After tumbling during the last three months of 2018, Amazon.com (AMZN - Get Report) is up over 30% in 2019 and flirting with both last summer's highs and a trillion-dollar market cap heading into Thursday's Q2 report.
On average, analysts polled by FactSet expect Jeff Bezos' firm to report Q2 revenue of $62.52 billion (up 18% annually) and GAAP EPS of $5.55 (up 9%). For Q3 -- Amazon provides revenue and operating income guidance in its report -- the consensus is for revenue of $67.28 billion (up 19%) and GAAP operating income of $4.42 billion (up 19%).
TheStreet will be live-blogging Amazon's earnings, which arrive after the bell on Thursday, along with an earnings call that starts at 5:30 P.M. Eastern Time. In addition to the aforementioned numbers, here are some things for investors to keep an eye on.
1. North American and International Segment Growth
Amazon's North American segment, which covers all of its North American operations outside of AWS, is expected to see revenue grow 16% annually in Q2 to $37.28 billion, with operating income dropping 6% to $1.73 billion due to aggressive spending.
International segment revenue, which covers all of Amazon's other operations outside of AWS, is expected to be up 12% to $16.41 billion, with the segment's operating loss narrowing a little to $551 million.
The dollar's strength has been a headwind for International segment growth. In Q1, International revenue rose 9% in dollars and 16% in constant currency.
2. AWS' Performance
All signs point to another strong quarter for Amazon Web Services (AWS). The public cloud giant is expected to see revenue rise 39% to $8.49 billion, with its operating income rising 49% to $2.45 billion.
Last week, top public cloud rival Microsoft (MSFT - Get Report) reported its Azure cloud unit saw revenue rise 64% in its June quarter (no revenue figure was shared, as usual), with stronger growth seen for the cloud infrastructure (IaaS) and developer platform (PaaS) services that directly compete against AWS.
3. The Performance of Other Services Businesses
Amazon's third-party seller services revenue, which covers commissions, fulfillment services and some other revenue streams produced via marketplace sellers, is expected to be up 24% to $12.01 billion. Subscription services revenue -- fueled by Prime membership fees and to a lesser extent digital content subscriptions -- is expected to be up 38% to $4.69 billion, and "Other" revenue (dominated by ads) is expected to be up 34% to $2.95 billion.
4. Amazon's Direct Sales
Amazon's "online stores" revenue, which covers its direct e-commerce sales and has long been growing at a slower pace than its third-party seller services revenue, is expected to be up by a relatively modest 11% in Q2 to $30.01 billion.
The company's "physical stores" revenue, which is dominated by Whole Foods, is expected to be up 2% to $4.42 billion. Physical stores sales have been pressured a bit by the growth of Whole Foods' online delivery and pickup orders, which are recognized as online stores revenue.
5. Gross Margin Expansion
As Amazon's revenue mix keeps shifting towards relatively high-margin services businesses, its gross margin (GM) has been steadily expanding. In Q1, GM rose by 3.4 percentage points annually to 43.2%.
For Q2, the consensus is for GM to be up 1.2 points annually to 43.3%. A pickup in shipping expense growth (more on that shortly) likely weighed on margins a bit.
6. Spending Growth and Commentary
During Amazon's April 26 earnings call, CFO Brian Olsavsky raised eyebrows by disclosing that his company now aims to make 1-day shipping the norm for Prime orders. Five weeks later, Amazon disclosed that over 10 million items are now available for free 1-day Prime delivery in the U.S. (that number is almost certainly higher now).
In addition, during February 1 earnings call, Olsavsky signaled that Amazon would broadly pick up its spending pace in 2019, after having seen spending growth slow (and profits surge) in 2018 as the company reaped the benefits of prior warehouse and data center investments. In light of all this, it's worth keeping an eye on Amazon's shipping, fulfillment and capital expense growth, as well as any comments shared about its second-half spending plans.
7. Commentary About Antitrust Probes
Last week, the EU announced that it's probing whether Amazon violated antitrust law by using data about its marketplace sales to strengthen its direct e-commerce business. And on Tuesday afternoon the DOJ announced -- in a statement that led Amazon, Alphabet (GOOGL - Get Report) and Facebook's (FB - Get Report) shares to all fall a bit in after-hours trading -- that it's "reviewing whether and how market-leading online platforms have achieved market power and are engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers."