Amazon appeared to pay a hefty price for its move to speedy shipping, as the online giant reported profits below expectations as it ramped up for one-day deliveries.
Profits edged up just 3.6% to $2.6 billion in the past quarter, a figure below most Wall Street forecasts.
Revenues rose 20% to $63.4 billion in the three months from April to June for the company, a dominant force in retail with its Prime subscription service which is moving from two-day to one-day delivery on most items.
"Customers are responding to Prime's move to one-day delivery - we've received a lot of positive feedback and seen accelerating sales growth," said chief executive Jeff Bezos in a statement.
"Free one-day delivery is now available to Prime members on more than ten million items, and we're just getting started," he added.
But analysts said the costs of ramping up infrastructure were eroding profits.
They said that the additional shipping expenses have taken their toll on the bottom line. They added that Amazon is being forced to make these investments due to tougher competition from rival retailers like Walmart and Target.
On a conference call, Amazon chief financial officer Brian Olsavsky said investments to speed up shipping have hit profits but that this would pay off in the long run.
"It does create a shock to the system, we're working through that now, and we expect we will be working to that for a number of quarters," he said.
"But when the dust settles, we will regain our cost efficiency over time."
Amazon Web Services, the cloud computing division which is a key profit driver for the company, saw revenue gains of 37% in the quarter.
Amazon - which has expanded from its origins in e-commerce to cloud services, streaming media, artificial intelligence and brick-and-mortar grocery stores - saw shares slip 0.5% in after-hours trade on the results, which showed profits below forecasts but better-than-expected revenues.
The latest results did not include sales from Amazon's big Prime Day two-day sales event, said to have been a record.
Amazon has been delivering consistently robust profits in recent quarters after years of thin margins, as the company has grown into one of the world's most valuable, making Bezos the world's richest person.
