Amazon Earnings Are Poised to Surge Further
April 29 2021 - 4:59AM
Dow Jones News
By Sebastian Herrera
Amazon.com Inc. is expected to post a strong start to the year,
with results driven by continued demand for the company's
e-commerce services and sales gains at its cloud-computing and
advertising businesses.
Amazon's success in the past year has catapulted the company to
new heights, after consumers flocked to online shopping during
pandemic lockdowns. The tech giant's dominant grip over e-commerce
and continued expansion into new industries have strengthened its
power, although the company continues to face challenges from
regulators and some employees.
Seattle-based Amazon is set to report first-quarter earnings
after markets close on Thursday. Analysts polled by FactSet on
average predict $104.5 billion in quarterly revenue and per-share
earnings of $9.54. The company said in February that it expects
first-quarter sales between $100 billion and $106 billion and
operating income between $3 billion and $6.5 billion.
Amazon's first quarter is typically slower than its preceding
end-of-year results, which are aided by holiday shopping sales. Yet
the company has exceeded expectations in recent quarters. It
shattered sales records last year as home-bound Americans turned to
its delivery services. The company's stock price rose 76% in
2020.
Amazon's dominance in online retail also parallels the strength
of Amazon Web Services, the business line that rents server
capacity and software tools to other corporations. AWS is Amazon's
main profit center, though its recent growth has slowed as
Microsoft Corp. and Google's cloud unit have moved aggressively to
sign up new customers. AWS Chief Executive Andy Jassy is set to
take over as Amazon's CEO in the third quarter after Jeff Bezos
said in February that he would depart the role to become executive
chairman.
The company's advertising business has also become a major
player in its industry. The fast-developing unit has put Amazon in
competition with Google and Facebook Inc.'s leading ad
businesses.
The coronavirus pandemic helped Amazon, Facebook and Google grow
even stronger, with the tech titans for the first time collecting
the majority of all ad spending in the U.S. last year, The Wall
Street Journal reported in March. Amazon also recently said it will
begin streaming the National Football League's Thursday-night games
by 2023, a deal that will expand Amazon's ad dollars and compete
more directly with traditional television broadcasters.
"What we always get back to with Amazon is the optionality --
they have multiple businesses firing off," said John Blackledge, an
analyst with investment firm Cowen Inc. Mr. Blackledge said with
the pandemic's end in sight, investors are eager to see Amazon ramp
up its one-day shipping offerings.
Amazon's earnings follow strong performances by its big tech
peers this week. Google parent Alphabet Inc. set sales records for
the first quarter, fueled by a surge in digital ad spending, while
Microsoft posted a 19% increase in quarterly sales because of
strong demand for its cloud and videogame services. Apple Inc.'s
profit more than doubled to $23.6 billion because of surging sales
of new, higher-price iPhones and pandemic-induced buying of
products such as Mac computers and iPads.
The nation's largest tech companies recorded staggering growth
last year as consumers and businesses relied more on online
shopping, software and cloud services, as well as their smart
devices and video streaming. The combined revenue for Amazon,
Google, Facebook, Apple and Microsoft grew by one-fifth, to $1.1
trillion. Their collective market capitalization soared to almost
$8 trillion at the end of 2020, compared with about $5 trillion at
the end of 2019.
Amazon's achievements have come as regulators increase their
focus on the company's market power. Congress has considered
significant changes to antitrust laws that could make it easier for
the government to challenge certain business strategies and
practices or force tech giants to separate lines of business. Last
year, a congressional panel found Amazon had amassed "monopoly
power" over sellers on its site, bullied retail partners and
improperly used seller data to compete with rivals. Amazon has said
that it is wrong to presume that success can only be the result of
anticompetitive behavior and that it is focused on keeping prices
lower for consumers.
The company has also dealt with activism from employees. It said
Wednesday that it is raising wages for its hourly workers,
providing more than 500,000 of its employees with pay increases of
between 50 cents and $3 an hour. The higher wages were announced
after workers at an Amazon warehouse in Alabama voted this month
not to form a union. More than 70% of workers who voted at the
facility rejected unionization, ensuring for now that Amazon would
retain full control over how it manages and pays employees as well
as what it expects from workers in warehouses.
Despite the victory at the Alabama warehouse, Mr. Bezos said the
company aims to improve how it handles its workforce. In his last
annual letter to shareholders as CEO, released this month, Mr.
Bezos said Amazon is working to invent solutions to reduce the
number of injuries at warehouses. He defended the company against
accusations by critics that it treats its workers unfairly.
Write to Sebastian Herrera at Sebastian.Herrera@wsj.com
(END) Dow Jones Newswires
April 29, 2021 05:44 ET (09:44 GMT)
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