(AMZN -0.34%) is slated to report its second-quarter 2020 results after the market close on Thursday, July 30.

We know the COVID-19 pandemic should have both a positive and a negative effect on the technology giant's results, we just don't know the magnitude of these effects.

On the positive side, the crisis should provide a tailwind to e-commerce sales. On the negative side, profits should be hurt by the company's need to increase spending to ramp up capacity in the e-commerce business and to keep its workplaces as safe as possible with respect to the novel coronavirus.

As to Amazon stock, in 2020, it's up a whopping 69.8% through July 21, whereas the S&P 500 has returned 1.9% over this period. 

Here's what to watch when Amazon reports.

Packages moving on a conveyor belt in an Amazon fulfillment center.

Image source: Amazon.

Key numbers

Metric Q2 2019 Result Amazon's Q2 2020 Guidance Amazon's Projected Change YOY Wall Street's Q2 2020 Consensus Estimate Wall Street's Projected Change YOY (Decline)


$63.40 billion

$75 billion to $81 billion

Approximately 18% to 28%

$80.84 billion


Adjusted earnings per share (EPS) 






Data sources: and Yahoo! Finance. YOY = year over year. Wall Street estimates as of July 21. Note: Amazon does not provide earnings guidance. 

Amazon expects its Q2 operating performance to hover around neutral. It guided for an operating loss of $1.5 billion to an operating income of $1.5 billion. This guidance assumes approximately $4 billion of costs related to COVID-19. In the year-ago period, the company posted operating income of $3.1 billion.

In last quarter's earnings release, CEO Jeff Bezos addressed the planned COVID-19-related spending in the second quarter:

Under normal circumstances, in this coming Q2, we'd expect to make some $4 billion or more in operating profit. But these aren't normal circumstances. Instead, we expect to spend the entirety of that $4 billion, and perhaps a bit more, on COVID-related expenses getting products to customers and keeping employees safe. 

Pandemic-related spending is not going to last forever. So investors should also consider the operating results excluding this increased spending to get a more accurate picture of the company's core operating performance. 

Also, since last year, Amazon has been investing in upgrading Prime's core free-delivery benefit from two days to one day. (Of course, the company's usual delivery speeds have been negatively affected by the pandemic.) Investors can likely expect some continued increased spending surrounding this initiative. The good news is this spending should be less than it was in the year-ago period. That means it should help the year-over-year operating income and earnings comparisons.   

For context, in the first quarter, Amazon's revenue rose 26% year over year (27% in constant currency) to $75.45 billion. Net income landed at $2.5 billion, which translated to EPS of $5.01, down 29% from the year-ago period.

Wall Street was looking for EPS of $6.25 on revenue of $72.95 billion. So Amazon fell short on the profit expectation, though easily beat the top-line expectation.

Amazon Web Services' overall growth

Investors should focus on AWS' growth since the fast-growing and very profitable cloud computing business drives the company's overall profits. In Q1, AWS' revenue surged 33% to $10.2 billion, or 13.5% of total revenue, while operating profit soared 38% to $3.1 billion, or 77% of total operating profit.

Prime member growth 

As I wrote in last quarter's earnings preview:

It would be great to learn how many new Prime members the company gained in the quarter. The pandemic likely drove more consumers to join Prime than might otherwise so they could get free, faster delivery. A jump in Prime members should be a long-term positive since members have been found to spend much more money than nonmembers on the company's site.

The last update Amazon provided on its Prime member count was in late January when it released its fourth-quarter 2019 results. At that time, it had "over 150 million paid Prime members around the world," Bezos said.

Third-quarter guidance

The market looks ahead, so its reaction to Amazon's report should depend more on the company's third-quarter outlook than on its second-quarter results, relative to Wall Street's expectations. (Amazon provides guidance for revenue and operating income but not for earnings. The operating income outlook, however, gives investors a rough idea as to what year-over-year percentage change the company expects on the bottom line.)

For Q3, Wall Street is currently modeling for revenue to jump 22.3% year over year to $85.61 billion and adjusted EPS to rise 6.1% to $4.49.