Amazon (NASDAQ:AMZN) is slated to report its fourth-quarter 2020 results after the market close on Tuesday, Feb. 2.

The e-commerce and technology giant is going into its important holiday quarter report on a strong note. In the third quarter, revenue and earnings easily beat the Wall Street consensus estimates, and fourth-quarter top-line guidance also came in higher than analysts had been expecting.

That said, shares fell slightly after last quarter's results were released because investors were somewhat disappointed with management's fourth-quarter operating income guidance. While there are no guarantees, investors should keep in mind that the company has been regularly breezing by its operating profit outlook in recent years. Last quarter, for instance, this metric landed at $6.2 billion, whereas management had guided for $2 billion to $5 billion.

As with the first through third quarters, we can expect that the COVID-19 pandemic provided a tailwind to Q4's revenue, and a headwind to its profits. 

Amazon shares have soared 72.6% in the one-year period through Jan. 29, while the S&P 500 has returned 15.6% over this period.

Packages moving on conveyor belts in an Amazon fulfillment center.

Image source: Amazon.

Key numbers

Metric Q4 2019 Result Amazon's Q4 2020 Guidance Amazon's Projected Change YOY Wall Street's Q4 2020 Consensus Estimate Wall Street's Projected Change YOY

Revenue

$87.4 billion

$112 billion to $121 billion

Approximately 28% to 38%

$119.7 billion

37%

Adjusted earnings per share (EPS) 

$6.47

N/A

N/A

$7.19

11.1%

Data sources: Amazon.com and Yahoo! Finance. YOY = year over year. Note: Amazon does not provide earnings guidance. 

In addition to getting a boost from the pandemic, revenue growth will also get a lift from the company's annual Prime Day event, which was pushed back to the fourth quarter this year from its usual place in the third quarter due to the global crisis. 

Management expects fourth-quarter operating income to range from $1 billion to $4.5 billion. This outlook assumes more than $4 billion of costs related to COVID-19. This guidance range represents operating income declining by as much as 74% to rising by as much as 15% year over year. The continued uncertainty surrounding the pandemic is a key reason for the wide range. 

For context, in the third quarter, Amazon's revenue surged 37% year over year to $96.1 billion. Net income tripled to $6.3 billion, which translated to earnings per share (EPS) skyrocketing 192% to $12.37.

Wall Street was looking for EPS of $7.41 on revenue of $92.7 billion. So, the company comfortably beat the top-line estimate and crushed the profit expectation.

Amazon Web Services' overall growth

Investors should continue to focus on Amazon Web Services' (AWS) overall results. The cloud computing service has historically been the company's profit growth engine. 

In the third quarter, AWS' revenue surged 29.1% year over year to $11.6 billion, or 12% of total revenue, while its operating profit soared 56% to $3.5 billion, or a whopping 57% of total operating profit.

First-quarter 2021 guidance

The market looks ahead. So, its reaction to Amazon's report will probably hinge more on the company's outlook than its Q4 results, relative to expectations. (Amazon provides guidance for revenue and operating income but not for earnings. The operating income outlook, however, gives investors a rough idea as to what year-over-year percentage change the company expects on the bottom line.)

For Q1 2021, Wall Street is modeling for revenue to increase 27% year over year to $95.5 billion and adjusted EPS to soar 80% to $9.03. The expected earnings growth is so large primarily because in the year-ago period the company incurred huge expenses when the pandemic started, and because consumers were focused on buying necessities, rather than items with higher profit margins.

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