Headed into Amazon.com's (NASDAQ:AMZN) fourth quarter, there was lots of uncertainty about what the e-commerce and cloud-computing company would report, particularly as it related to the company's profitability. But net income soared as operating income exceeded the high end of the company's guidance range.

Here's a closer look at Amazon's soaring profits and its overall fourth-quarter results.

Amazon employee sifts through inventory  at Amazon fulfillment center.

Image source: Amazon.com.

Amazon.com results: The raw numbers

Metric

Q4 2016

Q4 2015

Change (YOY)

Revenue

$43.7 billion

$35.7 billion

22%

Operating income

$1.3 billion

$1.1 billion

13%

Net income

$749 million

$482 million

55%

EPS

$1.54

$1.00

54%

Data source: Amazon fourth-quarter earnings press release. Table by author. YOY = year over year.

What happened with Amazon this quarter?

  • Revenue increased 22%, a rate that falls in the middle of management's own forecast for fourth-quarter revenue growth between 17% and 27%.
  • For its seventh quarter in a row, Amazon was profitable. Net income was $749 million, up 55% form the year-ago quarter.
  • Amazon's operating income was $1.3 billion, easily exceeding the company's forecast for fourth-quarter operating profits to be between $0 to $1.25 billion.
  • Amazon's North America e-commerce business saw its operating income rise from $636 million in the year-ago quarter to $816 million in the fourth quarter of 2016.
  • But the loss in Amazon's international e-commerce business widened from $108 million in the year-ago quarter to $487 million in the fourth quarter of 2016.
  • Amazon's cloud-computing business, Amazon Web Services (AWS), outperformed the company's North America e-commerce business when it comes to profitability. AWS' operating income increased from $580 million in the year-ago quarter to $926 million in the fourth quarter of 2016, accounting for 74% of the company's overall operating income.

What management had to say

Amazon continued to make progress on its flywheel strategy of delivering value for Prime members across a growing suite of membership benefits. Amazon CEO Jeff Bezos explained Prime's success in the company's fourth-quarter earnings press release:

Our Prime team's customer obsession kept them busy in 2016. Prime members can now choose from over 50 million items with free two-day shipping -- up 73% since 2015. Prime Video is now available in more than 200 countries and territories. Prime Now added 18 new cities, which means millions more members now get one and two hour delivery. New benefits were also added to the list, like Prime Reading, Audible Channels for Prime, Twitch Prime and more. And customers noticed -- tens of millions of new paid members joined the program in just this past year.

AWS, which Amazon prides itself on its rate of innovation, released "308 significant new services and features in the fourth quarter, bringing the total number of launches in 2016 to 1,017," management said. This is up from 722 significant new services and features in 2015.

Management continues to expect 2017 to be marked by a big step-up in investments. Amazon CFO Brian Olsavsky discussed these expected investments' impact on the company's first-quarter guidance during Amazon's fourth-quarter earnings call (via a Reuters transcript):

[W]hat you are seeing ... is the continuation of the step-up investment that we saw in the second half of last year. I talked about in prior calls about the fulfillment center step up.

We had 26 warehouses we added last year, 23 of them were in the second half of the year. Digital content, digital video content, end marketing stepped up quite a bit in the second half of the year.

We continue to invest heavily in those two areas. We also have investments in other Prime benefits from Prime Now to Amazon Fresh, and of course we're continuing to invest in Alexa in our Echo devices. And finally I'd point out India which continues to be a rather large investment for us.

For Amazon's first quarter of 2017, management said it expected revenue to be between $33.25 billion and $36.75 billion, up 14% to 23% compared to the first quarter of 2016. This guidance range, management emphasized, "anticipates an unfavorable impact of approximately $730 million or 250 basis points from foreign exchange rates." In anticipation of an aggressive investment year, management expects operating income to be between $250 million and $900 million, down from $1.1 billion in the first quarter of 2016.

Daniel Sparks has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon.com. The Motley Fool has a disclosure policy.