By Sam Boughedda
Amazon (NASDAQ:AMZN) shares were maintained at Outperform with a $130 price target at Oppenheimer on Wednesday, with analysts stating that the firm is confident in its 23/'24 AWS revenue estimates ahead of the tech giant's earnings release after the close on Thursday, February 2.
The estimates are 3% and 5% below consensus due to:
- Customers transitioning from on-demand billing to discounted term contracts.
- Optimizing workloads.
- Decreasing volume/usage as the digital economy reverts somewhat back to in-person.
- Reduced funding for startups/SaaS/Internet companies.
- And new application porting decelerating.
"Customer revenue shortfalls began in September. Our channel checks confirm further revenue pressure from all the above, particularly from more term contracts, with peak impacts hitting mid-2023," wrote the analysts.
"AWS has stayed true to its S-Curve since 2011, but secular demand is
showing cracks from macro. Over the past year, we have reduced our FY23/FY24 revenue estimates 12%/14% to $94B/$110B from $106B/$128B. Law of large numbers will pressure y/y growth, but we believe sequential growth in 2024–2025 could surprise to the upside when headwinds roll off," added the analysts.
They also state that despite the near-term headwinds, the firm remains "very positive" on AWS long term.