reported fourth-quarter earnings plunged 57 percent on weak Kindle Fire margins but the world's largest bookseller and online retailer beat Wall Street's earnings estimate.

Amazon's net income dropped to $177 million, or 39 cents a share, from $416 million, or 91 cents, in the fourth quarter of 2010.

Analysts surveyed by Thomson Reuters had expected the Seattle-based company to earn $91.6 million, or 19 cents.

Revenue rose 35 percent to 17.43 billion, up 35 percent from $12.95 billion in the fourth quarter of 2010 but short of the $18.2 billion analysts expected.

Much of the revenue increase was due to sales of the Kindle line of e-readers and tablets, especially the Kindle Fire tablet, which was introduced in September. Although the company hasn't released total sales of the Kindle, it did announce in December that they were sold at a rate of more than a million a week.

We are grateful to the millions of customers who purchased the Kindle Fire and Kindle e-reader devices this holiday season, making Kindle our bestselling product across both the U.S. and Europe, said Jeff Bezos, Amazon CEO. Our millions of third-party sellers had a tremendous holiday season with 65 percent unit growth and now represent 36 percent of total units sold.

Analysts believe the company took as much as a $50 loss on each Kindle Fire sold during the holiday season. The company hopes to make up the difference over time through content sales.  

Fourth quarter revenue also rose from online holiday shopping, which digital analytics firm comScore said rose 15 percent over 2010. But free shipping, which rose this holiday season, also put pressure on profit margins.

Shares of Amazon fell $15.61, or 8 percent, to $178.85 in after-hours trading.