New Business Ventures Expected To Drive Amazon Q2 Earnings

The world’s most valuable brand is set to publish its second quarter earnings report on Thursday (July 25), which is expected to provide insight into how Amazon’s newest acquisitions are boosting the company’s revenue.

Earnings should reflect strength in the company’s increasing profitability and web services growth, but an increase in spending will lower operating income, according to analysts.

Amazon reportedly spent $800 million over the quarter to upgrade Amazon Prime’s free delivery benefit from two days to one day, and analysts recommend watching to see how one-day delivery affects profits in the long run.

Amazon is investing in many other ventures and products that it hopes will expand its business model, including “surveillance as a service” drones and the Amazon Professional Beauty Store, a shopping center for stylists, barbers and estheticians.

Amazon is expanding its payments services as well, announcing a partnership with Synchrony Financial to launch the Amazon Credit Builder in June, a credit card for Prime members with bad credit.

The eCommerce firm is also expanding current services for a broader reach, bringing AmazonFresh — its one- to two-hour grocery delivery — to Las Vegas, kiosks with rotating items at discounted prices to the U.K. and a cashierless Amazon Go store to New York City.

But the tech giant is also facing tough competition in some areas — a recent report claimed that Shopify could grow to rival the company, and it shut down its Amazon Restaurants app on June 24, as Uber Eats and GrubHub fight for dominance of the food delivery market.

Amazon beat earnings in the first quarter but reported slower revenue growth that disappointed stockholders. Its strongest growth came from Amazon’s expanding cloud services and Amazon Web Services, which analysts predict will show strong numbers again this quarter.

But the company is also dealing with the recent regulatory scrutiny of Big Tech, which could slow Amazon’s current fast-pace of investments and acquisitions. The Retail Industry Leaders Association, which consists of companies such as Target, Walmart and Best Buy, spoke out against Amazon and Google and voiced their desire to speak with the Justice Department and the Federal Trade Commission regarding their alleged anti-competitive practices.

Regulation and investigations will continue to play a major role in the third quarter; an appeals court ruled that Amazon can be held liable for third-party sales conducted on its site, and an ongoing probe by EU Competition Commissioner Margrethe Vestager is expected to develop into a formal investigation this week.

This year’s Prime Day was the eCommerce firm’s biggest shopping event in history, larger than any Black Friday and Cyber Monday combined — despite workers’ strikes in Minnesota and Germany. Online sales were 64 percent higher than on a normal Monday. While Prime Day numbers will not impact Amazon’s second quarter report, analysts say they could give good insight into what third quarter results will look like.