The company's net income fell 73% in the quarter to $63 million, while analysts polled by Bloomberg expected a net income of $115.8 million. That figure was already a 50% drop from the year-ago period. Part of the reason is Amazon loses money on each Kindle it sells including the new Kindle Fire, though the company likely makes up the loss with sales of ebooks, music and other digital media.
Prior to Tuesday's drop, Amazon's stock was up about 30% for the year and analysts had predicted a sell-off if the company didn't meet all of its targets. The company came close to meeting its revenue target of $10.9 billion for the quarter with $10.88 billion.
Amazon's outlook is further complicated by the possibility that it may have to charge sales tax in some states, eroding its competitive edge. The company will begin charging such taxes for transactions taking place in California starting next September.
BONUS: Amazon's New Kindles