Holy moly, Amazon shares are going nuts after blowing away expectations

Amazon shares have been up as much as 12% in pre-market trading after the company blew away expectations with earnings on Thursday evening.

We've flipped through a dozen analyst reports on Amazon. They're all impressed by the quarter. Basically, sales are better than expected, Amazon's various investments are paying off, and profitability is something that seems to be coming. Also, Amazon Web Services, its cloud computing business is much better than expected.

JP Morgan analyst Doug Anmuth has the best explanation of why people are excited about the quarter. He upgraded the stock after the earnings report:

We are upgrading shares of Amazon.com from Neutral to Overweight and raising our Dec-15 price target from $375 to $535. Our upgrade is based on 3 key factors:

1) accelerating FXN revenue growth to 22% driven by EGM strength;

2) increasing commitment to profitability with 60bps of Y/Y CSOI margin expansion to 3.1% with additional Retail room going forward; and

3) AWS profitability far exceeding expectations with mid-teens CSOI margins driving a re-rating and higher SOP valuation.

We believe recent results more clearly show the rewards of Amazon's heavy investments in category expansion, fulfillment & sortation centers, and Prime. Amazon is also now heading into a period of easier comps due to last year's consumption tax in Japan and aggressive AWS price cuts. Our $535 price target is based on our SOP analysis which assumes 0.7x 2016E Retail GMV of $230B and 16x 2016E AWS EBITDA of $4.1B.

Here's another good summary of the quarter from Heather Terry at Goldman Sachs:

Amazon reported 1Q revenue of $22.7bn (+15.1% yoy vs. +14.6% in 4Q), above consensus of $22.4bn.

FX-neutral revenue growth accelerated to +22% from +18% in 4Q, driven by all segments.

GAAP operating income was $255mn (1.1% margins), above consensus of $7mn and guidance of ($450)-50mn, making this the second quarter in a row of significant profit outperformance.

Amazon reported 1Q AWS revenue of $1.6bn with 16.9% operating margins, far above our profitability expectations. 2Q revenue guidance of $20.6-$22.8bn brackets consensus of $22.1bn.

We continue to believe Amazon's investment in infrastructure, logistics, and web services is resulting in market share gains, cash flow growth, and continued high returns on invested capital. Therefore, we remain Buy rated (CL).

Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.