Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What's happening: Shares of Amazon.com (NASDAQ:AMZN) skyrocketed 16% early Friday after the online retail juggernaut announced better-than-expected first-quarter results the previous evening.
Quarterly revenue climbed 15% year over year to $22.72 billion, and that includes a $1.3 billion negative impact from foreign exchange rates. On a currency-neutral basis, Amazon's sales would have increased 22%. Meanwhile, that translated to a net loss of $57 million, or $0.12 per diluted share. But analysts, on average, were expecting an even larger net loss of $0.15 per share on lower sales of $22.1 billion.
Amazon also generated operating cash flow of $7.85 billion during the quarter -- a 47% year-over-year increase -- and achieved 112% growth in free cash flow to $3.16 billion over the same period.
Why it's happening: Perhaps most intriguing, however, was how CEO Jeff Bezos singled out his company's fast-growing AWS division, saying "Amazon Web Services is a $5 billion business and still growing fast -- in fact it's accelerating. Born a decade ago, AWS is a good example of how we approach ideas and risk-taking at Amazon."
Specifically, AWS saw revenue grow 49% year over year to $1.57 billion, and generated operating income of $265 million in the process. No matter how you slice it, to have a large, profitable segment like this accelerating growth is an exceptional achievement. And as long as Amazon can continue sustaining its top-line growth and grabbing market share, I see no reason the market won't continue to forgive its consistent approach of shunning bottom-line profitability.
Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of 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.