Amazon’s earnings are today, what are we doing?

Guys, yesterday I gave you META and anyone who followed got an easy 3-bagger. Last week, I predicted TSLA and that got quite a few of you a lot of profits. Well today, we have AMZN's earnings. Is anyone reading these? I just wanna put in my 2 cents and explain why I think Amazon won't do well with their earnings.

As of right now, from what I've read, analysts expect Amazon to show revenue growth of 10.5% in its second-quarter earnings report after the close on Thursday. They expect the following numbers:

• Earnings per share: $1.04 ($0.65 in Q2 2023)

• Revenue: $148.8 billion ($134.4 billion in Q2 2023)

• Amazon Web Services: $26 billion in revenue ($22.1 billion in Q2 2023)

• Advertising: $13 billion in revenue ($10.7 billion in Q2 2023)

Honestly, it's been a mixed earnings season for a lot of big tech companies. Google parent Alphabet met analysts' expectations for the second quarter, but posted disappointing YouTube ad revenue and dropped like a rock. Microsoft's beat on the top and bottom lines but then they mentioned their lower-than-expected Azure cloud revenue. As I predicted, Meta's results topped analysts expectations, fueled by growth in its core digital ads business. And of course, Apple is also reporting today after the bell.

During the call, I'm going to be keeping a close eye on how Amazon Web Services fared during the quarter, as these guys are racing to provide more artificial intelligence offerings. Microsoft reported 29% growth in its rival Azure business, and Google Cloud grew at about the same rate. From what I see, Amazon (which leads the cloud infrastructure market) is expected to report growth of 17.6%.

Analysts at BofA Securities said they viewed Google's cloud results "as a positive read-thru for AWS," adding that AWS should see tail winds from growth in its backlog revenue, and increasing demand from customers who need compute power to train their AI models.

Goldman Sachs analyst Eric Sheridan pointed to AWS’s growth trajectory and the advertising segment’s contributions among Amazon’s strengths.

Amazon, which has positioned itself as an AI leader, is another player in the arms race to claim AI market share and launch new enterprise and consumer services. But the mood around AI investments has shifted in recent days. Coming off lackluster results from cloud and AI leaders. Honestly, I don't really have a very positive stance toward AI spending anymore.

Meanwhile, on the ecommerce front, the everything store has drawn increasing competition (think Temu and Shein), companies that specialize in low-cost garbage that rely on a direct-from-factory supply chain. Amazon is reported to be developing a low-cost digital storefront of its own to directly compete for fashion and lifestyle spending. It is possible Amazon will offer an update today on those efforts as it works to defend its first place on online shopping.

Let's take a look at Amazon CEO Andy Jassy. For the past two years, he's been more disciplined in the company's spending, and has looked for ways to slash costs. Amazon has laid off more than 27,000 employees since late 2022, with the cuts going into 2024.

Amazon's profit has rebounded sharply over the past year as a result of the cost cutting. Operating income soared 200% in the first quarter, and analysts expect further growth in the second quarter with year-over-year expansion of about 79%.

Amazon's advertising business has emerged as one of its biggest growth and profit engines. Revenue in the segment increased 24% year over year during the first quarter, and is expected to show 22% growth in the second.

Earlier this year, Amazon joined its streaming peers in including ads in Prime Video content. Prime Video users are now automatically shown ads, unless they pay an additional $2.99 a month to unlock the ad-free tier. What's funny is that in a note on July 21, Loop Capital analysts called this a "gangster move" that could help propel Amazon to become an "advertising powerhouse."

The ad business could haul in as much as $150 billion in sales before the end of the decade, up from $47 billion in annual sales last year, the Loop analysts wrote. They have a buy rating on Amazon's stock.

During the quarter, Amazon secured a highly sought after position as the third rights partner in the NBA's new 11-year TV deal. It's the latest example of Amazon's push into live sports and is likely to boost its advertising business and Prime Video platform, which Amazon uses to hook new Prime subscribers and drive purchases on its store.

And lastly, AMZN investors are also looking out for a dividend surprise. Amazon is the last remaining Big Tech company to refrain from offering one, as Meta, Alphabet, and Apple (AAPL) recently announced or expanded their shareholder return programs. So we'll have to see.

While all of this sounds great, I believe expecations have been set to high. And you know what that means? AMZN may drop quite a bit if they don't achieve and even surpass these expectations. So, I'll be grabbing a put spread. Unfortunately, due to today's price action, these puts are not exactly at a discount. I'll be buying the AMZN 8/2 180p @ 4.65 and selling the 175p @ 2.85. This means I can get the spread for only $180. If AMZN were to drop as much as I think it can, this spread can bag us 2.8x profits. Regardless of how well it does, next week we have PLTR, ABNB, and a few other key earnings. Lots of stuff to be excited for. I'm going to definitely be checking out a few of those.