Why Amazon.com, Inc. Is Soaring Today

By Markets Fool.com

Image source: Amazon.com.

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What: Shares of Amazon.com are on a roll today, rising 12.5% as of 11:30 a.m. ET. The e-commerce and cloud computing giant reported second-quarter earnings last night, blowing past analyst estimates and management guidance alike.

So what: Amazon's second-quarter net sales rose 28% year over year to land at $29.1 billion. Trailing free cash flows doubled to $6.4 billion, Amazon turned the year-ago quarter's $0.12 adjusted net loss per share into $1.07 of positive earnings per share, and GAAP operating income quadrupled to $1.1 billion.

Wall Street's finest would have settled for adjusted earnings near $0.58 per share on roughly $28 billion in sales. Those turned out to be easy targets.

Management's own revenue guidance for this quarter was in line with the analyst view. As for operating profits, the reported figure was 57% above the top end of Amazon's very wide guidance range.

Looking ahead, revenue guidance for the third quarter pointed to 26% growth, stopping at $29.3 billion. The target range for non-GAAP operating income stretches from $1.2 billion to $1.8 billion. That's not a lowball goal.

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Now what: Much of Amazon's sudden bottom-line surge comes from the Amazon Web Services segment. That bundle of cloud computing tools saw second-quarter revenues rising 64% year over year, tripling its operating income take. This high-margin, high-growth operating generated 9% of Amazon's overall sales in the quarter, but 56% of the company's operating profits.

Standing on top of the online retail divisions and their solid financial foundation, the cloud computing business has become the little profit engine that could. In a few years, we might think of Amazon as a cloud computing business first and the e-tailing stuff as a curious side project -- assuming that these growth trends continue.

Now, where did I put that old crystal ball again...?

The article Why Amazon.com, Inc. Is Soaring Today originally appeared on Fool.com.

Anders Bylund has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.