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Amazon Crushes Q4 Earnings on Back of Huge Prime Membership Growth

Profit. Actual profit!

Ina Fried

Amazon’s big-time investments in its Prime membership program seem to be paying off.

The company crushed earnings in the all-important fourth quarter, sending its stock up 12 percent in after-hours trading even as its revenue came in below analyst estimates.

The Jeff Bezos-led e-commerce company recorded earnings per share of 45 cents, easily beating analyst estimates of 17 cents. Still, revenue was only $29.3 billion compared with estimates of $29.7 billion.

In an earnings release, Bezos said paid Prime membership rose 53 percent last year, on a base of tens of millions of customers.

“When we raised the price of Prime membership last year, we were confident that customers would continue to find it the best bargain in the history of shopping. The data is in and customers agree,” he said. Prime membership costs $99 a year and includes free delivery on most items as well as access to a library of streaming TV shows and movies akin to Netflix.

Bezos next stated something that maybe only Amazon could spin as a positive. “[I]n 2014 alone we paid billions of dollars for Prime shipping and invested $1.3 billion in Prime Instant Video.”

Amazon CFO Tom Szkutak declined to reveal the exact number of Prime members on a call with reporters, but noted that “Prime members do purchase a lot more than non-Prime members.”

He also declined to specify what specific actions drove the rare big profit for the company in the fourth quarter. Operating expenses only increased 14 percent year-over year in the quarter, compared with 17 percent for the full-year in 2014.

The company, which generally offers scant details on its many different business units, plans to disclose how its Web services division, AWS, is performing when it reports first-quarter results. AWS sells cloud services to Web companies, including Netflix. The business has come under pricing pressure from competitors such as IBM.

For the current quarter, analysts were expecting $23.14 billion in revenue, but Amazon is now guiding between $20.9 billion and $22.9 billion.

Amazon was coming off its largest quarterly loss in more than a decade, as it continues to spend huge sums on risky new projects such as its own original films and one-hour delivery in New York City and more cities in the future.

Many of these new initiatives are aimed at attracting new customers to Amazon Prime, the popular shipping and media membership program whose members are believed to spend a ton more on Amazon than nonmembers.

Going into earnings, Amazon’s stock was down 19 percent in the last 12 months.

This article originally appeared on Recode.net.