Amazon's second-quarter results show that pro-forma net loss has narrowed by 50% to $58m (£40.9m), compared with $116m (£81.9m) in the same period a year ago. Analysts had forecast a net loss of $80m (£56.5m).
Net sales rose 16% to $668m (£471.4m), up from $578m (£407.9m) in the same period last year.
The company's chief financial officer Warren Jenson said that Amazon "continued to make progress toward reaching pro-forma operating profitability in the fourth quarter of 2001".
Sales for the whole year, however, will be lower than expected -- between $625m (£441.1m) and $675m (£476.4m). Analysts had predicted between $700m (£494m) and $725m (£512m).
The company said that America Online has made a $100m (£71m) equity investment in Amazon stock, at about $15.28 (£10.79) a share.
The two firms also said they have signed a deal to join Amazon's online retail services with AOL's shopping channels and technology. Elements of Amazon's e-commerce technology platform, such as product comparisons, ratings, reviews and personalization features, will be used on the Shop@AOL service on AOL, CompuServe and Netscape.com.
In return, Amazon will promote AOL as its exclusive ISP, so that Amazon customers can download the AOL service from the Amazon.com website, and will promote a variety of AOL Time Warner products and services.