Amazon Earnings Preview: On the Verge of a Breakout?

Amazon.com (AMZN) heads into its upcoming earnings report as the clear laggard among the Magnificent Seven. The stock is up just 5% year-to-date and has been essentially flat over the past three months, a period that’s been broadly strong for large-cap tech. Over that stretch, Alphabet (GOOGL) and Tesla (TSLA) have led the group, rallying 39% and 44%, respectively.Despite that underperformance, Amazon may be setting up for a rebound. The stock now trades at 33.3× forward earnings, one of the most attractive valuations in its history and a reasonable multiple given its diversified growth engines in e-commerce, cloud computing, and digital advertising. From a technical standpoint, shares have been consolidating tightly since August and could be forming a base for a potential breakout if this quarter’s results exceed expectations.For the upcoming report on Thursday, analysts expect earnings of $1.57 per share, up 9.8% year-over-year, on revenue of $177.9 billion, an increase of 12% from the prior-year period. Importantly, earnings estimates have turned higher over the past week, lifting Amazon to a Zacks Rank #2 (Buy) and signaling improving sentiment heading into the results.Image Source: Zacks Investment ResearchAmazon Founder Bezos Bullish on AIWhile Jeff Bezos is no longer CEO, his recent comments show he remains deeply engaged in Amazon’s strategic direction, especially regarding artificial intelligence. Generative AI is a clear growth driver for Amazon Web Services (AWS), the company’s dominant cloud division, but Bezos has emphasized the broader opportunity to embed AI across operations.He’s described the integration of AI as his top priority, envisioning its use to enhance logistics and drive significant productivity gains. Just this week, we saw that Amazon plans to lay off some 30,000 employees. Could this be the first sign of the company’s increasing efficiency? This operational focus may prove pivotal as public markets begin to separate AI adopters from AI executors. Amazon, with its data scale and infrastructure, appears well positioned to emerge as one of the leaders in this next phase of AI-driven transformation.Earnings Revisions, Valuation, and Technical SetupAmazon’s earnings momentum remains strong. The company has beaten analyst expectations in 11 consecutive quarters, with an average surprise of 23% over the past year. The Zacks Earnings ESP currently projects an additional 8.9% beat for this quarter, suggesting analysts may still be underestimating performance.Looking ahead, earnings are forecast to grow 22.2% annually over the next three to five years, the second-highest growth rate among the Magnificent Seven, with sales expected to continue expanding at a steady double-digit clip. Combined with margin expansion and a reasonable valuation, the setup remains favorable.Technically, the stock has been consolidating just below resistance since early summer. A strong earnings beat and upbeat guidance could be the catalyst that propels shares higher and confirms a breakout from this multi-month base.Image Source: TradingViewCan Amazon Stock Play Catch-Up?After a year of muted performance, Amazon now finds itself at an inflection point. The company has the earnings power, operational leverage, and AI-driven tailwinds to narrow the gap with faster-moving peers like Alphabet and Tesla, both of which have surged in recent months.If Thursday’s results reaffirm improving margins and accelerating growth within AWS and its retail operations, Amazon could finally rejoin Alphabet and Tesla in leading the next leg of the Magnificent Seven rally. For investors, the stock’s combination of reasonable valuation, rising estimates, and emerging technical strength makes this one of the most important quarters to watch for a potential breakout#1 Semiconductor Stock to Buy (Not NVDA)The incredible demand for data is fueling the market's next digital gold rush. As data centers continue to be built and constantly upgraded, the companies that provide the hardware for these behemoths will become the NVIDIAs of tomorrow.One under-the-radar chipmaker is uniquely positioned to take advantage of the next growth stage of this market. It specializes in semiconductor products that titans like NVIDIA don't build. It's just beginning to enter the spotlight, which is exactly where you want to be.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Tesla, Inc. (TSLA): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks