Excluding acquisition costs and investment gains and losses, the Seattle-based company posted a pro forma net loss of $89.5 million, or 25 cents per share.
Analysts expected Amazon to post a pro forma loss of 33 cents per share for the third quarter, according to a survey by First Call/Thomson Financial. For the same period last year, Amazon reported a pro forma net loss of $85.8 million, or 26 cents per share.
Including costs and gains, Amazon posted a net loss of $240.5 million, or 68 cents per share, on $637.9 million in revenue.
Amazon's stock closed down 44 cents Tuesday to $29.56, yet jumped more than 11 percent to $32.94 after hours.
Amazon's U.S. books, music and DVD/video stores posted a combined pro forma operating profit of $24.7 million on $399.9 million in sales, the company reported. Other businesses did not fare as well, however.
For its other U.S. stores--including toys, electronics and home improvement sections--Amazon posted a pro forma operating loss of $53.6 million on $150.3 million in sales. International businesses lost $39.6 million on $87.7 million in revenue.
Amazon showed significant improvement in its gross profit margins, a number closely watched by analysts. Gross profit margins are the difference between what a company charges its customers for its goods and services and what those goods and services cost the company to provide. Gross profit margins indicate how profitable a company can ultimately be.
During the third quarter, Amazon posted a gross profit margin of 26.2 percent--up from 23.5 percent in the second quarter and 19.8 percent in the year-ago quarter.
"This was a strong quarter for Amazon.com. We are driving toward profitability and we surpassed our key internal operational and financial objectives," Warren Jenson, Amazon's chief financial officer, said in a statement.
Amazon's customer base increased by more than 2.8 million during the quarter to reach 25 million cumulative customer accounts, the company reported. Sales per customer reached $130 for the 12 months ended Sept. 30, compared with $108 in the 12-month period ended Sept. 30, 1999.
Amazon's revenues were boosted by its recent deal with Toys "R" Us and Toysrus.com.
Amazon made significant progress during the quarter on boosting its gross margins and on decreasing its operating losses as a percentage of revenue, said Henry Blodget, a financial analyst who covers Amazon for Merrill Lynch.
"That should go a long way toward calming fears that this company can't make any money," Blodget said. "It should be pretty clear now that they can make money. The question is, how much?"