Amazon Revenue Grows Despite Spending Increase

Amazon AMZN closed up nearly four percent Thursday at $337.15, prior to an earnings report that featured higher than expected revenue growth and earnings that met analysts’ diminished forecasts.

The revenue growth came despite an increase in spending on such items as technology, additional content, and new warehouse space.

The company’s international division, which has invested heavily in China and finds itself competing with Alibaba, showed growth of only 18 percent during the quarter. Global unit sales rose 23 percent.

Related: Will Amazon's New Smartphone Feature 'Point & Shop?'

Prime Growth

Even after increasing the price of its Amazon Prime service by $20 in March, the company still saw growth in users, a good sign according to chief financial officer, Tom Szkutak, who added in a conference call, “We are pleased with the overall fundamentals. A lot of areas contributed to growth.”

Razor-thin operating margins define Amazon but do not diminish the optimism of some analysts.

Forrester Research analyst, Sucharita Mulpuru, told Reuters in an email, "They continue to struggle with the level of profitability they should be seeing, but how can you do better when you're 'investing' for the future?"

In addition, Amazon’s move into hardware with the launch of its Fire TV video streaming device and continued rumors of a smartphone, have continued to keep many traders optimistic despite the low margins and diminished earnings expectations.

Other obstacles the company has faced include changing tax laws in several states that would force Amazon to collect sales tax in those states. A new study said the net result was a 10 percent drop in sales in affected states.

In the midst of all that, Amazon announced this week deals to stream older HBO shows on its Prime service and access to HBO GO on Amazon’s Fire TV device – assuming users also have an HBO subscription.

Looking Forward

Following Thursday’s earnings report, Jim Cramer’s The Street said it rated Amazon a Hold.

The team added, "The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks."

"The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins."

At the time of this writing, Jim Probasco had no position in any mentioned securities.