NEW YORK ( TheStreet) -- Amazon ( AMZN - Get Report) gets set to report first-quarter earnings after the close of trading, and investors will be looking to see whether the Internet giant's margins are improving.

In the fourth quarter, Amazon reported operating margins of 1.5%. That's down sharply from 3.7% during the same period last year, as return on invested capital fell to 22% during the quarter, from 34% in the fourth quarter of 2010.

The Seattle-based online retailer has been expanding into seemingly every business over the past few years, as it tries to drive people to its website to buy more products.

Amazon has been the only company outside of Apple ( AAPL - Get Report) to gain success with its tablet strategy, having launched the Kindle Fire in November 2011. The goal of Amazon's tablet effort is to drive sales on its website, albeit at very low margins.

Last quarter's big revenue miss during the all-important holiday season, however, sparked concerns over whether Amazon's all-encompassing strategy will pay off.

Raymond James analyst Aaron Kessler isn't concerned about revenue growth, but margins are making him take a wait-and-see approach. "Based on our checks and industry data points, we expect strong top line growth for Amazon in 1Q," Kessler wrote, in a research report. "While we remain positive on the secular outlook for Amazon, near term continued uncertainty around timing of margin improvements keeps us on the sidelines." The analyst rates Amazon shares "market perform."

Analysts polled by Thomson Reuters expect Amazon to report earnings of 7 cents a share on $12.899 billion in revenue. Independent analysts polled by Estimize expect Amazon to report earnings of 11 cents a share on $13.03 billion in revenue.

Amazon CEO Jeff Bezos is no stranger to spending the company's cash if he believes it will help the business long term, and it's hard to argue with that strategy, given the share price performance over the past five years. Amazon shares have gained 332.53%, versus a 21.57% return for the Nasdaq.

Investors will also be looking for any mention of weakness in Europe. Amazon generates a healthy percentage of its revenue overseas, but with so many European countries mired in recession (Spain, Greece, Italy, U.K, to name a few), sales deceleration may put a black mark on the quarter.

J.P. Morgan analyst Doug Anmuth points to channel checks from ChannelAdvisor, comScore ( SCOR - Get Report), and earnings from eBay ( EBAY - Get Report) and Google ( GOOG - Get Report) as indications that U.S. e-commerce may in fact be accelerating, despite concerns over Europe.

"ChannelAdvisor data suggests a significant deceleration in Amazon's 1Q SSS Same-Store-Sales growth to 51% Y/Y vs. ~64% in 4Q," Anmuth wrote in his research report. "comScore data suggests non-travel eCommerce accelerated to 17% Y/Y growth in 1Q from 14% in 4Q. In addition, comScore shows Amazon's US traffic grew ~30% -- a slight deceleration from 4Q -- and suggesting underlying user growth trends remain strong." The analyst rates Amazon shares "overweight" with a $210 price target.

Investors will be keen to hear any update Amazon has about its consumer electronics strategy, namely the Kindle Fire.

It's widely speculated that Amazon sells the Kindle Fire at breakeven or perhaps even a slight loss to drive traffic to its site, but there is little known about the growth of the device and its effect on margins. Bernstein analyst Carlos Kirjner notes a back-of-the-envelope estimate suggests that the Kindle Fire could positively impact first-quarter revenues by $300 million to $500 million, but it's dilutive to gross and operating margins. Kirjner rates Amazon shares "overweight" with a $239 price target.

Investors may also look to see whether UPS ( UPS) weakness is related strictly to UPS, or relates more broadly to Amazon, as UPS is one of Amazon's largest shippers.

Shares of Amazon are lower in Thursday trading, off 0.49% to $193.47.

Interested in more on Amazon? See TheStreet Ratings' report card for this stock.

-- Written by Chris Ciaccia in New York

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