Amazon's fourth quarter earnings plunged after a strong surge in costs, the company reported Tuesday, sending its after-market stock price sinking.
Net income in the quarter to December 31 sank to $177 million, compared to $416 million a year before, and earnings per share dropped to 38 cents from 91 cents, short of analyst forecasts.
Net sales grew 34.6 percent in the quarter to $17.4 billion, but a 37.6 percent rise in costs ate away at the internet sales giant's margins.
Despite a hugely successful holiday season for its Kindle e-reader and tablet devices, with sales up 177 percent from a year earlier, Amazon was challenged by price cutting from rivals on the web and those with storefronts, and many with both.
"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," said Amazon chief executive Jeff Bezos in a statement.
"Our millions of third-party sellers had a tremendous holiday season with 65 percent unit growth and now represent 36 percent of total units sold," he added.
The company said to expect more of the same for the first quarter -- strong sales growth but narrowing profit margins.
It forecast at best a 69 percent fall in operating income for the current quarter, and allowed for a possible net loss.
Investors sold off Amazon shares in trade after the markets closed: at 2330 GMT Amazon's shares were down 8.6 percent to $177.67.