SAN FRANCISCO (AFP) - Shares of online retail titan Amazon.com surged on Tuesday after the company reported that quarterly profit sank at the end of last year but its margins were better than expected.

The Seattle, Washington-based company reported a profit of US$97 million on sales of US$21.27 billion in the fiscal quarter that ended on Dec 31.

Sales were up 22 per cent from the same period a year earlier, but profit was 45 per cent less by comparison, according to the earnings report.

The earnings figures missed Wall Street forecasts, but a gross margin topping 24 per cent outshined expectations regarding the share of revenue staying in the company coffers after costs.

Amazon.com shares climbed more than eight percent to US$282.51 in after-market trading on the Nasdaq.

"We're now seeing the transition we've been expecting," said Amazon.com chief executive Jeff Bezos.

"After 5 years, eBooks is a multi-billion dollar category for us and growing fast - up approximately 70 per cent last year," he continued.

"In contrast, our physical book sales experienced the lowest December growth rate in our 17 years as a book seller, up just 5 per cent."