- Analysts estimate EPS of $8.55 vs. $15.79 in Q1 FY 2021.
- Amazon Web Services revenue is expected to rise YOY at an accelerating pace compared to the same quarter a year earlier, but at a slower rate compared to the most recent quarter.
- Companywide revenue is expected to rise, but at its slowest quarterly pace in at least three years.
Amazon.com Inc. (AMZN) reported strong annual earnings and revenue growth during the past two years as many customers increased their demand for the company's online services as they sheltered at home during the COVID-19 pandemic. But Amazon's quarterly growth has slowed significantly in the past year as pandemic restrictions have lifted. Additionally, the company is encountering a broad range of labor challenges that are weighing on it financially. These include a tight labor market, increasing employee dissatisfaction, and expanding unionization efforts, with one Amazon warehouses already having voted to unionize.
Investors will be looking to see how these trends will affect Amazon's performance when the company reports earnings on April 28, 2022 for Q1 FY 2022. Analysts predict a sharp year-over-year (YOY) decline in earnings per share (EPS) and the slowest companywide revenue growth rate in at least three years.
Investors will also be focusing on revenue generated by Amazon Web Services (AWS), the company's high-margin cloud computing business. AWS still comprises a relatively small share of the company's overall revenue, but it generates a substantial portion of Amazon's operating income. Analysts estimate that AWS revenue will grow substantially YOY, but at a slightly slower pace than in the last several quarters.
Amazon's stock has sharply underperformed the broader market in the last year. During that time, Amazon shares briefly outpaced the S&P 500 during July 2021. But they have lagged since then. Amazon began to trail the market in late July and traded largely sideways through January 2022, when it plunged. Although shares rallied in February and again in March, Amazon has been unable to maintain those gains. As of April 26, Amazon shares have provided a 1-year trailing total return of -18.2%, well below the S&P 500's total return of -0.3%.
Amazon Earnings History
In the past three years, Amazon has posted YOY EPS declines in only three quarters. Earnings skyrocketed from Q2 FY 2020 through Q1 FY 2021, roughly doubling YOY for those quarters. However, the last three quarters have been more volatile. EPS growth slowed to 46.8% YOY in Q2 FY 2021 and declined by 50.5% for Q3. In Q4 FY 2021, EPS nearly doubled YOY once again. Now, analysts predict another sharp reversal, with EPS declining 45.9% YOY in Q1 FY 2022.
Amazon's revenue performance has been more steady. In the last 14 quarters, the company has reported no declines. During FY 2020, quarterly revenue growth ranged from 26.4% to 43.6%. It reached its fastest growth rate of 43.8% in Q1 FY 2021 and has been decelerating since then. Revenue growth slowed to 27.2%, 15.3%, and 9.4% YOY for Q2, Q3, and Q4 FY 2021, respectively. Analysts now expect that revenue growth will slow to 7.3%, Amazon's smallest YOY growth rate in at least several years.
|Amazon Key Stats|
|Estimate for Q1 FY 2022||Q1 FY 2021||Q1 FY 2020|
|Earnings Per Share ($)||8.55||15.79||5.01|
|Amazon Web Services Revenue ($B)||18.3||13.5||10.2|
Source: Visible Alpha
The Key Metric
As mentioned above, investors will also focus on revenue generated by AWS, Amazon's cloud-computing platform. AWS offers developers a range of on-demand technology services, such as compute, storage, database, analytics, machine learning, and other services. These services are primarily used by start-ups, enterprises, government agencies, and academic institutions. The company's AWS business generates much higher margins than its e-commerce business. In FY 2021, Amazon's global retail sales- and subscription-based business segments generated about 87.5% of the company's total revenue while AWS accounted for a mere 12.5%. However, AWS accounted for 63.3% of total operating income for the year, making it Amazon's main profit generator.
AWS growth went through a period of deceleration between Q3 FY 2018 and Q4 FY 2020, when it slowed from 45.7% to 28.0%. Since that time, growth has gradually sped up. AWS grew by 32.1% YOY in Q1 FY 2021, 37.0% in Q2, and achieved 39.5% YOY growth in Q4 FY 2021. For Q1 FY 2022, analysts expect AWS revenue to grow 35.6% YOY. That rate would be higher than the same quarter a year earlier, but slower than Q4 FY 2021.
Bloomberg. "Jeff Bezos Is Heading to Space and Partying on Earth While Amazon Faces a Host of Challenges."
CNBC. "Amazon labor battle continues as union vote kicks off at second Staten Island warehouse."
Amazon.com Inc. "Q1 2022 Amazon.com, Inc. Earnings Conference Call."
Visible Alpha. "Financial Data."
Amazon.com Inc. "Form 10-K for the fiscal year ended December 31, 2021," Page 42.
Amazon.com Inc. "Form 10-K for the fiscal year ended December 31, 2021," Page 65.