AWS's $2.9 billion powers Amazon to surprise profit

Amazon.com on Thursday US time recorded a surprise profit for the second quarter in a row, propelled by its cloud computing business and higher sales in North America, as its shares rose 11 percent.

Amazon, which has historically struggled with profitability while spending to expand beyond its core online marketplace offerings, reined in costs and was helped to profitability by growth at its Amazon Web Services (AWS) segment.

Net sales from Amazon Web Services, which has more than 1 million active customers in 190 countries, rose more than 78 percent in the quarter to US$2.09 billion (AU$2.9 billion).

For the latest quarter, Amazon reported a profit of US$79 million, or 17 cents per share, compared with a loss of US$437 million, or 95 cents per share, a year ago.

Chief financial officer Brian Olsavsky told reporters on a conference call that the balance between investing and cost controls "will be lumpy over time".

Olsavsky said the company would continue to invest in areas that work with customers, adding that even though investments would "remain very high" Amazon would be looking for ways to cut costs.

BGC Partners analyst Colin Gillis said: "There are questions about what's the sustainable margin for this? Are we seeing just a hyper growth phase now? But for right now, AWS is driving the train, and it's going to for the near future."

Analysts on a separate conference call asked Amazon about its forecast for long-term margins on AWS, but the company provided no figures.

Cloud computing is the fastest growing business for Amazon, and the new services in which it is investing, such as Internet of Things, will help the company capitalise on rising demand to store and manage large amounts of information.

Sales in North America, the largest market for the world's biggest retailer, rose 28.3 percent to US$15.01 billion in the third quarter ended 30 September, on robust US Prime Day sales and demand for electronics and general merchandise.

The company forecast net sales growth of 14 percent to 25 percent, to a range of US$33.50 billion and US$36.75 billion, for the holiday shopping quarter. Analysts, on average, had been expecting revenue of US$35.16 billion, according to Thomson Reuters I/B/E/S.

Total net sales rose 23.2 percent to US$25.36 billion. Analysts, on average, had expected a loss of 13 cents per share on revenue of US$24.91 billion, according to Thomson Reuters I/B/E/S.

Amazon's shares rose to US$625 in late trade after closing at US$563.91 on Thursday US time. 

(Reporting by Anya George Tharakan in Bengaluru; Writing by Bernard Orr; Editing by Ted Kerr, Toni Reinhold)