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It's been a fabulous year so far for Amazon.com (NASDAQ: AMZN). While the S&P 500 has gained less than 4% in 2018, Amazon shares have skyrocketed 50%, driven by its growing dominance in the realm of e-commerce and strength in the company's industry-leading cloud computing business.
Investors will be looking closely at the numbers when Amazon reports the financial results of its 2018 second quarter on Thursday, July 26, after the market close. Let's revisit Amazon's performance last quarter and review the metrics to watch when the company releases its earnings.
Image source: Amazon.
A look back
In the first quarter, Amazon reported sales of $51 billion, up an incredible 39% year over year, excluding a favorable impact from foreign exchange rates. This exceeded both the high end of the company's forecast and analysts' expectations. Net income growth was even more impressive, up 125% compared to the prior-year quarter.
One of the highlights of the quarter was the stunning growth of Amazon Web Services (AWS), the company's cloud computing operation, which grew 49% year over year, generating more than 10% of Amazon's total revenue and 74% of its operating income.
A few things to watch
Amazon's top line is ruled by its e-commerce revenue, so investors will be watching that growth closely. In the first quarter, online sales in North America and international markets grew 46% and 34% year over year, respectively. Watch those growth rates for signs that customers are continuing to flock to its e-commerce platform.
AWS has been Amazon's crown jewel, and adoption of the cloud computing platform has been accelerating. While investors shouldn't expect 50% year-over-year growth indefinitely, there haven't been any indications that it will be slowing measurably any time soon. Watch for any significant drop-off, as competition from other providers is increasing. Amazon has historically been able to maintain its share, even as the overall market for cloud computing services has continued to grow, and I suspect that will continue.
Finally, Amazon will be reporting its financial results shortly after the conclusion of its fourth annual Prime Day, which kicked off at 3 p.m. EDT on July 16 and ran for 36 hours. In previous years, Amazon has shared some of the highlights of the event when it reports earnings, and I expect that will be the case this year.
Image source: Amazon.
Looking ahead
For the just-completed second quarter, Amazon forecast net sales in a range between $51 billion and $54 billion, which would represent 38% year over year growth at the midpoint, and include $1.2 billion in expected benefits from the favorable impact of foreign exchange rates. The company expects operating income in a range of $1.1 billion to $1.9 billion, an exceedingly wide scope. It represents impressive growth of 75% to 202% compared to the prior-year quarter.