NEW YORK (CNN/Money) - Amazon.com Thursday reported a much narrower loss for the third quarter as sales jumped 33 percent.

The world's biggest Internet retailer said it had a net loss of $35 million, or 9 cents a share, in the quarter, down from a net loss of $170 million, or 46 cents a share, a year earlier.

Revenue rose to $851 million from $639 million.

Excluding restructuring-related and other one-time charges, Amazon said it broke even during the quarter. Most analysts had expected the company to log a loss, excluding charges, of 4 cents a share, according to a survey conducted by First Call.

Jeff Bezos, Amazon's chairman and CEO, attributed the stronger-than-expected results in the third quarter to aggressive pricing and promotions, including free shipping for all orders over $25.

"We lowered prices so significantly over the last 15 months, there have been five significant price reductions," Bezos told CNNfn Thursday.

CEO of the online retailer talks about the success of a free shipping incentive program and robust growth overseas. Play video (QuickTime, Real or Windows Media)

"The most aggressive of them all was to make shipping free for orders over $25," Bezos said. "So $25 is a very low hurdle for customers to cross -- almost every order can qualify."

Bezos acknowledged that the free shipping does result in increased costs for the company. Still, he said Amazon has decided to continue to offer free shipping on orders over $25 throughout the upcoming holiday season.

"It's a big decision; it's a big deal," he said. "We think it's a right thing for long-term investment in the company."

Even with the added costs, Amazon said it still is aiming for a profit in the fourth quarter and raised its sales forecast for the period.

"While we are guardedly optimistic, we enter the holiday season with momentum and we're pleased to be able to increase our guidance," Mark Peek, Amazon's chief accounting officer, said on a conference call.

Fourth-quarter net sales are expected to be between $1.3 billion and $1.4 billion, the company said.

At last count, most analysts had expected fourth-quarter revenue of $1.25 billion, according to the First Call survey.

Amazon's fourth-quarter profit, excluding one-time charges, is expected to be between $70 million and $95 million, Amazon said.

Looking even further ahead, Amazon said it expects net sales to rise 10 percent in 2003, resulting in an operating profit of more than $200 million.

Amazon said international sales, representing its U.K., German, French and Japanese sites, rose 90 percent to $264 million, and each site's sales grew by over 60 percent.

Sales of books, music and video products -- Amazon's core business -- rose 17 percent to $412 million. Revenue from electronics, tools and kitchen products rose 25 percent to $129 million, the company said.

Shares of Amazon (AMZN: Research, Estimates) fell 96 cents to $18.90 in extended-hours trade following the earnings release, which was issued after the closing bell. They finished up 11 cents at $19.86 on Nasdaq.