Schwab Network on $AMZN (Oct 29, 2026)

Amazon is under pressure today amid the volatility we are seeing in the technology sector, with reports from Max and Alphabet-Google weakening market momentum.

Yes, when we look at Amazon, it is of course a huge company, and we have insights into specific sectors, namely the cloud, the retail sector, and the advertising sector.

When we look at this, we know that because of the change in Prime's timing, retail and advertising performance is expected to be relatively weak due to how the calendar is being run.

But when we look at the cloud, it is expected to grow by about 38% year-on-year, which is the level of expectations, and this comes after a very strong quarter last quarter. I think it was Amazon's strongest quarter for cloud growth since 2021.

So, this is something that all eyes are on, at least based on what we're seeing in investor comments. Interestingly, Amazon is also following Microsoft and Google, both of which have achieved very strong numbers in the cloud sectors.

When we look at Amazon, we find that site visits and orders are almost constant on a year-on-year basis. For us, this is an indicator of momentum. We don't expect the ratio to be exactly the same, but this helps us identify times when cloud growth is accelerating or slowing down.

In fact, if we go back to the last quarter and ask: "What growth rate did we observe at the end of the second quarter?" We had an increase of approximately 17% year-on-year. Therefore, there is a change and a slowdown in our view that has led to a decrease in that momentum.

Therefore, we do not expect the same huge surge and surprise that we saw in the last quarter. We are seeing growth of only about one percent on an annual basis.

So, this is somewhat in line with expectations, especially if we remember that the growth rate in the last quarter was around 37% year-on-year. They are now forecasting around 38% year-on-year, so it's somewhat consistent, but this slowdown from a momentum perspective is a little worrying.

Therefore, it will certainly be interesting to see what happens before the earnings are announced. Yes, one of the strengths of the other earnings we've seen is in the growth. So, we'll be monitoring AWS for this expected growth of around 37%, but there are other things, aren't there?

We will check capital expenditures at 220 billion. We'll look at gross free cash flow, and Megan, here's the exact thing we don't know anything about, right? Will it make a difference that the numbers will be different because Prime Day was in a different quarter?

It's not in this quarter now, it was in the last quarter, and they performed well and the stock rose, but then it came back and fell completely. Would it be problematic, the fact that they don't have a Prime Day this quarter?

So, we'll have to adjust our expectations for the numbers, Megan.

Yes, we will certainly have to try to understand how that compares on an annual basis. This change in the calendar makes things difficult, and it also affects advertising activity.

As you know, it's not just about retail, it includes advertising because a large portion of advertising revenue comes from retailers who advertise on Prime.

Therefore, it is definitely something to keep an eye on. Whenever we look at our data, and when we look at the purchase intention on Prime itself, we actually find some really strong numbers.

We have an upward trend of about 12% year-on-year, and I think that's important.

We see that this increases even after Prime Day. You can see the yellow line in the graph there. Therefore, we still see strong interest when it comes to year-on-year growth. We got a good boost from the mini-Prime Day, so to speak, which took place at the beginning of this month.

That could certainly be a good sign from a guidance perspective, and it makes sense why Amazon might want to hold such an event, especially with the calendar changing.

However, at least according to our data from a consumer perspective, Prime still appears to be a very strong value component for consumers. We see a lot of interest there, and positive feelings as well.

So, Prime might perform stronger than expected, despite this slight change in the calendar.

So, in our data, we have a rather conflicting mix, which is a rather confusing mix because of that. But we have stronger-than-expected retail data, and we have some, um, some caveats when it comes to AWS growth.

For AWS, is this a potential warning sign, or is it just something you should keep in mind here? What is this? What conclusion did you reach, that signal?

Yes, when we look at this, we find that it is slowing down compared to the last quarter. In the last quarter, we thought that AWS's growth from the first quarter to the second quarter was close to, or, a jump of more than 10% in terms of overall growth rate.

Therefore, we do not expect such a broad growth rate in this quarter. I don't think Wall Street expects a growth rate of that magnitude either.

But we don't necessarily expect, or rather, exceed expectations, because, you know, we've seen Google Cloud deliver really strong results. We've seen Azure deliver really strong results, and we don't necessarily put, um, AWS in the same category per se.

It is certainly the market share leader, but for us, if you compare it to the other two, AWS represents a bit of a yellow warning sign, I would say, in our data, and it is really what is pulling our signal down, compared to the others, especially with a stock that has been really stable over the past month, if you look at it.

Okay, one last question. I want to go back. So, this is the warning side, where you have a yellow light there. Where there seems to be a green light, it's the consumer, but tell me, does this indicate momentum heading towards the holiday shopping season, for example?

yes it is. This is an area of strength, at least in our data for Amazon. We also see, as you know, good viewership numbers across the board, even if you look at the NFL shows that Amazon owns.

So, we're always talking about, you know, we can talk about ads on Prime, but we can talk about ads on live streaming too. This is another tool that Amazon is really working on developing.

So, for us on the consumer retail advertising front, we are seeing some signs of strength.

Um, and as for the cloud front, as I mentioned, there's just a small yellow warning sign there. So, as far as we're concerned, we're neutral. Whenever we look at the reports, if we compare them to Google, it is clear that we see that Google has taken a heavy hit today.

Even Microsoft, after a very strong report, is still trading down about one point today. So, for us, for Amazon, we are being a bit cautious. Hmm, and that's why we're watching the event from afar.

Repeat your earnings result again, Megan. We are at -7. So, we are in a completely neutral zone. But it tends to be slightly pessimistic only because of that slowdown in Amazon Web Services that we saw in the last quarter.