Amazon is scheduled to release its next earnings report on July 28 after closing bell, and Goldman Sachs analysts have significantly increased their price target going into that report. They expect continued acceleration in revenues and margin expansion. After adjusting their estimates for the second quarter, they also raised their price target from $790 to $900 per share and maintained their Buy rating on Amazon.

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What to expect in Amazon’s earnings report

Analyst Heath Terry projects $29.4 billion in revenue, which is slightly behind the consensus of $29.5 billion and higher than management’s guidance of $26.5 billion to $29 billion. He estimates non-GAAP earnings of $1.86 per share, which is far short of the consensus of $2.38 per share. He projects adjusted operating income of $1.736 billion, compared to the consensus of $1.68 billion, and an adjusted operating income margin of 5.9%, compared to the consensus of 5.7%.

He estimates that Amazon’s North America e-commerce revenue grew 28% year over year in the second quarter, marking a slight acceleration from the 27% growth in the first quarter. He believes the online retailer’s international business grew 17% in the quarter, compared to the 23.5% growth rate observed in the first quarter for the international business.

Amazon expands cloud capacity

The Goldman analyst expects a 58% growth rate in revenue for Amazon Web Services in the second quarter, which is a deceleration from the first quarter’s growth rate of 64% as the company brings new capacity online and offsets modest price cuts at the beginning of the first quarter. Although he does expect a deceleration, he believes the rapid migration of workloads to the cloud, plus Amazon’s capacity investments this year, will accelerate growth in the second half of the year.

Terry added that pricing was pretty stable throughout the second quarter as the last price cut Amazon announced was in early January when it reduced EC2 prices by about 5% in some areas. The company has been in a pricing war with competitors in the cloud space, but the stability in pricing suggests margins will expand in the second quarter, he explained. He now estimates that AWS segment operating margins hit 28.4% in the second quarter from 27.9% in the first quarter before the new capacity came online.

Amazon shares edged upward by as much as 0.3% to $746.49 during regular trading hours on Friday.