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By Jacob Pramuk, CNBC

Amazon shares plunged on Thursday after the Internet retail giant posted quarterly earnings that fell well short of expectations, even as its key cloud computing business continued growing rapidly.

The Internet retail giant reported fourth-quarter net income of $1 per share on $35.75 billion in sales. Revenue rose 22 percent from $29.3 billion in the previous year.

Analysts expected Amazon to post quarterly earnings of $1.56 per share on $35.93 billion in revenue, according to a consensus estimate from Thomson Reuters.

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Its shares fell as much as 15 percent in choppy after-hours trading.

The free-spending Amazon has now posted profits in three straight quarters, but disappointed analysts' expectations for profitability. Wall Street has watched Amazon's margins as well as the rapid growth of its Web Services business.

Sales in the segment rose to $2.41 billion in the quarter, up 69 percent from the previous year. Analysts expected the segment to post $2.38 billion in revenue, according to a StreetAccount consensus estimate.

Amazon's operating margin as a percentage of net sales was 3.1 percent, up from 1.6 percent from the previous quarter. Total operating expenses rose to $34.64 billion from $28.74 billion in the prior-year period.

Net revenue in North America rose to $21.5 billion, up 24 percent from the previous year. The same metric in international markets hit $11.84 billion, up 12 percent.

Amazon said it took a hit of about $1.2 billion from foreign exchange rate changes.

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