NEW YORK (AP) — Amazon.com is expected to post sharply higher revenue when it reports second-quarter results Thursday after the market closes, but its investments in new distribution facilities may weigh on the online retailer.
WHAT TO WATCH FOR: Because Amazon's revenue has been strong, investors are likely to focus on the company's profit margins and bottom line. The company has been reinvesting a lot of its earnings to build up a distribution network so that it can better grow its business over the long term.
The effects of the weak economy in Europe on sales will also be a focus. In addition, looming sales tax requirements, a slowdown in Kindle Fire shipments ahead of the launch of a new version and rising costs for acquiring content should "warrant some caution" regarding Amazon's results, said Baird analyst Colin Sebastian.
Amazon.com Inc. only collects sales tax from residents of Kentucky, Nebraska, New York, North Dakota, Texas and Washington and has said that it wants Congress, not individual states, to resolve the issue of whether it is required to do so.
WHY IT MATTERS: As the world's largest online retailer, Amazon's results can provide a glimpse into the mood of consumers, which power 70 percent of all growth in the U.S. economy. In general, online retailers have been weathering the shaky economy better than their brick-and-mortar counterparts, as eBay Inc.'s strong second-quarter results showed last week.
WHAT'S EXPECTED: Analysts, on average, are expecting earnings of 1 cent per share on revenue of $12.92 billion, according to a poll by FactSet.
Amazon said in April it expects revenue to grow between 20 percent and 34 percent, or to between $11.9 billion and $13.3 billion.
LAST YEAR'S QUARTER: Amazon earned $191 million, or 41 cents per share, on revenue of $9.91 billion.