Amazon Earnings: What to Watch on July 28

Amazon (AMZN -1.35%) is slated to report its second-quarter 2022 results after the market close on Thursday, July 28. An analyst conference call is scheduled for the same day at 5:30 p.m. ET. 

Investors will probably be approaching the e-commerce and technology behemoth's report feeling somewhat cautious. Last quarter, the company's earnings missed Wall Street's expectation, while its revenue was in line with the consensus estimate. While investors were undoubtedly not pleased with the bottom-line result, they were likely more concerned about the company's second-quarter revenue guidance. It came in significantly lower than what analysts had been projecting.

Investors are increasingly worried about the macroeconomic environment. So far, persistent high inflation hasn't affected consumer spending, in general, all that much. However, this could change as more consumers become concerned that the U.S. economy could slip into a recession. If many consumers notably ratchet back their discretionary spending, Amazon's e-commerce business results would be hurt.

That said, investors should keep the bigger picture in mind, as this is a company with what seems like countless current and potential avenues for long-term growth. 

Here's what to watch in Amazon's upcoming report.

Image source: Getty Images.

Amazon's key numbers

Data sources: Amazon and Yahoo! Finance. *Adjusted to reflect the 20-for-1 stock split in June 2022. Note: Amazon does not provide earnings guidance.

While Amazon doesn't provide guidance for earnings, it does so for operating results. Management expects its operating result to fall between an operating loss of $1 billion and an operating income of $3 billion. In the year-ago quarter, the company posted operating income of $7.7 billion.

The company is facing tough comparables, as it had robust results in the year-ago period. One factor adding to the challenging comparables is the shifting of the annual Prime Day event from the second quarter of last year to the third quarter of this year. In addition, foreign exchange headwinds likely hurt the second-quarter's revenue because the U.S. dollar has gained strength against other currencies over the last year.

For context, in the first quarter, Amazon's revenue increased 7% year over year (and 9% in constant currency) to $116.4 billion. That result was on target with the $116.3 billion Wall Street had expected and near the high end of the company's guidance range of $112 billion to $117 billion. By segment, sales in North America and Amazon Web Services rose 8% and 37%, respectively, while those in international fell 6%. 

Last quarter's net loss was $3.8 billion, or $7.56 per share ($0.38 per share when adjusted for the 20-for-1 stock split in June). That compared with net income of $15.79 per share in the year-ago period. This result fell far short of the analyst consensus estimate of net income of $8.48 per share.

A sizable part of the shortfall was due to a pre-tax valuation loss of $7.6 billion from Amazon's common stock investment in electric vehicle maker Rivian Automotive, which held its initial public offering (IPO) last November. Absent this item, Amazon would have recorded a net profit, rather than a loss. However, it still would have missed Wall Street's expectation.

Third-quarter guidance

Amazon stock is likely to move if management's third-quarter outlook comes in notably different than Wall Street's expectations. 

The company provides guidance for revenue, but not earnings. However, its operating income outlook usually gives investors a ballpark idea as to what year-over-year percentage change management expects on the bottom line.

For Q3, analysts are currently modeling for Amazon's revenue to increase 15% year over year to $127.8 billion and EPS to rise 16% to $0.36. Keep in mind that Q3 will get a boost from Prime Day being held in the quarter, versus in Q2 last year.