Under CEO Jeff Bezos, Amazon.com Inc. (AMZN), the world’s premier e-commerce company, is famous for focusing relentlessly on longterm revenue growth even if it hurts earnings short term. That's a key reason the stock has risen 20-fold in the past decade and is far outpacing the market this year. That strategy will be largely on display when the company reports fiscal second-quarter results this Thursday July 25. Analysts expect Amazon to report weak profits on strong sales growth.

Bank of America expects a respectable, not blowout, quarter, but is bullish longterm. "While added delivery costs are a risk, we think Amazon stock could benefit as y/y rev. growth deceleration moderates (or reverses) & Street gets optimistic on benefits of One Day shipping after a solid Prime Day," said BofA in a recent report, adding, "We expect healthy 2Q cloud growth to support the long-term thesis."

What Amazon Investors Are Watching For

Investors are likely to focus on a number of key trends when Amazon reports. For starters, they'll want to know how much the company's popular free one-day shipping for Prime customers has boosted sales and how much it squeezed margins. Investors also will monitor Amazon’s core e-commerce business for signs of slowing growth as consumer debt hits levels not seen since before the 2008 financial crisis and consumer sentiment wanes amid ongoing global trade conflicts. A big question also is whether Amazon's cloud business, AWS, is picking up the slack as it's done recently with torrid growth and fat margins. 

Other big question marks relate to grocery retailer Whole Foods, as well as how the company will deal with a potential U.S. antitrust lawsuit.  

Analysts’ 2Q Estimates

For 2Q, analysts currently estimate a 10% year-over-year increase in earnings per share (EPS), according to Yahoo! Finance. That estimate has come down significantly from the 24% increase analysts were expecting more than 90 days ago. Revenue growth, on the other hand, is expected to be about 18%, 2% above Amazon’s own projection from last quarter, according to the Wall Street Journal.

While it's unclear what's causing the slowing profit growth, Loop Capital analyst Anthony Chukumba says he's comfortable with strained profits from Amazon's free 1-day shipping if it boosts sales. “We do not expect near-term margin compression to be a significant hurdle for Amazon investors (provided it results in an acceleration in top-line growth),” according to Chukumba, per a recent Barron's story. “These investments expand Amazon’s competitive moat [and] Amazon’s infrastructure investments have historically stimulated higher per-member spending.”

The estimated 2Q revenue growth also is better than the earlier 1Q, when revenue increased 17%. Still those numbers are down significantly from the 30% quarterly pace that the company has averaged over the past three years, per the Wall Street Journal.

Amazon’s New Growth Engine: AWS

Amazon may count on its AWS cloud-computing business to bolster corporate growth. AWS's growth is way ahead of rivals like Microsoft Azure, Google Cloud, IBM, and others, according to a recent survey conducted by analyst John Blackledge and his team at Cowen. Blackledge estimated the value of AWS alone at $506 billion, which is about half of Amazon’s total market cap

He expects this high-margin component of Amazon’s business to grow by 31% a year to reach $140 billion by 2024. “We are encouraged by the step-up in expected growth and note it does not include net new and/or international customers,” Blackledge wrote, according to a May story in Barron’s.

To be sure, Amazon still is overwhelmingly dependent on its e-commerce business and consumer spending for the bulk of its business. If e-commerce goes south with the U.S. and global economy, Amazon will need the cloud more than ever to maintain its growth.