Amazon set to report third-quarter earnings after the bell. Here’s what to expect

Amazon will announce third quarter earnings after the market close on Thursday.

Here’s what analysts are expecting:

• Earnings: $7.41 per share, according to analysts surveyed by Refinitiv
• Revenue: $92.7 billion, according to analysts surveyed by Refinitiv

Amazon’s cloud-computing unit, Amazon Web Services, is expected to post another mixed quarter, after revenue growth slipped below 30% for the first time in the second quarter. AWS is projected to grow its revenue by roughly 29% year-over-year in the third quarter, according to analysts surveyed by FactSet.

The company’s core retail business is likely to get another lift from the pandemic-fueled rush to online shopping. However, the results may not be as eye-popping as they were in the second quarter, when Amazon trounced Wall Street’s earnings expectations and reported double-digit revenue growth year-over-year.

Since July, overall e-commerce activity has remained at elevated levels compared to the same period last year, but spending tapered off slightly in August, as more people returned to physical retail stores and curbed spending in categories like apparel, according to Adobe’s Digital Economy Index. E-commerce sales grew 42% year-over-year in August, compared to growth of 55% year-over-year in July, according to Adobe.

Investors will be watching for guidance on the fourth quarter and steps Amazon is taking to prepare for the online-heavy holiday shopping season. They’ll also be looking for any announcements around additional fulfillment and coronavirus-related expenses, as well as any new color on Prime Day results, including the number of new Prime subscribers who signed up during the two-day discount event.

Amazon’s peak period typically starts in the middle of the fourth quarter, but it kicked off the holiday rush earlier than ever this year when the pandemic forced it to hold Prime Day in October, instead of mid-July. Less than 48 hours after Amazon wrapped up a successful Prime Day, it began offering early deals ahead of the holidays.

As usual, Amazon is staffing up its warehouses to assist with increased demand over the holiday season. The company said it would hire 100,000 seasonal workers, after it went on a hiring spree in recent months.

The company has also ramped up its investments in fulfillment and logistics in order to prevent potential delivery delays or capacity issues that could arise from the back-to-back shopping rush of Prime Day and the holidays. It previously set a goal of growing its global network square footage by 50% in 2020, up from a 15% increase in 2019.

Amazon appears to be on track to exceed this target, according to Jefferies analysts, which said the company is adding “the equivalent of ~40 football fields each week in the U.S. alone…representing a 70% year-over-year increase” in network square footage.

The company is likely to give an update on the growth of its fulfillment network when it holds a conference call with analysts at 5:30 p.m. ET. The extra capacity will be crucial for Amazon to weather what’s expected to be a record-setting holiday shopping season, Wedbush analysts said in a recent note to clients.

“The earlier holiday sales period, Prime Day shift, and likely share shift towards ecommerce spend from brick and mortar locations this year all position Amazon to perform exceedingly well over the holiday period,” Wedbush analysts said. “However, we expect to see signs of strain, with some third parties likely to shift warehousing during the holidays to other online vendors.”

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