Amazon's revenues soared in the first quarter of the year but the online retail giant's profits tumbled as the firm poured more money into new services and expansion.

The company reported earnings of $201m, or 44 cents a share, down from $299m, or 66 cents a share, for the same period a year ago. Analysts had been expecting 61 cents a share and shares fell in after hours trading. But the retailer's first quarter revenue was $9.86bn, 38% higher than last year's figure and well ahead of Wall Street expectations.

In a statement, Amazon chief executive Jeff Bezos cited new Amazon products and services including new services for Kindles, the firm's move into cloud computing services and online video and said he was "excited about the long-term opportunities."

The company made clear that it intends to keep sacrificing short-term profits in order to keep up expensive infrastructure investments. In the latest period, operating expenses surged 41% and Amazon added 4,200 employees over the quarter. Amazon expects expenses to hit operating income in the second quarter too but expects revenues of $8.85bn to $9.65bn, above Wall Street expectations.

The results come at a tricky moment for Amazon. The company is pushing ever harder into cloud services where customers, including consumers and companies, use Amazon's services to remotely store their information. The company has launched Cloud Drive, a music service where people access their music online rather than store it on their own computer or iPod at home. Amazon is also increasingly competing with Google and other technology firms for corporate accounts.

Last week the firm's cloud-based web services suffered a major outage. Many major sites including Foursquare, HootSuite and Reddit rely on the service to host their sites and were affected by the outage. The crash happened at Amazon's northern Virginia data centre, one of five global sites that underpin the service, known as EC2.