The online giant reported a net income of $224 million, or 9 cents per share, for the quarter ended Dec. 31. That compares with income of $86 million, or 4 cents per share, for the same period a year ago.
Analysts expected AOL to earn 8 cents a share, according to First Call consensus estimates. Wall Street "whisper" numbers predicted AOL would beat expectations by 1 cent or 2 cents per share.
Analysts reacted favorably to the earnings report, noting that AOL has maintained its revenue and market lead over its competitors in both the access and content side.
"The bright point is that there's no point to question," said Brian Oakes, an equity analyst at Lehman Brothers. "You look through the earnings report, you don't find any problems."
Revenues for the final three months of 1999 reached $1.6 billion, up 41 percent from the same period a year ago.
Advertising and commerce revenue accounted for $437 million of the total, a 79 percent increase from a year ago. Analysts said this growth gives a good indication that AOL is relying less on access fees as the cornerstone of its revenue model.
In addition, time spent on AOL's proprietary service increased to over one hour a day on average. Time spent on the service may be a primary factor for the continued rise in advertising and commerce revenues, said Jordan Rohan, an equity analyst at Wit Capital.
"It ties very accurately into the company's ability to keep people on their site longer and to extract more revenue in the form of advertising and e-commerce," Rohan said. "This metric is something that investors are increasingly focused on and this is where AOL really excels."
AOL chief executive Steve Case also touted time spent on the company's properties as a major area for growth. Now that AOL is planning to acquire media and entertainment giant Time Warner in a deal worth about $160 billion, the combined company will own many forms of media that consumers use on a daily basis.
"We are trying to compete on a 24-hour, daily basis, and not on a one-hour-a-day business," Case said in a conference call with Wall Street analysts.
Nevertheless, a significant portion of today's earnings call was spent addressing issues surrounding the planned merger with Time Warner. When and if the deal closes later this year, the combined companies will own online access, cable programming and services, as well as a slew of content ranging from films to television shows and music.
But many questions still remain--most regarding the integration of the two companies and their accompanying management teams. Already, the companies have formed an "integration team" including AOL co-chairman Ken Novack, AOL president Bob Pittman and Time Warner Digital Media chairman Rich Bressler.
"I think that both companies have been through enough mergers and acquisitions that I give them a high level of confidence that they'll pull this off," said Paul Noglows, an equity analyst at Chase H&Q. "I think you've got a lot of seasoned pros who know how to put companies together."
However, Noglows, along with other analysts, did express concern over certain issues regarding AOL's use of Time Warner's content. He warned that if AOL restricted its service to only Time Warner-owned content, the effects could backfire on the company.
"I think they understand that they need to keep platforms as open to as broad a customer base as possible," Noglows added. "The proof will really be when these contracts start expiring--do they go with a Time Warner brand or with another brand?"
AOL's Case maintained a stance of openness over the issue of content offered and eventually in terms of access to the combined company's broadband pipes. But Case added that AOL would take a closer look at whether Time Warner properties would make more sense when current content contracts expire.
"We are open to working with a variety of companies," Case said during the conference call. "Ultimately, consumers do want choices and we will provide choices."