Net sales rose to $35.75bn, which was about $200m short of Wall Street predictions.
That was enough to send shares tumbling more than 13% in after-hours trading in New York.
Annual net profit of $596m also missed estimates as operating expenses jumped almost 18%.
However, profits for the three months to 31 December more than doubled to a record $482m (£335m).
It was the third consecutive quarter that Amazon has reported a profit and the first time it has done so since 2012.
Sales for the full year were up 20% to $107bn - the first time the total has exceeded $100bn.
Amazon also reported a 51% increase in its global Prime membership, which costs $99 a year and offers access to its video streaming service as well as free shipping.
Analysts think it has about 50 million members, but the exact number is not revealed.
Before the results were released, Amazon shares had risen almost 9% on Thursday and have more than doubled in the past 12 months.
Investors were also paying attention to Amazon Web Services, the company's cloud computing business.
The unit has been a bright spot for growth since Amazon began reporting figures separately at the start of the 2015 financial year.
Fourth quarter sales rose almost 70% to $2.4bn, but that was down from 78% in the previous three months.
Amazon missed analysts' estimates for the fourth quarter despite posting a 21.8% rise in sales and record profits.