Amazon | Fundamental Analysis | Long

Amazon will report its Q2 2022 results after the market closes on Thursday, July 28. An analyst call is scheduled for the same day at 5:30 p.m. ET.

Investors will likely approach the e-commerce and technology giant's report with some caution. Last quarter, the company's earnings fell short of Wall Street's expectations, while revenues were in line with the consensus forecast. While investors were undoubtedly unhappy with the final result, they were likely more concerned about the company's earnings outlook for the second quarter. It was significantly lower than analysts had forecast.

Investors are increasingly concerned about the macroeconomic situation. So far, continued high inflation has not had much of an effect on consumer spending overall. That could change, however, as more and more consumers are becoming concerned that the U.S. economy could slide into recession. If many consumers markedly reduce their discretionary spending, Amazon's e-commerce results would suffer.

Nevertheless, investors should be mindful of the bigger picture, as this company has seemingly countless current and potential long-term growth opportunities.

Here's what to watch out for in Amazon's upcoming report.

While Amazon does not make earnings guidance, it does in terms of operating results. Management expects operating results to range from an operating loss of $1 billion to an operating income of $3 billion. The company had $7.7 billion in operating income in last year's quarter.

The company faces a difficult comparable performance since it had a strong performance last year. One factor adding to the difficulty of comparisons is the postponement of its annual Prime Day event from Q2 last year to Q3 of this year. In addition, currency headwinds likely affected second-quarter earnings, as the U.S. dollar has strengthened against other currencies over the past year.

By comparison, Amazon's Q1 revenue rose 7% year over year (and 9% in constant currency) to $116.4 billion, a result that was in line with Wall Street's expected $116.3 billion and close to the upper end of the company's forecast range of $112 billion to $117 billion. By segment, sales in North America and Amazon Web Services rose 8% and 37%, respectively, while sales in the international segment fell 6%.

Last quarter's net loss was $3.8 billion, or $7.56 per share ($0.38 per share given the 20-for-1 stock split in June). This compared to a net income of $15.79 per share a year ago. That result was well below the consensus forecast of analysts, who had an expected net income of $8.48 per share.

Much of the shortfall was due to a $7.6 billion pre-tax loss from Amazon's investment in the common stock of electric car maker Rivian Automotive, which held an initial public offering (IPO) last November. Had this article not been in place, Amazon would have made a net profit, not a loss. However, it still would not have met Wall Street's expectations.

Amazon stock is likely to rise if management's Q3 outlook differs significantly from Wall Street's expectations.

The company provides a revenue forecast, but not an earnings forecast. However, the operating income forecast usually gives investors a rough idea of what percentage change management expects for the year.

Currently, analysts are predicting that Amazon's Q3 revenue will grow 15% year over year to $127.8 billion and that earnings per share will increase 16% to $0.36. Keep in mind that this quarter will get a boost from Prime Day compared to the Q2 last year.

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