Amazon (AMZN) -) shares moved lower in early Thursday trading ahead of the cloud and retail tech giant's third quarter earnings slated for after the closing bell.
Amazon's profit-driving Web Services business is likely to provide the key focus of tonight's release, following a mixed set of figures from cloud computing rivals Microsoft (MSFT) -) and Alphabet (GOOGL) -), the latter of which triggered a $166 billion loss in market share and the biggest slump in tech stocks since February.
Analysts see revenue growth for Amazon Web Services in the region of 12.5%, following a 12% gain over the three months ending in June, as the group's investments in AI-related technologies boost enterprise sales.
Related: Amazon, Microsoft slip lower as Britain opens probe into cloud market dominance
Amazon, which has lagged Google and Microsoft in this year's rapid race to develop and deploy AI technologies, could use the Anthropic investment to springboard its efforts, particularly in the cloud space, heading into the final months of the year.
Jassy told investors in early August that while "most people are talking about the application layer, specifically what OpenAI has done with ChatGPT," further layers and investment opportunities remain.
The impact of the AI cycle on consumer Internet will be massive and it will start w/ the cloud service divisions," said Wedbush analyst Dan Ives, who carries an 'outperform' rating with a $180 price target on the stock. "This speaks to a key narrative this week with the tech stalwarts giving a spotlight on enterprise spending trends and the appetite for transformative AI projects heading into 2024."
Amazon's AI drive, which includes a $4 billion investment in San Francisco-based startup Anthropic, is also likely to improve sales and margins across its e-commerce business, as well, following a solid boost from its Prime Day event in early July, which included the sale of 375 million items, a 25% increase from 2022 levels.
"Amazon's first-party online sales business has been resilient, despite consumers cutting back on discretionary purchases and leaning more into value goods," said CFRA analyst Arun Sundaram. "Amazon is expanding its selection of everyday essentials, which has helped increase basket sizes and overall shopping frequency. In addition, Amazon has been focused on providing even faster delivery speeds this year."
At a headline level, analysts see Amazon posting a bottom line of 58 cents per share, more than double the tally from the same period last year, with overall revenues rising 11.3% to $141.42 billion.
Related: Amazon slumps as FTC brings antitrust lawsuit against online retail business
Investors will not only look to Amazon's fourth quarter outlook for a read on consumer spending strength into the holiday season, but also to the group's first investor-focused reaction to a lawsuit brought by the U.S. Federal Trade Commission late last month accusing the group of operating a monopoly in its giant online retailing business.
The suit alleges that Amazon will "bury" lower-priced products deep into its search rankings, effectively making them "invisible," while effectively conditioning sellers to obtain "Prime" eligibility for their products, which are then automatically linked to the company's fulfilment services.
Amazon shares were marked 1.1% lower in late-morning trading Thursday and changing hands at $120.05 each.
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