Despite a slight slowdown in revenue growth, Amazon’s massive cloud computing company again helped buoy the entire company even in the retail-heavy fourth quarter, sending shares soaring as much as 13% in after-hours trading today.

The company overall reported net income of $3.3 billion, or $6.47 a share, on a 21% rise in revenue, to $87.4 billion. That easily beat analysts’ expectations of a $4.04-a-share profit on revenue of $86 billion.

Amazon also provided updated guidance for the first quarter, ranging from $69 billion to $73 billion, bracketing the $71.6 billion analysts had forecast.

Amazon Web Services Inc., the company’s cloud computing company, extended a multiquarter slowdown in revenue growth, but not by much, as sales rose 34%, to $9.95 billion, in the quarter, compared with a 35% growth rate in the third quarter. Analysts on average had expected only about 30% growth from AWS.

Perhaps just as important, AWS, which now constitutes 12% of overall revenue, up from 10% a year earlier, remains Amazon’s cash cow. It reported operating income of almost $2.6 billion, up 19%, and constituting a full two-thirds of the overall company’s operating profit.

“AWS had an exceptional quarter,” said Patrick Moorhead, president and principal analyst at Moor Insights & Strategy. “AWS sales grew over $2.5 billion for the quarter, which is larger than the overall annual size of most cloud companies’s revenue.”

Indeed, on an annualized basis, it’s now a $40 billion business to Google Cloud’s $8 billion, which also includes software-as-a-service revenue from G Suite and other services. Chief Financial Officer Brian Olsavsky said in a conference call with analysts that the growth was “broad-based” across types of customers and workloads, thanks to added products and features as well as more salespeople. “Our product set leads the market and we add to it at a quicker pace than our competitors,” he said.

“Amazon’s increased profits during this quarter in the face of increased costs and competitive pressure in AWS was the real surprise,” said eMarketer Principal Analyst Andrew Lipsman. Mizuho Bank Ltd. analyst James Lee added in a note to clients that the outperformance of AWS indicates it has been successful application services with higher margins.

The unit suffered a blow during the fourth quarter when the Defense Department in late October granted Microsoft Corp. the $10 billion, 10-year Joint Enterprise Defense Infrastructure or JEDI cloud infrastructure project. AWS had been the front-runner much of the year.

Last week AWS filed a motion to stop work on the project. Earlier the company charged that the decision was politically influenced by President Donald Trump’s animosity toward Bezos, who personally owns the Washington Post, for critical coverage of the president. Meanwhile on Wednesday, Microsoft reported that its Azure cloud infrastructure revenue rose 62%, though it doesn’t reveal absolute revenue numbers.

Amazon’s shares were rising nearly 13% in immediate after-hours trading before settling back to about an 11% rise. That catapulted Amazon’s market value over the $1 trillion mark, joining Apple Inc., Microsoft and Google parent Alphabet Inc. The stock had closed the regular trading session up two-thirds of a point, to $1,870.68 a share, on a mildly down day for the overall market.

The reason for investors’ enthusiasm no doubt was surprisingly high profits, not to mention a cheery outlook for a customarily slow quarter. Besides the sales growth forecast, Amazon said it expects first-quarter operating income to come in between $3 billion and $4.2 billion, which would be lower than the $4.4 billion reached in the first quarter of last year.

It’s likely that’s the result of big spending on a new program to provide one-day and even two-hour shipping on some products to Prime members. Still, Amazon Chief Executive Jeff Bezos focused on the benefits of its $119-a-year Prime membership, which enables free fast shipping and access to its large library of video content.

“More people joined Prime this quarter than ever before, and we now have over 150 million paid Prime members around the world,” Bezos said in prepared remarks. “The number of items delivered to U.S. customers with Prime’s free one-day and same-day delivery more than quadrupled this quarter compared to last year.”

Although the faster shipping no doubt drove topline growth, it doesn’t come cheap. Amazon has spent about $1.5 billion on a program announced last year to provide one-day delivery options on many products. However, one reason for investor optimism is that shipping costs stabilized this past quarter.

Subscription services, chiefly Amazon Prime, also rose at a rapid clip, up 32%, to $5.24 billion. And Amazon’s “other” category, mostly advertising, jumped 41%, to $4.78 billion.

Photo: Robert Hof/SiliconANGLE