Amazon preps for earnings as investors eye AWS margins, robotic warehouse upside, and the AI arms race

[Amazon]
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Amazon (NASDAQ:AMZN [https://seekingalpha.com/symbol/AMZN]) is lined up to report third-quarter earnings on October 30. The Seattle-based company is forecast to report revenue of $177.8 billion, adjusted EPS of $1.98, operating income of $19.8 billion, and a gross margin rate of right at 50%.

As always, investors will have their eye on the AWS business. Analysts see revenue of $32.4 billion and operating income of $11.1 billion from the cloud part of the business. Color on the impact of the major AWS outage in October will also be closely watched. AWS margin came in at 32.9% last quarter and is expected to rise to 34.2% in Q3, but that level is still below the over 35% level seen earlier in the year. S&P Global highlighted that there is a significant range of estimates for the Q3 AWS margin into the release, with analysts expecting anywhere from 30.7% to 38.1%

The spotlight will also be on Amazon's (NASDAQ:AMZN [https://seekingalpha.com/symbol/AMZN]) business of building or running AI models amid some concerns the company has lost momentum as it battles Google (GOOG [https://seekingalpha.com/symbol/GOOG]), Microsoft (MSFT [https://seekingalpha.com/symbol/MSFT]), Oracle (ORCL [https://seekingalpha.com/symbol/ORCL]), Coreweave (CRWV [https://seekingalpha.com/symbol/CRWV]), and Nebius (NBIS [https://seekingalpha.com/symbol/NBIS]). S&P Global said it is closely watching what the company will say about its investments into AI, as Amazon's (AMZN [https://seekingalpha.com/symbol/AMZN]) FY26 CapEx numbers have continued to increase. According to consensus projections/

Wedbush said it is encouraged by the implied level of AWS demand given the pace of backlog growth and a higher capex guide for 2025. Analyst Scott Devitt and his team think the risk-reward profile on the e-commerce stock is attractive. "We are constructive on the setup leading into the report, given positive commentary around AWS growth, healthy trends for the core retail business, and strong advertiser demand," wrote Devitt. Notably, Amazon (AMZN [https://seekingalpha.com/symbol/AMZN]) is seen beating the consensus operating income estimate. The firm has an Outperform rating on Amazon (AMZN [https://seekingalpha.com/symbol/AMZN]) and a price target of $280.

Morgan Stanley has its eyes on the billions of savings that could be on the plate as Amazon (AMZN [https://seekingalpha.com/symbol/AMZN]) opens about 50 next-gen robotics warehouses over the next few years. "We continue to believe the market is under-appreciating AMZN's GenAI advances in its retail business, with robotics-driven efficiencies near the top of the innovation list," updated analyst Brian Nowak. The firm has an Overweight rating on Amazon (AMZN [https://seekingalpha.com/symbol/AMZN]) and a price target of $300.

On Seeking Alpha, Investing Group Leader Andres Cardenal [https://seekingalpha.com/article/4831947-3-reasons-to-buy-amazon] reminded investors that Amazon (AMZN [https://seekingalpha.com/symbol/AMZN]) has an unparalleled business moat due to scale, cost efficiencies, and brand recognition. He thinks the relatively low valuation for the stock is the fact that top-line growth is slowing down. "However, this perspective could be underestimating the potential for earnings growth via margin expansion over the years ahead," reasoned Cardenal.

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