Amazon.com Earnings: Expect Huge Revenue Growth

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There's a lot of worthwhile metrics to check in on when e-commerce giant Amazon.com (NASDAQ: AMZN) reports fourth-quarter results next week, but one of the most highly anticipated metrics is its year-over-year revenue growth. For the holiday quarter, Amazon guided for an enormous jump in sales -- and several updates from the company on its performance during popular shopping days during Q4 suggest the company lived up to its aggressive forecast.

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Of course, there're plenty of other important facets of Amazon's business beyond revenue growth. Other items worth checking on include operating income, Amazon Web Services, and Whole Foods. Ahead of its fourth-quarter results, here's a brief preview of Amazon's sharp revenue growth, as well as a look at these other areas.

Revenue growth

In Amazon's third quarter, revenue jumped an impressive 34% year over year -- a significant acceleration compared to second-quarter revenue growth of 25%. But Amazon's third-quarter revenue benefited from $1.3 billion of incremental revenue from Whole foods. Still, excluding this Whole Foods revenue and a $124 million favorable impact from changes in foreign-exchange rates, revenue was up 29% year over year -- a markedly higher growth rate than Q2.

Amazon expects this momentum to continue in its fourth quarter. Management guided for year-over-year revenue growth in the range of 28% to 38%. To be fair, investors should note that Amazon's acquisition of Whole Foods will have an even more favorable impact on this metric in the company's fourth quarter than it did on its third-quarter growth. Management said the guidance included an approximate 1,000 basis-point impact from Whole Foods on its expected revenue growth rate. But even excluding the impact of Whole Foods on the quarter, the company continues to expect more sharp revenue growth.

Operating income

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As usual, Amazon's guidance for its quarterly operating income consisted of a very wide range of outcomes. Management forecasted the quarter's operating income to be anywhere between $300 million and $1.65 billion. In Amazon's third quarter, operating income was $347 million, even though management guided for third-quarter operating income to be between a loss of $400 million and positive $300 million.

Can Amazon post operating income above its guidance range again?

Amazon Web Services

Though the bulk of Amazon's revenue comes from e-commerce, most of its profits come from its more profitable cloud business, Amazon Web Services (AWS). In Q3, AWS generated operating income of $1.17 billion on net sales of $4.6 billion. This compared to operating income of $861 million and net sales of $3.2 billion in the year-ago quarter, which highlighted how fast the segment is growing.

For Amazon's fourth quarter, investors should look for AWS' net sales and operating income growth to be near the year-over-year growth of 42% and 36%, respectively, seen in Q3.

Whole Foods

Amazon didn't take long to make aggressive strategic moves at Whole Foods after it acquired the company in August. Chief among the changes Amazon quickly initiated at the grocer was price cuts to many staple items. Investors now will want to know whether these changes are paying off.

For some context, in Whole Foods' first fiscal quarter of 2018, or the company's fourth calendar quarter of 2016, revenue was $4.92 billion. In addition, the company was guiding for full-year 2017 sales growth of just 1.5%, or greater, at the time. Will Whole Foods post meaningful revenue growth under Amazon's ownership?

Stay tuned for Amazon's fourth-quarter results on Feb. 1, after market close.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.