Amazon’s Scariest Number Has a Track Record and It’s Bullish for AMZN Stock

Amazon (AMZN) is set to report its earnings on July 30, with Wall Street expecting revenue of around $197 billion, well within the company’s own guidance and up 17% year-over-year (YoY). For many analysts, it is AWS that is the center of attention. The segment is expected to report a growth of 32% on the back of huge AI infrastructure demand. Cloud backlog had already jumped to $364 billion in the last quarter and is likely to rise again. The company’s custom Silicon business is firing on all cylinders, growing nearly 40% quarter-over-quarter (QoQ) and helping the company reduce its reliance on Nvidia (NVDA). In the long run, this also helps boost its margins. The company’s ads business is also nearing $79 billion in annualized revenue, and considering it is an extremely high-margin part of the business, it cannot just be treated as a small part of the overall business.

Yet none of the above is what investors are looking at when they wait for the quarterly numbers after market close on July 30. As with all the hyperscalers, all eyes are on the capex figure. In my view, even though people are looking at the right thing, they are looking at it through the wrong lens. Whether the capex rises or not hardly matters in the grand scheme of things. What matters is the cash flow trajectory. All hyperscalers are closing in on negative free cash flow, and that is therefore something the market has already priced in. What it hasn’t priced in is how fast each company can recover.