Amazon is set to report first-quarter 2024 results on Apr 30.
The company is expected to have continued gaining from the solid momentum in the rapidly growing cloud market on the back of its cloud computing division, Amazon Web Services (“AWS”).
We note that the growing popularity and the strong adoption of AWS have been aiding Amazon in generating high margins from the cloud business. The trend is expected to have continued in the yet-to-be-reported quarter.
AWS’s revenues were $24.2 billion in fourth-quarter 2023, accounting for 14% of net sales, rising 13% year over year.
An expanding customer base, owing to a robust AWS portfolio, is likely to have driven AWS’s top line in the quarter under review.
The Zacks Consensus Estimate for first-quarter 2024 AWS net sales is pegged at $24.26 billion, indicating an improvement of 13.6% from the year-ago quarter’s reported figure.
Analyzing Factors Influencing Amazon’s Q1 Earnings
The company’s expanding AWS portfolio is expected to have benefited the first-quarter performance of the underlined segment. Growing efforts to bolster its generative AI capabilities are likely to have been other positives.
In the quarter under review, AWS extended its partnership with NVIDIA to power its portfolio with generative AI technology via the NVIDIA Blackwell GPU platform. Notably, the platform features GB200 NVL72, with 72 Blackwell GPUs and 36 Grace CPUs interconnected by fifth-generation NVIDIA NVLink.
AWS’s partnership with a South Korean AI startup called Upstage remains noteworthy. As part of the deal, Upstage launched its small language model called SOLAR MINI on AWS. It has also selected AWS to train SOLAR MINI with the help of Amazon SageMaker.
Expanding portfolio offerings are expected to have driven AWS’s customer momentum in the first quarter.
Deutsche Fußball Liga (DFL) extended its multi-year partnership with AWS to drive innovation across Bundesliga and Bundesliga 2. As part of this, AWS has become the official generative AI provider for DFL and has been the official technology provider for the latter.
NTT DOCOMO also selected AWS, and intends to leverage the latter’s robust infrastructure and cloud services to deploy its nationwide 5G Open Radio Access Network in Japan.
Owkin selected AWS as the primary cloud provider. Owkin intends to develop generative AI applications and accelerate drug discovery and clinical trials with the help of AWS’s scalable storage options, enhanced data security measures, and strong computing capabilities.
A strong customer base is expected to have continued to help Amazon, which currently carries a Zacks Rank #2 (Buy), to boost its competitive position in the cloud computing market against Microsoft and Alphabet’s Google, which have been making concerted efforts to bolster their cloud market share.
Evaluating the Competitive Landscape in Cloud Computing
Microsoft Azure has become the key growth driver for Microsoft. Azure’s globally increasing number of availability zones and regions, along with strength in Azure AI and growing generative AI capabilities, remain noteworthy.
Similarly, Google Cloud is contributing substantial growth to the total revenues of Alphabet. Expanding data centers, availability zones and cloud regions, and solid momentum in generative AI have been positives.
