Inside Amazon's (AMZN) Impressive Earnings Report

Amazon (AMZN) Investors See a Light at the End of the Tunnel

Amazon (AMZN) shares were drifting lower heading into Thursday evening's earnings report, suggesting the market was fearing the worst. When investors got anything but the worst, that lull reversed course, in spades. Amazon shares are up nearly 10% following their earnings report,  and have a good deal of room to move ahead after a sizeable setback in December and January.

Last quarter - the company's first fiscal quarter of 2016 - Amazon.com earned a per-share profit of $1.07 on $29.1 billion worth in revenue. Both were well up from year-ago comparisons of a loss of 12 cents per share and sales of $22.72 billion. Moreover, both numbers handily topped estimates for per-share income of 58 cents and sales of $27.99 billion.

The company's much-watched cloud-computing division Amazon Web Services (or AWS) was the hero it was expected to be

Amazon Web Services' revenue grew 64% on a year-over-year basis, to $2.57 billion. AWS' operating income grew to $716 million, almost tripling the year-ago operational bottom line. It wasn't just AWS driving strong revenue and income growth, however. North American e-commerce sales grew 27%, to reach $17.0 billion, leading to $588 million worth of operating profit. Net income for the entire company came in at $513.0 million.

The numbers finally start to offer hope that Amazon isn't just a sales-growth machine, but can turn a respectable profit as well.

As for the future, Amazon anticipates revenue of between $28.0 billion and $30.5 billion for the quarter currently underway, versus analyst estimates of $28.14 billion. Operationally speaking, that should mean income of somewhere between $375 million $925 million. That projected range mostly compares favorably with the $464 million worth of operational income produced by Amazon  in the second quarter of 2015.

The trailing and forward-looking revenue and income graph below illustrates how last quarter's numbers fit into the bigger trend. The past two quarters have been especially profitable ones (by Amazon standards anyway), and the projections suggest Amazon has finally achieved enough scale and culled enough costs to be measured based on earnings growth.