...All that competition is keeping a lid on profits by forcing Amazon to spend more aggressively on everything from hiring to research and development to marketing. Chief Executive Jeffrey P. Bezos said his company is hiring more computer scientists and programmers, who are helping it launch a stream of new features. The latest: its first membership program, in which frequent buyers can pay $79 a year to get free two-day shipping on more than 1 million items.

The biggest surprise came in marketing costs, which rose 44% -- far more than the 26% sales growth after stripping out the weak dollar's foreign-exchange benefit. Capital spending is also rising, from $89 million last year to $175 million this year, by Amazon's estimates.