The Q1 earnings season is heating up, and this week, we have two Big Tech earnings to consider, as both Amazon (AMZN) and Apple (AAPL) will release their quarterly reports. It’s been a mixed earnings season for the “Magnificent 7”, and while Meta Platforms (META) fell over 10% after its results, both Tesla (TSLA) and Alphabet (GOOG) rallied after their Q1 earnings.

Alphabet, incidentally, joined the $2 trillion market cap club after its report, as the Google parent dispelled fears that it is slacking on artificial intelligence (AI) initiatives. Will Amazon also join the $2 trillion club after its Q1 earnings release this Tuesday night? We’ll discuss in this article, beginning with the e-commerce giant’s Q1 earnings estimates.

Amazon Q1 Earnings Estimates

Analysts expect Amazon to report revenues of $142.5 billion in Q1, a YoY rise of 11.9%. During the Q4 earnings call, Amazon guided for Q1 revenues between $138 billion and $143.5 billion, which implies YoY growth between 8%-13%. 

The company expects to post operating income between $8 billion and $12 billion - which, even at the lower end, is significantly higher than the $4.8 billion that it reported in Q1 2023. Consensus estimates call for Amazon’s Q1 earnings per share (EPS) to rise 164% YoY to $0.82. Thanks to a renewed focus on “efficiency,” Big Tech companies have seen spectacular growth in their bottom line over the last few quarters, far exceeding their revenue growth.

Q1 Earnings Season Has Been Quite Interesting

It has been an interesting earnings season. Netflix (NFLX), which was up sharply for the year ahead of its Q1 report plunged following the release despite the earnings beat. While the company’s decision to stop providing quarterly subscriber numbers going forward might also have played a part, the earnings failed to live up to the price action.

Conversely, Tesla (TSLA) soared despite missing on both the top line and the bottom line. It was among the worst-performing S&P 500 Index ($SPX) stocks of 2024 heading into the confessional, and some positive commentary from management - especially on the low-cost model - helped trigger a relief rally.

As for Amazon, it does not have any major “baggage” in terms of price action - at least to the extent that Netflix carried. The shares are up a little over 18% YTD, and while the returns are three times what the Nasdaq Composite Index ($NASX) has delivered, the stock has pulled back from its overbought status earlier this month.

Could Amazon Become a $2 Trillion Company?

I see a realistic chance of Amazon becoming a $2 trillion company after the Q1 earnings. The company has impressed markets with its last couple of earnings reports, and in particular has posted stellar free cash flows. The ongoing cost cuts, coupled with comments on its AI initiatives and the growing advertising business (which should receive even more momentum with Prime’s ad-supported version) should make for an interesting earnings call.

Earlier this month, JPMorgan (JPM) reiterated Amazon as its best idea for 2024, even as it said it is the “most owned across our coverage.” JPMorgan analyst Doug Anmuth expects Amazon to post impressive store growth and expansion in North America profit margins in Q1. He also believes that the profitability of Amazon’s international business will continue to improve, which - alongside other enabling factors, like cost cuts - will drive a multi-year free cash flow ramp.

To be sure, JPMorgan is hardly the only brokerage that highlighted Amazon as a top idea for 2024. Piper Sandler, Bank of America, D.A. Davidson, Wolfe, and Wells Fargo are among the other firms that listed Amazon as their top pick for 2024.

If anything, brokerages are turning incrementally more bullish on the stock, as BMO, Wedbush, and Citi are among those firms that have raised Amazon’s target price heading into the report.

Amazon’s Long-Term Forecast Also Looks Bullish

Amazon’s long-term forecast also looks bullish. The growth in its e-commerce and enterprise-focused Amazon Web Services (AWS) business has stabilized from the troughs. It has several growth drivers, like Amazon Business, which is its business-to-business (B2B) platform, its pharmacy business, and the still fast-growing ad business. Generative AI initiatives should also help drive both Amazon’s top line and bottom line.

Finally, Amazon trades at a next 12-month (NTM) price-to-earnings multiple of just over 43x, which seems reasonable considering the kind of top-line and bottom-line growth the company brings to the table. As for the company hitting a $2 trillion market cap, it seems a matter of when and not if, with a good possibility of it happening after the Q1 report itself.