Amazon.com (NASDAQ:AMZN) is slated to report its fourth-quarter and full-year 2018 results after the market closes on Thursday, Jan. 31.

The e-commerce and cloud computing giant is going into its report on less of a strong note than it did going into its previous quarterly reports this year. While Amazon once again trounced Wall Street's earnings expectations last quarter, it released much weaker-than-anticipated fourth-quarter revenue guidance, and its operating income outlook came in light relative to recent results.  

Amazon stock has gained 31.2% over the one-year period through Friday, Jan. 18. This is a great showing, considering the S&P 500 (including dividends) is down 2.7% over this period.

Here's what to watch when Amazon reports.

Man carrying an Amazon package walking up to a house.

Image source: Getty Images.

Key numbers

Here are Amazon's year-ago results, its fourth-quarter revenue guidance (the company doesn't provide an outlook for earnings, just for revenue and operating income), and Wall Street's estimates to use as benchmarks. 

Metric

Q4 2017 Result

Amazon's Q4 2018 Guidance

Amazon's Projected Year-Over-Year Change

Wall Street's Q4 2018 Consensus

Wall Street's Projected Year-Over-Year Change

Revenue

$60.45 billion

$66.5 billion to $72.5 billion

10% to 19.9%

$71.82 billion

18.8%

Earnings per share (EPS)

$2.16

N/A

N/A

$5.65

162%

Data sources: Amazon and Yahoo! Finance.

For the fourth quarter, Amazon guided for operating income of $2.1 billion to $3.6 billion, representing growth of 0% to 71% year over year. Given that operating income soared 966% (Q3), 378% (Q2), and 92% (Q1) year over year in the three preceding quarters, you can see why the market was disappointed when the company released its outlook. 

For the fourth quarter, Wall Street is looking for earnings growth of 162% year over year. Given the company's history of trouncing earnings expectations, investors can probably expect another earnings beat. However, the e-commerce giant could have a more challenging time demolishing the earnings consensus like it did in the first three quarters of the year. For one thing, Amazon's year-over-year results will no longer be getting a lift from its Whole Foods acquisition, which closed in August 2017. 

For some context, here are Amazon's year-over-year growth results for the first three quarters of 2018:

  • Q3: Revenue and EPS rose 29% and 1,006%, respectively.
  • Q2: Revenue and EPS jumped 39% and 1,168%, respectively.
  • Q1: Revenue and EPS surged 43% and 121%, respectively.

North America's operating income

One of the two biggest themes this year in Amazon's results is the North America segment's blazing operating income growth. In the second quarter, this segment -- by far the largest by revenue -- posted operating income growth of 321% year over year, resulting in it contributing more to Amazon's total operating income than did Amazon Web Services (AWS), the company's cloud computing service. North America came darn close to repeating this impressive feat in the third quarter, when its operating income skyrocketed 1,714% year over year to $2 billion. That was just slightly lower than AWS' $2.1 billion contribution to Amazon's overall operating income of $3.7 billion. (International had an operating loss of $385 million.)

Amazon Web Services' accelerating profitability 

The other major theme this year has been AWS becoming an even more powerful profit machine. In the third quarter, it had a whopping 31.1% operating margin (operating income divided by revenue), up from 26.9% in the second quarter, and 25.7% in the first quarter.

Given how profitable AWS is, it's a huge plus that its revenue growth has been strong. In constant currency, the cloud service's revenue surged 46% year over year in the third quarter, 49% in the second quarter and 48% in the first quarter. 

Cash flows

Growth in operating income and net income, or "earnings," is well and good, but these metrics are simply accounting measures. Cash flows are better measures of a company's performance. Don't be too concerned with free cash flow, because Amazon spends heavily on growth initiatives, but do focus on cash generated from operations, which reflects the profitability of the company's current operations.

Last quarter, operating cash flow grew 57% year over year to $26.6 billion for the trailing 12 months. Free cash flow nearly doubled to $15.4 billion from $8 billion.

Q1 2019 guidance

Given that the stock market is a forward-looking machine, the market's reaction to Amazon's earnings release is probably going to hinge more on the company's guidance for the first quarter of 2019 than on its results for the fourth quarter of 2018.

So you should know what Wall Street is expecting. For Q1 2019, the Street is projecting revenue to increase 19.5% year over year to $60.99 billion and EPS to jump 36.1% to $4.45.

Check out the latest Amazon earnings call transcript.