Amazon (NASDAQ:AMZN) announced on Monday that it achieved record-breaking delivery speeds in the United States during the second quarter, while simultaneously reducing costs. As the company gears up to report its Q2 financials on Thursday, investors are keen on spotting growth signals in its e-commerce business.

Apart from the e-commerce segment, investors are also closely monitoring updates on Amazon’s cloud business, ad revenue growth, and consumer health as the holiday season approaches. The impact of inflation on spending for both corporations and consumers has heightened interest in these areas.

One of the primary concerns for investors is how Amazon Web Services (AWS), the company’s cloud provider, stacks up against competitors like Microsoft (NASDAQ:MSFT) and Google (NASDAQ:GOOGL). Microsoft and Google reported slowed growth in their cloud businesses in the quarter ending June 30. Amazon had previously acknowledged a decrease in AWS growth as some business clients reallocated their spending to cut costs.

Tom Forte, a senior research analyst at D.A. Davidson Companies, points out the potential for cloud computing, including AWS, Microsoft’s Azure, and Google Cloud, to significantly benefit from companies investing in artificial intelligence.

However, the current trend of consumers reducing spending could impact companies’ investments in AI and cloud tools, potentially influencing cloud computing growth.

During the first-quarter call in April, Amazon’s Chief Financial Officer, Brian Olsavsky, predicted that the company’s cloud business might slow down as enterprise clients became more cautious in their spending.

Investors are also interested in Amazon’s advertising business and its integration with language models and generative AI. The company’s advertising business experienced “robust growth” due to its machine learning investment, as highlighted by Chief Executive Andy Jassy during the first-quarter earnings call.

Comparisons with Google’s advertising revenue, which increased by 3.3% to $58.1 billion despite a broader advertising pullback, will likely be a focal point for investors. In the first quarter, Amazon’s advertising business recorded $9.51 billion in net sales, with estimates suggesting a second-quarter increase to $10.3 billion.

On the retail front, Amazon investors are closely monitoring how the company plans to retain consumer interest in shopping on its platform as discretionary spending slows down. U.S. retail sales only saw a nominal 0.2% increase in June. However, Amazon’s efforts to create a regional fulfillment network, expand same-day delivery, and place products closer to shoppers have reduced costs for both consumers and the company.

A major concern for investors is Amazon’s game plan to improve the profitability of its e-commerce business for the remainder of the year. Notably, Prime Day sales, which took place on July 11-12, will not be reflected in Amazon’s second-quarter results. The company witnessed record sales during the first half of the two-day Prime event and plans to host another fall Prime event.

As of the most recent data, Amazon’s shares have risen approximately 57% this year, compared to a 19% increase in the S&P 500 index (.SPX). The company’s forward p/e multiple stands at 60.94, higher than Walmart’s (NYSE:WMT) 24.39 and Microsoft’s 30.49.

Another key area of focus for investors is Amazon’s profit margin. While the first-quarter margin stood at 46.77%, analysts expect a margin of 46.53% in the second quarter, according to Refinitiv. Amazon’s effort to increase the number of third-party sellers on its platform has contributed to the growth of its ad business, as vendors can now purchase ad space in search results and utilize other tools to attract customers.

In summary, investors are anxiously awaiting Amazon’s earnings report, hoping to find evidence of a revenue surge, cloud growth, and improved retail margins. The results will provide insights into how the tech giant is navigating challenges related to consumer spending, cloud competition, and advertising revenue in a changing economic landscape.

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