Amazon Poised for its Best Quarter Ever

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NEW YORK (CNNMoney) — As the rest of the retail sector crumbles, Amazon is poised to set all kinds of records.

When Amazon reports its fourth-quarter finances on Thursday afternoon, Wall Street analysts expect the company to shatter its five-year-old quarterly profit record, blow past its sales from a year earlier and post astounding growth in its booming cloud business.

What a stark contrast between Amazon and its competitors. Growth at traditional retailers during the holiday quarter was virtually nonexistent. Walmart, Macy’s and others are closing stores and laying off employees.

There are many keys to Amazon’s success, including its Prime membership program. Amazon is tight-lipped about how many Prime members it has, but a new Consumer Intelligence Research Partners study revealed that 54 million Americans now subscribe to the service, making up just under half of all households. Amazon said it sold 3 million new Prime memberships in the week before Christmas alone.

Amazon has typically been unprofitable because it plows earnings back into long-term investments and growth strategies. But the company shocked investors over past two quarters by declaring that it was in the black, driven by its successful Amazon Web Services cloud business. Meanwhile, its retail business was still unprofitable. Expect that to change this quarter, as holiday shoppers likely flocked (online) in record numbers to buy items from Amazon.

With all that said, Amazon is a notoriously secretive company, making its financials difficult for analysts to predict. So Amazon has a big potential for a surprise. Investors have sent shares up or down 6% each time after Amazon announced its past seven quarterly financial statements.

Up or down, Amazon still has a compelling story to tell.

Profit

Fourth quarter of 2014: $214 million Fourth quarter of 2015 forecast: $734 million, up 243%

Amazon’s previous quarterly profit record was set in the final three months of 2010, when it posted earnings of $416 million. Analysts surveyed by FactSet expect Amazon to have topped that last quarter.

It’s conceivable, albeit unlikely, that 2015 will end up being Amazon’s most profitable year ever. Amazon was in the black through the first three quarters of 2015, with a combined $114 million in profit.

That means the company would need to post just over $1 billion in profit in the fourth quarter to top the record $1.15 billion profit it recorded over the course of 2010.

Sales

2014: $29.3 billion 2015 forecast: $35.9 billion, up 23%

Amazon is poised to record its highest quarterly revenue of all time.

Retail

2014: $20.6 billion 2015 forecast: $25.8 billion, up 25%

The biggest part of Amazon remains its retail business, and it has been growing at a startup-like pace. Analysts expect that to continue.

Amazon’s Echo gadget alone is poised to become a billion-dollar business soon, according to ChannelAdvisor.

AWS

2014: $1.4 billion 2015 forecast: $2.4 billion, up 71%

Amazon Web Services hosts companies’ online content and apps in Amazon’s giant data centers. It has big-named customers, including Netflix, Airbnb, Yelp, Expedia, Major League Baseball and Slack.

AWS’ electric growth helped bring Amazon into the black over the past couple quarters. CEO Jeff Bezos has predicted that cloud sales will one day surpass Amazon’s retail revenue.

Media

2014: $7 billion 2015 forecast: $7.2 billion, up 3%

Sales of books and music are expected to grow, albeit by a much smaller amount than Amazon’s retail business.

The media segment does not include Amazon Prime Instant Video sales, about which the company remains secretive.

Shipping costs

2014: $1.3 billion, 4.6% of sales 2015 forecast: $1.5 billion, 4.1% of sales

Amazon’s net shipping losses are expected to exceed $1 billion for the second straight quarter and surpass last year’s total. That’s why investors will have a close eye on anything Amazon announces about drone delivery, building its own logistics business and other attempts to control its delivery costs.

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