Proactive Investors - Amazon.com Inc (NASDAQ:AMZN) is set to release its third-quarter earnings after the bell Thursday, and analysts at Jefferies are eyeing strong performance in Amazon Web Services (AWS) but noting uncertainties in retail margins.
The firm's price target for Amazon stands at $210.
Shares of Amazon were down around 3.3% at midday Thursday, reflecting broader investor concerns about Big Tech earnings.
Jefferies expects Amazon to report revenues of $157 billion for Q3, closely in line with the Street estimate of $157.3 billion.
Analysts are more optimistic about the company's operating profit, projecting $15 billion, 2.1% higher than the Street’s $14.7 billion estimate.
"AWS continues to show strong growth, with data indicating the potential for 20% year-over-year growth,” Jefferies analysts wrote.
That could translate to “significant” quarter-over-quarter growth, according to Jefferies.
They estimate AWS will contribute to an overall operating profit margin of 9.5%, up from 4.2% in the prior quarter. However, challenges remain in the retail sector, with shifts toward consumables impacting Amazon's first-party margins, third-party services, and advertising revenues.
For the fourth quarter, Jefferies expects Amazon to guide revenues between $179.5 billion and $186.5 billion, slightly below the Street estimate of $186.4 billion. The firm also anticipates operating income to range between $12 billion and $16 billion, compared to Visible Alpha's forecast of $17.4 billion.
"Given the recent raises for Amazon's fulfillment employees, we have slightly reduced our profit estimates for Q4 and 2025,” analysts wrote.
“We now expect $16.5 billion in Q4 profit, down from our previous forecast of $17.4 billion."
The analysts also cautioned that the Street might be overestimating the Q4 guide based on Amazon’s historical guidance trends.
Despite near-term concerns over retail margins and guidance, Jefferies remains optimistic about Amazon's medium-term prospects, particularly its exposure to AI-driven cloud demand.
"AWS growth and its margin opportunity are key reasons to own Amazon,” they wrote.
“We also see the potential for retail margin reacceleration in the second half of 2025 if the shift to consumables normalizes."
Jefferies has a Buy rating on Amazon stock.
--Updated with current share price--