Skip to main content (AMZN) is down sharply Friday largely due to the investment-driven margin pressure the e-commerce giant saw in Q3. But the market's sense of concern may be overdone.

Amazon reported mixed third-quarter earnings on Thursday after the markets' close, topping revenue but missing earnings per share estimates. 

The Seattle-based e-commerce company reported $32.7 billion in revenue and $0.53 in earnings per share, compared to the consensus estimate of $32.687 billion and $0.79 of EPS.

But margins lagged largely due to Amazon's aggressive investments across a wide range of growth areas in retail, technology and media especially content and fulfillment centers. For example, consolidated segment operating income clocked in at $1.38 billion with 4.2% margin, missing estimates of $1.49 billion and 4.7% margin.

Shares of Amazon dropped 4.2% Friday to $784.16.

The pullback is "100% investment margin-related," said Maxim Group analyst Tom Forte said by phone Friday.

But investors shouldn't fret about the margin pressure as investments actually indicate the e-commerce empire's willingness to aggressively prepare for new frontiers of growth.

"Amazon has a track record. They know when to ramp up investment spending to go after opportunities," Forte said, adding that it's encouraging that Amazon is positioning itself to stay ahead of competition. 

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Apparel, groceries and voice assistant Alexa are among the key investment area of focus for Amazon and will likely remain so, he added, adding that it will particularly put incremental pressure on grocers like Kroger (KR) , Walmart Stores (WMT) and Target (TGT) over time.

Aside from its core e-commerce business, Amazon has ambitiously tapped into grocery delivery services, private-label brand production, fulfillment centers and physical stores. It has also been building out offerings for voice assistant Alexa and investing in original content and apparel. Elsewhere, Amazon is building out its own transportation and logistics capabilities and has its eyes on becoming the e-commerce king in India

Once again, Amazon's cloud computing business Amazon Web Services was the shining star. Its revenue grew 55% year over year to $3.23 billion with 27% in operating margins vs. Wall Street's expectations of 53% and 25%. 

As an early mover in cloud computing, AWS has been generating impressive growth despite its large size and continue to race past its peers Microsoft's (MSFT) Azure and Alphabet's (GOOGL) Google Cloud Platform.

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"Management has indicated plans to invest heavily in areas such as fulfillment (18 new FCs opened in Q3), digital content (more than doubling Y/Y) and AWS infrastructure through the end of the year," wrote Robert W. Baird analyst Colin Sebastian wrote in a Friday note, adding that the investments are "setting the stage" for meaningful revenue growth in the future.

Amazon has also been injecting capital toward emerging tech such as smart home and machine learning.

The long-term fundamentals are still intact despite the market correction, wrote RBC Capital Markets analyst Mark Mahaney in a Friday note. 

Amazon's retail revenue growth rates are consistent and impressive, and the investments that are temporarily squeezing margins will likely sustain growth long-term, he said. 

"Then there's AWS, which is growing faster and scaling profitability more quickly than we and the market thought possible," Mahaney further said, adding that cloud computing and retail -- Amazon's key end-markets -- are still only about 10% penetrated.