For every 100 paperback books sold, Amazon is selling 115 Kindle books, although sales of paperbacks are also increasing.
Profit before tax for the last quarter of 2010 rose to $506m (£319m) from $471m the year before, with full-year profits rising to $1.49bn from £1.16bn in 2009.
Sales at Amazon passed the $10bn mark for the quarter for the first time, rising 36% to $12.95bn (£8.16bn). Full-year sales rose 40% to $34.2bn (£21.55bn).
Jeff Bezos, chief executive of Amazon.com said: "We achieved two big milestones. We had our first $10bn quarter, and, after selling millions of third-generation Kindles with the new Pearl e-ink display during the quarter, Kindle books have now overtaken paperback books as the most popular format on Amazon.com.
"Last July we announced that Kindle books had passed hardcovers and predicted that Kindle would surpass paperbacks in the second quarter of this year, so this milestone has come even sooner than we expected – and it's on top of continued growth in paperback sales."
In November, Amazon acquired FMCG ecommerce business Quidsi, which owns baby product site Diapers.com, for a reported $540m (£334m).
It also bought online shoe retailer Zappos in 2009 in a deal worth $850m (£531m).