Amazon.com has for the first time opened up its cloud services division to public scrutiny, reporting that Amazon Web Services’ net sales increased 49% in the first quarter of 2015 while margins remained steady at 16.9%.

Amazon’s first breakout of AWS results fueled hopes that the company is headed toward profitability. The cloud business racked up $1.57 billion in first-quarter sales, with $265 million in profit (up slightly from $245 million for the same period last year). Amazon as a whole had a net loss of $57 million, or 12 cents a share.

Cloud “could be lucrative beyond hopes,” The Street’s Jim Cramer wrote. “In one fell swoop, it obliterated the long-term short story of how Amazon would never get profitable.”

Amazon CEO Jeff Bezos

Amazon CEO Jeff Bezos

Yahoo Finance said the cloud sales were about as expected, but the profits were a surprise. “Amazon Web Services is a $5 billion business and still growing fast — in fact it’s accelerating,” CEO Jeff Bezos said in a news release, referring to the unit’s annualized run rate.

Amazon stock closed up more than 14% at $445.17, reflecting not only the AWS results but also a second-quarter operating income forecast of as much as $650 million excluding the cost of stock-based compensation. That was much higher than most analysts had been assuming for what is typically a slow quarter for the company. Last year, Amazon reported a loss of $15 million in second-quarter operating income.

“Every few years, Amazon eases up a bit on its invest-everything-for-growth strategy and demonstrates just how profitable it can be,” Yahoo Finance said. “After the new second-quarter forecast, investors seem to believe 2015 will be a ‘show me the money’ kind of year.”

Amazon has consistently posted a net loss as it re-invests revenue back into the company. “The lack of profitability is a key concern for Amazon’s investors,” Forbes noted.

Photo: Steve Jurvetson, CC BY 2.0

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