Amazon (AMZN 1.04%) shareholders had a fantastic 2023 as their stock gained 80% on the year, easily beating the 24% rally in the S&P 500 and the 43% spike in the tech-heavy Nasdaq Index. That performance wasn't quite good enough to put the e-commerce giant's shares back into record territory, although it did push its valuation back above $1.5 trillion. Amazon stock remains below the all-time highs of over $180 per share that were set when the market was soaring in late 2021.

The 2023 rally was powered by several encouraging trends that imply much higher annual earnings ahead for this massive business.

Accelerating sales growth

Amazon posted accelerating sales trends throughout the year, giving investors one big reason to like the stock. Sales were up 13% in the most recent quarter compared to an 11% increase in fiscal Q2 and a 9% uptick in Q1. Wall Street loves to see speeding revenue gains, especially in a business that books over $500 billion of sales each year.

Part of that rebound came from a return to growth in the e-commerce division following a painful post-pandemic slowdown through most of 2022. But investors were even happier to see Amazon's services segment expand more quickly. That division, anchored by the Amazon Web Services (AWS) platform, grew at a blazing 18% rate last quarter and now accounts for well over 50% of the total business. That's great news because a continued shift toward service sales likely means higher profitability over time.

Amazon also showed solid progress in its pivot toward more balance between growth and profits. Operating cash flow soared over the last few quarters and is in solidly positive territory after declining in 2022. Earnings are on a much stronger trajectory, too.

Extending the positive momentum

The 2023 rally means the odds are stacked against Amazon repeating its market-thumping performance this year. Yet growth stock investors shouldn't ignore that possibility. If its operating and financial momentum carries through into 2024, operating profit margin could keep moving toward the double digits. Success here would mean much higher profits, and positive shareholder returns, over the long term.