Update: On Friday morning, Amazon shares are trading up 22% to an all-time high of $588.
Amazon (AMZN) shares zoomed higher in extended trading on Thursday after the online retailer posted second-quarter results that widely beat Wall Street's expectations.
The shares rallied more than 16%, adding to a gain of 55% this year, to an all-time high price of over $561. It was the third-consecutive stock jump following earnings for Amazon and put the company, founded by Jeff Bezos in 1994, on track to surpass the market value of Wal-Mart Stores (WMT), the giant brick-and-mortar retailer.
The Seattle, Washington-based company posted per-share earnings of 19 cents, compared to the consensus estimate of a loss of 15 cents a share. Sales of $23.2 billion, up 20% from last year, also topped expectations of $22.4 billion.
Revenue at the firm's Amazon Web Services unit hit $1.8 billion for the quarter, up from $1 billion in the same three months in 2014. That 81% increase was double the growth rate AWS experienced in the same quarter last year, signaling the growing strength of Amazon's cloud offering.
The acceleration of growth at Amazon comes just as competition is increasing. Wal-Mart has said it plans to spend billions of dollars to try and catch Amazon, Macy's (M) is bolstering rapid delivery service and upstart Jet.com opened for business this week with a $100 million marketing campaign.
At the end of regular trading on Thursday, Amazon's market capitalization stood at $224.5 billion, according to FactSet, less than 4% behind Wal-Mart's $233.5 billion value. If the stock hits the $560 level in regular trading on Friday, Amazon's stock market valuation will reach $260 billion. And that would represent a total gain of 80% so far this year from the stock's close at the end of 2014.
The big gain after Amazon's report on Thursday put the company in line with other tech darlings that jumped on second quarter reports this month. Netflix (NFLX) shares jumped 18% to an all-time high on July 16 after the company hit 65 million subscribers worldwide. And shares of Google (GOOGL) rose 16% on July 17 after the search giant beat Wall Street expectations and emphasized greater discipline over expenses.
Earnings reports have been a boon to Amazon shareholders this year. Amazon shares closed up 14% in January after it reported better than-expected-results for the fourth quarter of 2014 and captured another 14% gain in April after reporting surprisingly good first quarter results.
The 2015 Amazon stock rally got started after previous CFO Thomas Szkutak in January signaled to analysts that the company would spend the year focused on becoming more efficient and productive after a "heavy investment cycle." Investors assumed, correctly it turned out, that the company would slow spending on new initiaves and report higher profits.
On Thursday's earnings call, analysts tried to get brand new CFO Brian Olsavsky to extend that implicit pledge to 2016 and 2017, but he wasn't biting. "I can’t forecast into the future on that," he replied.
Amazon attracted 265 million active customers in the quarter, Olsavsky told analysts, up from 237 million a year earlier.
Booming sales in India are prompting Amazon to invest more to expand there, Olsavsky said in response to a question. "When we see a positive surprise, we double down on it and India is that kind of surprise," the CFO said. "We’re super excited about India."
The second quarter results didn't include the impact of Amazon's highly publicized and made-up shopping holiday. The company declared July 15 "Prime Day" and said it would offer more deals than it did on "Black Friday," traditionally the busiest buying day of the year. Critics said the best deals were few and far between, but Amazon said it sold more items than it did on "Black Friday" last year.
"It surpassed all of our expectations," Olsavsky said, but declined to reveal actual sales on the day.