Amazon (AMZN) shares surged in post-market trading after the Club holding reported late Thursday a better-than-expected second quarter and delivered on exactly what investors wanted to see. Wall Street was happy to see stabilizing growth at the company’s cloud unit Amazon Web Services and an uptick in operating margins. Management’s upbeat third-quarter sales outlook suggests more gains could be ahead. Revenue for the three months ended June 30 increased 11% year-over-year to $134.39 billion, beating expectations for $131.5 billion, according to estimates compiled by Refinitiv. Earnings-per-share on the basis of generally accepted accounting principles, or GAAP, increased to 65 cents, compared with a loss of 20 cents per share last year. Operating income increased 130% to $7.68 billion, significantly exceeding forecasts of $4.78 billion, according to FactSet, and above the high-end of management’s guidance. AMZN 5Y mountain Amazon 5-year performance Notably, the EPS figure included a pre-tax valuation gain of about $200 million related to Amazon’s investment in Rivian Automotive (RIVN), while the figure from the same period a year prior included a loss of $3.9 billion. Due to its significant stake in the electric-vehicle maker, Amazon is required to record changes in Rivian’s fortunes as non-operating income when there are gains, or as an expense when there are declines. Given that analysts don’t include Rivian’s swings in their estimates, the consensus forecast for EPS of 35 cents does not offer an accurate comparison. As a result, the operating income estimate is a more telling metric on how Amazon fared relative to Wall Street’s expectations — and make no mistake, it was strong. Bottom line Shares of Amazon soared roughly 9% in after-hours trading Thursday to more than $140 apiece. The cloud and e-commerce giant checked off what it needed to do in the second quarter in order to exceed the high bar that comes with the stock up 53% year to date and moving ever closer to its 52-week high of $146.57 last August. Amazon Web Services, the cloud computing unit that doubles as the profit engine of the company, has finally started to stabilize after several quarters of slowing growth. Some may be quick to call a bottom, but we, at least, are relieved that the business has made a stand in the low double digits before falling back to the high single digits. And it comes right before what should be tailwinds related to monetizing generative AI, which is still very early. As for retail, Amazon delivered on its pledge to get its house in order and become more efficient, which is something we pleaded with management to do all last year as we shockingly witnessed it lose money in North America. There’s still work to be done to get the business back to operating at its pre-Covid margins, but management thinks it can get there in time. With Amazon turning a corner on profitability and AWS revenue growth stable, we think the stock still has more room to run. We are increasing our price target to $160. Shares reached an all-time closing high of $186.57 in July 2021 during the Covid pandemic. Second-quarter results Amazon beat estimates on nearly every line item across the board. At Amazon Web Services, revenue growth surprised to the upside at about 12% — two percentage points higher than Wall Street’s expectations — helping operating income beat forecasts, despite the slight miss on margin. There’s been plenty of debate surrounding AWS lately, with analysts and investors questioning whether revenue growth would decelerate to the high single digits. That’s why the market cheered when CEO Andy Jassy, who ran AWS before becoming CEO in 2021, said Thursday that the cloud unit’s growth rate has stabilized around the quarter’s 12% rate. Following several quarters of AWS growth slowing due to customers optimizing their spending in the cloud, Amazon said it has finally started to see more customers prioritize innovation by bringing new workloads to the cloud. While it still may be too soon to call the exact bottom, it’s hard to not be encouraged with what management said. Amazon also said Thursday that it’s taking significant steps to democratize access to generative artificial intelligence for companies of all sizes and technical acumen at an affordable cost. Another major part of the Amazon bull thesis is improving profitability, and the company delivered this quarter with operating margins of 5.72%, beating estimates of 3.6%. In North America, second-quarter operating margins improved to 3.9%, compared with 1.2% in the first quarter and a loss of 0.8%) a year ago. It was Amazon’s fifth-consecutive quarter of North American margin improvement after bottoming out in the first quarter of 2022. Margins have inflected higher in part because Amazon’s advertising services business, a high-margin revenue stream, continues to grow at a fast clip. But what’s really driving the margin improvement at the company is the significant progress it has made in lowering the cost to serve its stores’ fulfillment network by increasing efficiencies and unlocking leverage. As evidence, Amazon said its unit growth, which comprises items sold in Amazon’s marketplace, is growing faster than shipping costs and fulfillment costs. Easing inflation headwinds from fuel prices, linehaul rates, and ocean and rail rates also helped margins in both the North America and the company’s international segments. Third quarter outlook Amazon followed up the strong second quarter with a very bullish view of the third. The company said it expects net sales to grow between 9% and 13% year-over-year, to be in a range of $138 billion to $143 billion. This midpoint of $140.5 billion is solidly above analysts’ estimates of about $138.4 billion. The rebounding profit story is expected to continue into the third quarter, with management expecting operating income to come in between $5.5 billion and $8.5 billion, up from $2.5 billion last year. This midpoint of $7 billion is higher than forecasts of about $5.5 billion. (Jim Cramer’s Charitable Trust is long AMZN. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. 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Amazon (AMZN) shares surged in post-market trading after the Club holding reported late Thursday a better-than-expected second quarter and delivered on exactly what investors wanted to see.