Amazon's Most Recent Innovation: It's Making A Profit

The massive retailer also revealed that it spent over $1 billion on its streaming video service in 2014.

Getty Images Matthew Lloyd

Amazon has tried a lot of new things in the last year, from becoming a smartphone maker to offering delivery within hours, not days. And Thursday, the company announced another novel development: An unexpectedly profitable quarter.

Amazon's earnings of $214 million were well above analysts expectations. As usual, Amazon continued to grow its sales quickly, going from $25.6 billion in the fourth quarter of last year to $29.3 billion this year. The sales figure, however, was slightly below analysts' expectations of $29.7 billion.

Relative to such giant revenues, the company's $214 million in profit may seem modest, and it's short of the $239 million it made a year ago. But the profit is a change from losses of $126 million and $437 million in the last two quarters.

Investors were happy with the results, sending Amazon shares up over 8.5% in after hours trading.

Like many American companies with large overseas business, Amazon's bottom line suffered from a strengthening dollar in 2014, which diminished foreign currency earnings. The company said its sales in dollar terms would have been $895 million higher had exchange rates been unmoved in the last year.

Amazon stock is down almost 20% in the last year, after enduring two quarters with bigger losses than usual. The third quarter loss of $437 million — the biggest quarterly loss in the company's history — more than offset its full-year profit in 2013, while it also suffered an embarrassing $170 million writedown of its Fire Phone inventory. For all of 2014, Amazon reported a net loss of $241 million.

But these big losses, as Amazon's patient investors know, are due to the company's enormous investments in infrastructure and new businesses. Amazon founder and chief executive officer Jeff Bezos said in a statement that Amazon spent $1.3 billion on Prime Instant Video last year. Some of that firehose of cash was directed toward producing original TV shows, including the hit Transparent, which recently won a Golden Globe for best TV series.

Bezos also said that Amazon Prime membership grew 53% in 2014, even though the price jumped from $79 to $99. Bezos said the company spent "billions" on free shipping for Prime users.