Amazon.com posted higher first-quarter net profit on Wednesday that beat analysts' estimates and raised its 2008 sales outlook, but said operating income and profit margins, would be lower than previously expected.
Shares of Amazon were down more than 5 percent in extended trading Wednesday. The stock finished regular hours 1.76 percent higher at $81.
The global Internet retailer said gross margins, a continuous source of worry for investors, were below year-ago levels, although improved over the prior quarter.
Net income rose 30 percent to $143 million, or 34 cents per share, from $111 million, or 26 cents per share, a year earlier.
Revenue rose to $4.13 billion from $3.02 billion.
Analysts, on average, had been expecting earnings per share of 32 cents on revenues of $4.08 billion, according to Reuters Estimates.
"It's a good revenue story, but the margins are not expanding as the more bullish people have been hoping," said Global Crown Capital analyst Martin Pyykkonen, who added he believed the company was using lower prices to drive sales growth.
Operating income rose 36 percent to $198 million, on the high side of Amazon's own forecast.
Concerns over weaker U.S. consumer spending have unnerved investors of consumer companies in recent quarters and shares in the company, the most popular Web e-commerce site behind eBay, are down 14 percent since Jan. 1.
(For more on Amazon earnings, see the CNBC video at left.)
Gross margins as a percentage of sales, which had declined over the previous two quarters, were 23.1 percent, slightly lower than the 23.8 percent a year earlier, but improved from the 20.6 percent in the fourth quarter.
Amazon had forecast its first quarter net sales would rise between 31 percent and 38 percent, with operating income between $155 million to $200 million.
For the second quarter, Amazon said sales would rise between $3.88 billion and $4.08 billion with operating income between $120 million and $160 million.
Analysts, on average, have been expecting revenues of $3.82 billion.
For 2008, Amazon said it now forecasts net sales between $19.1 billion and $20 billion, with operating income between $740 million and $940 million.
Wall Street, on average, has been expecting net sales of $19.3 billion.
The company's previously-held 2008 forecast was for net sales of $18.75 billion to $19.75 billion and operating income between $785 million to $985 million.
As of Tuesday's close, Amazon shares traded at 53 times projected 2008 earnings, well above the Amex Internet Index average of 20.
EBay and retail giant Wal-Mart Stores are valued at 18 and 16.5 times forward-looking earnings.