Amazon’s AMZN second-quarter 2020 results, which are scheduled to be released on Jul 30, are likely to reflect its strengthening cloud services offerings.

The company’s cloud computing arm, Amazon Web Services (AWS), holds a dominant position in the cloud computing space courtesy of solid momentum across customers on the back of its portfolio strength. Moreover, AWS offers strong discounts for long-term deals that help it in attracting customers. These factors are likely to get reflected in the second-quarter results.

Notably, AWS has become an integral division of the company as it generates significantly higher margins compared with Amazon’s retail business. We believe expanding customer base might have contributed to AWS’ second-quarter topline.

In the last reported quarter, AWS revenues were $10.2 billion, accounting for 14% of the net sales. The figure had also surged 32.8% year over year. We further note that AWS operating income improved 38.3% from the year-ago quarter to $3.1 billion.

The Zacks Consensus Estimate for second-quarter AWS net sales is peggedat $10.8 billion, indicating an improvement of 29.4% from the year-ago reported figure.

Click here to know how the company’s overall second-quarter performance is likely to be.

AWS to Lead Despite Intense Competition

During the second quarter, Amazon expanded cloud services portfolio by unveiling and making several AWS servicesgenerally available. These initiatives may have benefited AWS’ second-quarter performance.

We believe portfolio strengthis likely to have helped AWS sustain its dominance in the cloud market where competition has been intensifyingowingto growing endeavors by Microsoft’s MSFT Azure, Alphabet’s GOOGL Google Cloud and Alibaba’s BABA cloud division,among others.

Additionally, its strategic partnerships might have favored AWS in the quarter under review. Notably, the company entered into a multi-year agreement with Slack Technologies in the second quarter to offer integrated enterprise software tools.

Further, strengthening data center network and increasing number of AWS regions are likely to get reflected in AWS’ second-quarter results. In the to-be-reported quarter, the company launched AWS Africa (Cape Town) and AWS Europe (Milan) regions.

Growing Clientele to Drive AWS Sales

Notably, Lyell Immunopharma, which is focused on creation of curative adoptive cell therapy for solid tumours, went all-in on AWS in the quarter under review.

Further,TC Energythathas already migrated 90% of its corporate and commercial applications went all-in on AWS. Also, Capella Space has gone all-in on AWS in the second quarter.

Additionally, IHS Markit, which is migrating a vast portion of its data processing infrastructure, corporate platforms, and end-user applications and services, has selected AWS as its preferred cloud infrastructure provider in the to-be-reported quarter.

AWS alsogot selected as the preferred cloud provider by Genesys for Genesys Cloud in the second quarter.

Hence, the company has been witnessing expanding customer base during the quarter under review, driven by portfolio strength. Moreover, expanding clientele is likely to have driven net sales of AWS in the to-be-reported quarter.

Currently, Amazon carries a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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