Amazon Schools Bears Anew

Updated from 9:16 a.m. EDT

For an affable guy with a slight build, Jeff Bezos looks like the unlikeliest of bear wrestlers. Yet the Amazon.com(AMZN Quote) CEO has again gone to the mat with the bears and knocked the wind out of them.

When the tech bubble was crashing a few years ago, many expected Amazon to crumble. Instead, it posted its first profit in 2003. When Amazon announced free three-day shipping for orders over $25, bears again warned it would weigh the company down. Instead, it built customer loyalty in an increasingly competitive marketplace.

Earlier this year, Amazon caused a lot of head-wagging when it debuted Amazon Prime, which for a $79 annual fee gives free two-day shipping, or overnight shipping for $3.99. But Amazon's second-quarter report showed not only was revenue stronger than analysts' forecasts, but operating margins were healthier than most were expecting.

One reason, Bezos indicated on the conference call, was that Amazon Prime was a factor. "In effect, Amazon Prime led to more shopping in more categories," he said, noting that the program could lead in coming years to a larger share of spending among what he called "convenience-motivated shoppers."

"Once people sign up and start using it, it changes the way they think about Amazon," he said. "It makes shopping simpler and improves availability so they can get it fast."

Amazon had disappointed investors in the past two quarters with deteriorating profit margins. While some analysts and investors believed Amazon would pull it off in the long term, few of them expected an improvement this quarter. That's one reason why Amazon's stock was trading up more than 10% after its earnings were reported Tuesday afternoon.

Amazon said it earned $52 million, 12 cents a share, in the second quarter ended June 30. That was below the 12-cents-a-share number of a year ago, but this quarter Amazon faced a tax expense of $56 million.

The shares recently traded at $42 on Wednesday, up more than 11% from Tuesday's close.