What's going on?

Hot on the heels of great results from Facebook, Amazon reported first quarter profit that was much higher than investors were expecting (in fact, it was its highest ever quarterly profit). The stock shot up more than 12%!

What does this mean?

This is Amazon�s fourth straight quarterly profit. That might not sound like a long streak for such a big company, but it�s important because Amazon used to hardly ever actually make a profit (it would plough all the money it made back into product development). This practice has changed lately and investors are applauding the new stance (as you can imagine, shareholders do tend to like actual profits). But it�s not just that Amazon is doing a better job of generating profits (by cutting costs somewhat) � its sales are also still growing at a mammoth pace (for such a big company). Its cloud services business impressed investors with its growth and, although Amazon doesn�t report it specifically, its Prime membership is thought to be growing a lot too. Finally, its international growth picked up this quarter – an exciting proposition for a company that has plenty of scope to grow outside of America.

Why should I care?

For the stock: It�s an �expensive� stock. That means it has to keep exhibiting very high revenue growth (and eventually profit growth) in order to justify the current stock price. It could well do that � it�s trying to revolutionize delivery logistics, which could be very lucrative, for example � but it�s set itself a high hurdle to jump.

The bigger picture: The battle of �old� vs. �new� tech. Remember those big �ole tech companies that sold loads of hardware to businesses so they could store all their data (we�re looking at you, EMC, HP and IBM). Well, that model isn�t needed anymore. Businesses are flocking to �the cloud� � no need for big, fat, expensive servers. The traditional players are trying to pivot, but they�re late to the game. And Amazon (and to some extent Microsoft) is reaping the rewards.