The No. 1 online retailer's sales shot up because of lower prices and free shipping, but profits missed analyst targets as it invested heavily in tech.

Amazon.com Tuesday reported that sales increased 22 percent in its latest quarter, but earnings fell short of Wall Street expectations after it parted ways with Toysrus.com and increased technology spending, writes CNNMoney.com. Earnings were 5 cents a share for its second quarter, ended June 30, down from 12 cents a year ago; analysts expected 6 cents a share. Net income fell to $22 million from $52 million a year earlier (a 58 percent drop). Sales, in line with forecasts of $2.1 billion, reached $2.14 billion from $1.75 billion.

Toys 'R' Us stopped paying fees to Amazon after winning a lawsuit against it for violating an exclusivity contract, reducing income by $20 million, reports Bloomberg. The company also lowered its operating income profit forecast for the year to a range of $310-$440 million. In April, it had forecast up to $520 million. Sales are expected to rise to as much as $10.65 billion; in April, it had forecast a lower $10.50 billion.

Plans to spend on Amazon.com's own toy sections and lower prices led to the decline in the operating income forecast, CFO Tom Szkutak said on a call with reporters. It's also reportedly planning a video download service.