Amazon posted a profit of $79 million, or 17 cents per share, for the third quarter, surprising analysts that expected the online retail giant to swing back to a loss of 13 cents per share after reporting a profitable second quarter.
Shareholders of Amazon are accustomed to the company's decisions of investing the money that it makes, while posting either very narrow profits or a loss. However, for the third quarter, Amazon's financials were boosted by unit Amazon Web Services, which rents out storage and computing power to companies over the Internet.
The revenue of the Amazon Web Services division for the third quarter increased by 78 percent to $2.1 billion, with the unit's operating income increasing by over five times to $521 million.
Not only was Amazon able to post an unexpected profit for the quarter, but it was also able to report revenue that is higher than expected. Amazon's net sales increased by 23 percent to $25.36 billion, beating the expectations of analysts for sales of $24.91 billion.
The unexpected third quarter results for Amazon, which were released after the close of the stock market, resulted in high demand for Amazon shares. At the end of the trading day, Amazon shares were at $563.91, an increase of $8.14, and then jumped up with an increase of $54.79 to $618.70.This would be an all-time high for Amazon's shares if it remains at this level upon the opening of trading on Oct. 23.
The massive gain in stock prices is a complete turnaround for Amazon, which posted a larger-than-expected loss that caused its share prices to dip below $300. The troubles of Amazon then were largely attributed to the disappointing performance of the company's Fire Phone.
On the earnings call, Brian Olsavsky, the chief financial officer of Amazon, discussed the company's strategy for reinvestments, stating that the initiatives have been allowing Amazon to decrease costs and post strong results at the same time.
"The good thing about 30 percent revenue growth is it gives you a lot more costs to work on as well," Olsavsky said, adding that cost reduction will always be present despite different levels of investments.
This is only the third time that Amazon has posted consecutive quarterly profits over a span of three years. If the company can once again turn out a profit next quarter, it would be the longest streak since the company started falling in and out of loss since 2012. Whether the online retail giant can do so, however, remains to be seen, though it will be aided by the holiday shopping frenzy.