In a sign of strength in everything from its retail operations to its surging cloud computing business, Amazon.com Inc. once again managed to outpace forecasts in its latest quarter.

The retail and cloud computing giant today reported a first-quarter net profit of $3.27 per share, well over double a year ago despite continuing heavy investment in everything from data centers and warehouses to video content and consumer electronics devices. Revenue rose 43 percent, to $51 billion.

Wall Street had expected an adjusted profit of just $1.26 a share on revenue of $49.8 billion, up 39 percent from last year’s first quarter, according to a survey by Thomson Reuters. Amazon itself had forecast revenue of $47.75 billion to $50.75 billion.

However, the results benefited from a big boost from favorable foreign exchange rate changes that added $1.6 billion in revenue. Without that, net sales rose 39 percent from a year ago, spot on analysts’ estimate.

Investors still cheered the news. In after-hours trading, shares shot up more than 7 percent. Shares had risen just under 4 percent, to $1,517.96, in regular trading today. They’re up 25 percent on the year, even as the Standard & Poor’s 500 Index is down 1.3 percent.

“AMZN is executing extraordinarily well,” Macquarie Capital (USA) Inc. analyst Ben Schachter said in a note to clients. “We believe that even without margin expansion in core retail, the other businesses can drive significant profit growth over the coming years and will make AMZN the first trillion dollar company.”

Sunny days for the cloud

Amazon Web Services Inc., the company’s fast-growing cloud unit, again led the way on the profit side, with a 57 jump in operating income, to $1.4 billion — a full 73 percent of Amazon’s overall operating income. The income jump outpaced AWS revenue growth of 49 percent, to $5.4 billion. That beat not only the 45 percent jump in the fourth quarter, but also the $5.3 billion analysts had expected.

The unit, run by Chief Executive Andy Jassy (pictured), is still only 11 percent of Amazon’s overall revenues at an annual run rate of nearly $22 billion, but that’s up from 8.5 percent a year ago. And its continuing rapid growth and relatively high profitability means it looms ever larger in the company’s future. Keybanc Capital Markets analyst Edward Yruma recently estimated that by 2020 AWS would double its revenue, to $41 billion, and Jefferies analyst Brent Thill thinks it can hit $60 billion in annual revenue in five years.

In a sign of the cloud unit’s outsized importance, Amazon founder and CEO Jeff Bezos focused his prepared comments exclusively on AWS.

“AWS had the unusual advantage of a seven-year head start before facing like-minded competition, and the team has never slowed down,” he said. “As a result, the AWS services are by far the most evolved and most functionality-rich. AWS lets developers do more and be nimbler, and it continues to get even better every day. That’s why you’re seeing this remarkable acceleration in AWS growth, now for two quarters in a row.”

The unit has added a raft of new customers in recent months, aiming to show it’s staving off tough competition from the likes of Microsoft Corp.’s Azure, Google Cloud Platform and Oracle Cloud. Early this month, AWS announced two new marquee customers, image publishing service Shutterfly Inc. and vehicle services firm Cox Automotive Inc. That’s on top of Comcast Cable and GoDaddy Inc. in January and at least five major new customers announced at the company’s annual re:Invent conference last fall, including The Walt Disney Co., Turner Broadcasting System Inc. Expedia Inc., the National Football League and Intuit Inc.

Part of the driver of those deals is machine learning, in particular SageMaker, a relatively new cloud service designed to streamline the building and training of models for analyzing and getting value from enterprise data.

“It wouldn’t be an overstatement to say that AWS has been and remains the revenue boiler,” said Charles King, president and principal analyst at consultant Pund-IT Inc. “The steady black ink AWS provides underscores Jeff Bezos’ ‘genius’ reputation and helps justify the company’s continuing focus on reinvesting its profits in new infrastructure and acquisitions.”

Still, it seems likely AWS will increasingly face more aggressive competition. “The biggest danger of AWS is the volatility that ‘horse race’-focused shareholders can bring to play when it looks like competitors like Microsoft or Google are getting a leg up on AWS,” King said. “We’re still so early in the adoption cycle for cloud that this dynamic is likely to be business as usual for some time to come, especially when you consider that those competitors are just as ambitious as Amazon.”

Big spender

As always, spending on seemingly endless new initiatives, such as on Echo smart speakers and other devices, international expansion, programming for its growing video operation, and cloud data centers, remains a prime concern of investors. Operating expenses overall rose 41 percent, to $49.1 billion, though that rate is less than the revenue growth rate.

For its current quarter, Amazon forecast operating income between $1.1 billion and $1.9 billion. It also predicted revenues between $51 billion and $54 billion, or up from 2017’s first quarter between 34 and 42 percent, right in the center of analysts’ expectations. That includes an expected foreign exchange benefit of about $1.2 billion. Analysts were expecting operating income of $1.13 billion on a 38 percent rise in revenue, to $52.2 billion, boosted in part by the Whole Foods acquisition that closed in August.

Another smaller but lucrative business, advertising, is also growing fast. It’s the majority of the “other” revenue segment, which jumped 132 percent from a year ago to $2 billion. “Advertising continues to be a bright spot both from a bright spot and also financially,” particularly in profitability, Amazon Chief Financial Officer Brian Olsavsky said on the earnings conference call.

Photo: Robert Hof/SiliconANGLE