Image source: Wayfair.

What: Shares of online retailer Wayfair (W -3.72%) surged on Monday following the company's first-quarter earnings report. Results were mixed relative to analyst estimates, but extremely fast revenue growth was enough to send the stock about 12.5% higher by noon.

So what: Wayfair reported revenue of $747.3 million, up 76.1% year over year and $52.5 million higher than the average analyst estimate. Direct retail revenue was $711.8 million, up 92.7% year over year. The number of direct retail active customers rose 68.9% to 6.1 million, while net revenue per active customer over the past 12 months increased 13.3% to $392. Average order value also increased, up $22 year over year to $238.

While this revenue growth was enough to push the stock higher, Wayfair fell short in terms of profitability. Non-GAAP EPS came in at a loss of $0.36, down from a loss of $0.23 during the prior-year period and $0.03 below analyst expectations. On a GAAP basis, the company lost $41.2 million, or $0.49 per share. Gross margin declined to 24%, down from 24.2% during the first quarter of 2015, while operating expenses rose by 70% year over year.

Now what: Wayfair is still a long way from profitability, in part because advertising spending is elevated in an effort to gain more customers. It spent $97.7 million on advertising during the first quarter, or 13.3% of revenue. Wayfair continues to grow revenue at an astounding rate, and with sales coming in higher than analysts expected, investors boosted the stock on Monday.

As CEO Niraj Shah said about the company's quarter:

We are seeing tremendous traction with both new customer growth and repeat purchases as we focus on leveraging technology and innovation to reinvent the way customers shop for home and build a truly differentiated retail experience. From expanding selection across key categories such as housewares and home improvement to introducing specialized service teams to guide customers through complex purchases, we are strengthening our leadership position as the number one place to shop for home.