Thursday afternoon, Amazon.com (AMZN 0.91%) will publish its results for the first quarter of fiscal year 2018. The online retail giant crushed both Wall Street's and the company's own estimates in the holiday quarter, setting Amazon investors up for a 24% return on their investment in January alone.
Here's what you need to look out for in this week's business update.
By the numbers
These are the headline numbers that are likely to move the market on Friday morning. Amazon doesn't offer earnings guidance in the traditional sense, focusing on operating income and top-line sales instead:
|
Metric |
Q1 2018 Guidance (Midpoints) |
Q1 2018 Analyst Consensus |
Q1 2017 Results |
|---|---|---|---|
|
Revenue |
$49.3 billion |
$49.9 billion |
$43.7 billion |
|
Operating income |
$650 million |
N/A |
$1.0 billion |
|
Adjusted earnings per diluted share |
N/A |
$1.25 |
$1.48 |
Data sources: Amazon, StreetInsider.com.
What else is new with Amazon?
The behemoth that Jeff Bezos built is always in the headlines. The recent news feed includes:
- Last fall, Amazon introduced a program to let the company's delivery drivers drop off packages inside your locked home, using a combination of smart locks and digital surveillance to keep things safe. Now, the company is expanding this idea to car trunks in a partnership with Volvo and General Motors (GM 1.00%). The in-home delivery program was reportedly well received by Amazon's customers, but I expect analysts to grill management on the security aspects of the car-trunk idea during Thursday's earnings call.
- The Amazon Prime program just passed an impressive milestone, as the company said it has more than 100 million subscribers. The program, which combines free shipping on many Amazon orders alongside access to the streaming Prime Video service, has often been held up as a driver of customer loyalty, but this is the first time Amazon has reported any firm subscriber counts. Will Amazon make a habit out of reporting Prime membership tallies now? That remains to be seen, but we investors can always hope.
- In a surprise move, big-box electronics retailer Best Buy (BBY +1.84%) recently said it will start selling TV sets powered by Amazon's smart-media operating system, known as Fire TV. At first, the Amazon-based TVs will come from Toshiba and from Best Buy's store brand, Insignia. Other names may follow later on. I think kids these days would call this partnership a "frenemies" situation.
Image source: Amazon Web Services.
Beyond these newsworthy details, it pays to keep an eye on how Amazon Web Services are contributing to the company's bottom line. For comparative purposes, the cloud-computing division's sales stopped at $5.1 billion in the last quarter, producing operating income of $1.35 billion. That's a 46% year-over-year revenue boost and a 64% share of Amazon's total operating profits.
Furthermore, the company is investing a lot of money in real-world infrastructure. From delivery services and data centers to Whole Foods store improvements and Prime Video content production, Amazon is running some capital-intensive projects. As a result, the $4.7 billion of free cash flow in the fourth quarter of 2016 has plunged below the breakeven point. Last quarter, the figure stood at a negative $1.5 billion. Pay close attention to the first quarter's cash generation -- or lack thereof.
