Amazon earnings preview: Investors watching 1-day shipping costs, AWS, and regulatory scrutiny

Amazon debuted a new delivery program in June 2018 in Seattle that lets entrepreneurs deliver packages with Prime-branded vans and uniforms. (GeekWire Photo / Kurt Schlosser)

Update: See all our Amazon earnings coverage here:

  • Amazon shares fall 8% after missing profit expectations again; $70B in Q3 revenue up 24%
  • Amazon Web Services approaches $9B in quarterly revenue, but growth slows again, missing analyst expectations
  • Amazon tops 750,000 employees for the first time, adding nearly 100,000 people in three months
  • Amazon will spend nearly $1.5B in Q4 for one-day delivery initiative as shipping costs skyrocket

Amazon will report its third quarter earnings this afternoon and investors are keeping a close eye on the company’s new 1-day shipping initiative, its cloud computing business, and any impact from regulatory scrutiny.

Analysts expect Amazon to post earnings per share of $4.62 on revenue of $68.8 billion, which would be up 21 percent year-over-year. Amazon stock reached record highs in July but has dipped in the past three months. Shares are still up 15 percent this year, trading at around $1,781 on Thursday.

Amazon said it spent more than $800 million during the second quarter as it shifts from two- to one-day shopping as its core Amazon Prime benefit. That expense was higher than expected as the company builds more delivery capacity.

Amazon lowered expectations for its operating income in the current quarter, down as much as $1.6 billion from last year, suggesting that it is spending big on new initiatives such as 1-day shipping.

The company is hoping that the strategy adds more value to its $119/year Prime memberships and increases the amount of purchases customers make on Amazon versus elsewhere — including physical retailers.

Profits from Amazon Web Services and the company’s growing advertising arm continue to help even out expenses from initiatives such as the 1-day shipping rollout — investors will surely keep an eye on those metrics. Analysts expect $9.1 billion in revenue from AWS, up from $6.7 billion last year.

In a note to investors earlier this week, RBC listed a 12-month price target of $2,600 with an “outperform” rating, though it warned that investments in 1-day shipping “may have a greater than expected impact on operating margin.”

Amazon is also facing increased scrutiny from regulators over antitrust concerns and from its own employees with issues such as climate change and facial recognition technology. The company drew criticism this week from presidential candidates Elizabeth Warren and Bernie Sanders for spending $1.45 million on an effort to unseat the Seattle City Council.

Other key Amazon news from the third quarter include its big Prime Day sales extravaganza; its epic hardware event; and much more.

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