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saw third-quarter earnings jump 16%, surpassing Wall Street's estimates.

Regardless, continued weak margins are pressuring the stock, sending shares down 3.5% to $159.15 in after-hours trading.

During the quarter, the Internet retailer earned $231 million, or 51 cents a share, compared with $199 million, or 45 cents, in the year-ago period for Amazon.

Amazon revenue surged nearly 40% to $7.56 billion.

Analysts were calling for a profit of 48 cents a share on revenue of $7.35 billion.

Operating income came in at $268 million, compared with estimates of $289.5 million, sending margins to 3.5%.

Revenue from Amazon's electronics and other general merchandise shot up 68% to $3.97 billion, while books, CDs, DVDs and other media grew 14% to $3.35 billion.

Amazon said Kindle is the No. 1 best-selling item of all-time on the site.

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The report comes on the heels of Amazon's latest price cut, as it is now offering its Wi-fi-only device for $139 and its Wi-fi/3G version for $189.

Amazon does not provide actual Kindle sales numbers.

Looking ahead, Amazon is guiding for a midpoint sales target of $12.65 billion in the fourth quarter, compared with analysts' target of $12.3 billion.

Amazon expects fourth-quarter margins between 3% and 4.2% versus Wall Street forecast of 5%.

--Written by Jeanine Poggi in New York.

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