Amazon (AMZN) is set to release quarterly results after the bell on Thursday, following a mixed showing from its Big Tech peers and a market shake-up over the emergence of Chinese AI upstart DeepSeek.
Amazon’s earnings come after cloud rivals Microsoft (MSFT) and Google (GOOG, GOOGL) missed on expectations for cloud sales in the quarter. Microsoft posted revenue of $40 billion, with Wall Street anticipating $41.1 billion, and Google reported sales of $11.9 billion. Analysts were looking for $12.1 billion.
Both companies blamed the misses on a lack of capacity to meet demand for their cloud and AI services.
Shares of Microsoft and Google opened lower the morning after their reports, with Microsoft’s stock tumbling 6% and Google parent Alphabet’s dropping 7%.
Amazon is the world’s largest cloud provider and, like Microsoft and Google, is furiously investing in building out its AI infrastructure capabilities to meet demand. In Q3, CEO Andy Jassy told shareholders the company planned to spend $75 billion on capital expenditures in 2024, and even more in 2025.
For Q4, Amazon is expected to post earnings per share of $1.50 on revenue of $187.3 billion, up from an EPS of $1.00 and revenue of $169.9 billion the company posted in the same period last year.
Amazon Web Services revenue is set to top out at $28.8 billion, up from $24.2 billion last year, while the company’s ad revenue is expected to climb to $17.3 billion from $14.6 billion in Q4 2023.
Investors will also be looking to Amazon executives to respond to the breakout success of DeepSeek’s R1 model.
Just ahead of the first wave of Big Tech earnings, Deep Seek’s rising popularity sent Wall Street into a panic as investors questioned how an outfit with a modest budget and lacking state-of-the-art chips could churn out an AI model to rival those of the most well-capitalized tech companies in the US.
Amazon, like Microsoft, has already made DeepSeek’s AI model available via its AI services platform, giving users the ability to access and use the AI software as they please.
Amazon executives have said that its AI business has already generated billions of dollars for its cloud unit. And the company expects AWS to generate more than $105 billion for the year. Capex for AWS is expected to exceed $14.5 billion for the quarter, according to Bloomberg data.
Analysts expect Amazon’s advertising operations to be a bright spot. While it’s still in the early stages of monetizing Prime Video’s ad spaces, ad revenue is expected to rise nearly 20%, Bloomberg data shows.