SEATTLE - Internet retailer Amazon.com Inc. offered more mixed results for investors, saying its fourth-quarter profits dropped by half as sales jumped 34 percent during the crucial holiday shopping season.

The steep hit to earnings - which included higher income tax charges - didn't stop the company from edging ahead of Wall Street's expectations, and investors pushed the stock price up in after-hours trading.

For the three months ended Dec. 31, Amazon.com said it earned $98 million, or 23 cents per share, compared with $199 million, or 47 cents per share, in the year-ago period.

Analysts polled by Thomson Financial were expecting earnings of $90.4 million, or 21 cents per share, on $3.77 billion in sales.

The Seattle company said the most recent results were hurt by $91 million in income tax expenses in the quarter, compared with a tax benefit of $38 million in the comparable 2005 period.

The results were released after the market closed Thursday. Shares of Amazon.com closed up $1.03, or 2.7 percent, at $38.70 on the Nasdaq Stock Market. Shares added another 20 cents, or about 0.5 percent, in after-hours trading.

Net sales for the three-month period were $3.9 billion, up 34 percent from $2.98 billion in the fourth quarter of 2005. The company said sales would have been up by 30 percent without the favorable $122 million impact of changes in foreign exchange rates.

Piper Jaffray analyst Safa Rashtchy said investor enthusiasm about the company's sales growth could be tempered by concerns about significantly weaker margins.

"It seems like pretty good results, although kind of typical of Amazon's performance - it's usually one good news and one bad news," Rashtchy said.

He added that company spending on technology, long a concern for investors, seemed relatively stable: "At least it didn't increase."

The company said sales growth was driven in part by increased memberships in the Amazon Prime program, which offers unlimited two-day shipping but has prompted shoppers to buy more products across several categories.

"Adoption of Prime is a big driver for us," Chief Financial Officer Tom Szkutak told reporters in a Thursday afternoon conference call.

Sales of media products were up 25 percent to about $2.5 billion, Szkutak said. Meanwhile, revenue from electronics and other general merchandise was up 55 percent, to $1.4 billion.

Net shipping costs were about $125 million, up 37 percent from costs of $91 million a year ago, the company said.

For the year, Amazon.com said it earned $190 million, a 47 percent drop from $359 million in 2005. Revenue was up 26 percent to $10.71 billion, compared with $8.49 billion in the previous year.

The company said it expects first-quarter sales of between $2.85 billion and $3 billion, a growth rate of 32 percent from a year earlier. Amazon.com also predicted yearly sales of between $13 billion and $13.7 billion, representing growth of up to 28 percent.

One notable factor in future sales - the seventh Harry Potter book - was offered for pre-sale on Amazon.com on Thursday. The company didn't release hard numbers but said Thursday's sales of "Harry Potter and the Deathly Hallows," which will be released July 21, already had tripled the previous Potter book's first day of sales.