Amazon (AMZN) released its third quarter earnings report on Thursday, surpassing analysts' expectations in terms of net sales and earnings per share (EPS). However, the company fell short of its cloud revenue target, impacting investor sentiment.

Following the announcement, Amazon's shares initially jumped by as much as 5% during after-hours trading. However, the gains were short-lived as investors absorbed the details of the report.

Amazon's cloud business, known as Amazon Web Services (AWS), slightly missed analysts' net sales projections. AWS reported net sales of $23.06 billion, slightly below the $23.13 billion expected by Wall Street. Despite this, AWS sales recorded a 12% year-over-year growth, and the division's operating income experienced a substantial increase of approximately 29% compared to the previous year, reaching $7 billion.

The performance of cloud services has been a focal point for investors this year. Earlier in the week, Microsoft (MSFT) reported better-than-expected growth in its Azure cloud business, while Alphabet's (GOOG, GOOGL) cloud growth fell below expectations.

The AWS growth trajectory has been intensively scrutinized, drawing significant attention from investors. Prior to the earnings release, JPMorgan analyst Doug Anmuth highlighted the significance of AWS performance for the company. During a media call on Thursday, Amazon CFO Brian Olsavsky expressed confidence that AWS growth has not completely stalled, characterizing it as a "delicate" transition.

Olsavsky noted, "We have cost optimization work that's starting to slow down... and we're starting to see more and more new workloads come up."

Here are the key figures reported by Amazon compared to Bloomberg's analyst estimates:

- Net sales: Actual $143.08 billion vs. Expected $141.56 billion
- AWS net sales: Actual $23.06 billion vs. Expected $23.13 billion
- Earnings per share: Actual $0.94 vs. Expected $0.58
- Operating margin: Actual 7.8% vs. Expected 5.46%
- Q4 net sales guidance: Actual $160-167 billion vs. Expected $166.57 billion

Currently, analysts' recommendations for Amazon stand at 63 Buys, two Holds, and zero Sells.

Commenting on the Q3 results, Amazon CEO Andy Jassy stated, "We had a strong third quarter as our cost to serve and speed of delivery in our Stores business took another step forward, our AWS growth continued to stabilize, our Advertising revenue grew robustly, and overall operating income and free cash flow rose significantly."

Looking ahead, analysts advise keeping a close watch on Amazon's operating margins, which have been steadily increasing. The company's operating margins have risen by 32% between the first and second quarters and exceeded expectations in Q3. This suggests that Amazon's efforts to improve efficiency post-pandemic have yielded positive results.

Wedbush analyst Scott Devitt conducted an analysis of historical data and concluded, "Amazon shares have appreciated 84% when operating margins are rising, versus just 1% when operating margins are declining."

As the e-commerce giant continues to navigate volatile market conditions, investors will closely monitor Amazon's ability to maintain its growth and optimize its operations in an increasingly competitive landscape.