forecasting on average adjusted earnings of 84 cents a share on revenue of $142.6 billion. They're anticipating second-quarter sales of $150.2 billion.

Accelerating Amazon Web Services growth and margins, coupled with e-commerce market-share gains, should lead to solid first-quarter results and second-quarter guidance, according to Baird analyst Colin Sebastian. "We remain positive at current levels as we expect further solid growth and consolidated margin expansion, while key investments in AWS reflect healthy and increasing demand," Sebastian said in a note last week.

Jefferies analyst Brent Thill is keying in on Amazon's commitment to "harvest mode" in cost trimming.

"We believe [Amazon] is sitting in front of a multi-year margin-expansion opportunity supported by a continued focus on driving efficiencies across every segment of the business and faster growth in [Amazon's] highest-margin businesses (AWS and Advertising)," Thill said in a note last week, while maintaining his buy rating and price target of $225 on Amazon shares.

Amazon Chief Executive Andy Jassy's shareholder letter promised more cost cutting related to Amazon's inbound fulfillment architecture and inventory placement this year, one factor that recently prompted Needham analyst Laura Martin to raise her profit estimate.

See also: Why Amazon CEO Andy Jassy says the company is especially suited to win in AI

Another essential topic, Martin said, involves Amazon's generative-AI plans, including chips to "train and drive better inferences from [large language models]," she wrote earlier this month.

Mizuho Securities analyst James Lee notes that Amazon is tracking "modestly ahead of expectations, indicating strength for commerce. At the same time, ad pricing held firm for clothing and beauty categories with rising trends into March," he said. He maintains Amazon shares as a buy with a price target of $230.

-Jon Swartz

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04-29-24 1133ET

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