Amazon's operating income nearly hit $2 billion in Q1 — almost double what Wall Street expected (AMZN)

The company's profit beat Wall Street's forecast by a whopping $2 a share as its operating income came in much better than it had forecast at the end of last quarter.

Here's what the company reported:

Revenue:
EPS (GAAP):
Revenue guidance (Q2):
Operating income guidance (Q2):

Investors cheered the results. In recent after-hours trading, the company's stock was up $97.54, or 6.4%, to $1,615.50.

The company recorded $1.9 billion in operating income in the quarter. That was much better than analysts were expecting. In February, the company forecast that its operating income for the first quarter would likely range from $300 million to $1 billion, influencing analysts' profit predictions.

Several factors played into the better-than-expected results, Brian Olsavsky, Amazon's chief financial officer, said in a conference call with analysts. The company's revenue came in higher than Amazon expected. Because much of the company's costs — such as those related to running its fulfilment centers and data centers — are fixed, a good portion of the extra revenue trickled down to Amazon's bottom line, he said.

Additionally, at the end of the fourth quarter, the company had relatively high inventory levels and was worried that it would incur significant costs shifting products around among its warehouses to ensure each one had optimal levels, Olsavsky said. But the better-than-expected sales in the period meant the company didn't have to do that rebalancing of inventory, he said.

What's more, Amazon benefitted from surging advertising sales, he said.

"Advertising continues to be a strong contributor to profitability," Olsavsky said.

Amazon is hiking the price for Prime

In the quarter, Amazon saw strong gains from its North American retail segment, thanks in part due to Whole Foods, which it acquired in the second half of last year. Sales from that segment rose 46% year-over-year to $30.7 billion in the quarter. The segment posted an operating profit of $1.1 billion, which was nearly double the $596 million operating profit it recorded last year.

It was also much bigger than Wall Street was expecting. On average, analysts were forecasting that the North American retail business would have an operating income of $660 million in the quarter, according to Colin Sebastian, an analyst who covers the company for Robert W. Baird.

The North American segment could see a surge in coming quarters from another piece of Amazon's business — its Prime subscription service. The company announced Thursday that it plans to hike the annual price for Prime to $119 in May from the current $99 a year rate.

Amazon Web Services is actually picking up steam

Amazon's results were also helped by its cloud business — Amazon Web Services — which saw sales grow 49% to $5.4 billion. Yet again AWS contributed the lion's share of Amazon's profit. The cloud business had operating income of $1.4 billion in the quarter, up from $890 million a year earlier.

Although AWS's sales have grown at rates of 40% or better for at least the last six quarter, its pace in the just-completed period was the fastest over that time span.

"AWS had the unusual advantage of a seven-year head start before facing like-minded competition, and the team has never slowed down," Amazon CEO Jeff Bezos said in a statement. "As a result, the AWS services are by far the most evolved and most functionality-rich ... That's why you're seeing this remarkable acceleration in AWS growth."

Advertising boosted Amazons bottom line

Amazon's results were also augmented by its burgeoning advertising business. The company's "other" revenue, which includes ad sales, was up a massive 139% in the quarter from the same period last year to $2 billion.

Consumers who are shopping for particular products are increasingly starting at Amazon's site. The company has seen growing interest from marketers eager to advertise to those shoppers.

Meanwhile, the company was able to keep something of a lid on the losses in its international retail business. That segment's sales jumped 34% to $14.9 billion from the same period a year earlier. While the segment's operating loss grew to $622 million, that figure rose 29% — a pace slower than its sales.

It also was much lower than analysts expected. Wall Street had forecast that the international retail business would post an operating loss of $950 million in the quarter, Sebastian said.

However, favorable foreign exchange rates helped improve the international segment's top and bottom lines. Without that boost, Amazon's international retail sales would have risen by 21%, and its operating loss would have swelled 44%.

The company's overall retail business — North American and international — was also helped by Whole Foods and Amazon's other physical stores as well as the money Amazon makes from third party merchants who offer goods through its sites. Amazon's brick-and-mortar outlets accounted for $4.3 billion in sales in the quarter. Its revenue from third-party merchants was $9.3 billion, up 44% year-over-year.

By contrast, Amazon's traditional online retail business, where it sells products directly to customers, posted $26.9 billion in sales in the quarter, up just 18% from the same period a year earlier.

Amazon's results came on a busy day for tech earnings reports. Among the other notable results:

Intel topped Wall Street's revenue expectations, which sent its own stock soaring.

And Microsoft reported better-than-expected financials, thanks in part to its cloud business.

We'll be continuing to cover the results, so hit refresh or click here for the latest.