Amazon.com (NASDAQ:AMZN) late Tuesday reported a 58 percent drop in quarterly profit, as the online retail giant pushes ahead with heavy spending and a dramatic expansion at the expense of margins.
The online bookseller said net income for the fourth quarter ended December 31 fell to $177 million, or 38 cents per share, from $416 million, or 91 cents per share a year earlier. Revenue rose 35 percent to $17.43 billion.
Wall Street analysts had expected Amazon to report earnings of 17 cents per share for the quarter - which includes the important holiday-shopping season - and $18.25 billion in revenue.
Amazon.com founder and CEO Jeff Bezos said: "We are grateful to the millions of customers who purchased the Kindle Fire and Kindle e-reader devices this holiday season, making Kindle our bestselling product across both the US and Europe.
"Our millions of third-party sellers had a tremendous holiday season with 65% unit growth and now represent 36% of total units sold."
Amazon also forecast first-quarter revenues of $12 billion to $13.4 billion. Wall Street was looking for $13.4 billion, according to Thomson Reuters.
Amazon has been growing at least twice as fast as the e-commerce sector in recent years. To keep up that pace, the company is expanding into new categories and regions, spending heavily on growth and crushing profit margins.
Amazon's first-quarter forecasts suggest the company may continue this heavy investment.
For the fourth quarter, operating expenses grew 38 percent to $17.2 billion. The company has been investing heavily in new sales-fulfillment centers. Investments such as these cut into profits during all of last year.
Amazon said sales of its Kindle tablet computers and e-reader gadgets nearly tripled compared with the final quarter of 2010. The company did not give exact sales numbers for the devices.
The Kindle Fire, Amazon's $199 tablet, went on sale in November. The company sees the Kindle as a way to drive sales of digital content such as e-books, music, movies and apps.
CEO Jeff Bezos said the Kindle was Amazon's bestselling product during the holiday season in both the US and Europe.
Sales at Amazon's media business, which includes books, DVDs, and content consumed on the Kindle, grew 15 percent to $6 billion. Sales from electronics and other general merchandise, which includes the Kindle devices, jumped 48 percent to $10.9 billion.
The company grew its employee base 67 percent from a year earlier, ending the year with 56,200 full-time and part-time workers.