The company reported a first-quarter profit of $5.24 billion, or 62 cents per share, on revenue of $18.53 billion. Both are improvements from a year ago, when Microsoft rang up a $4.7 billion (53 cents) profit on revenue of $16 million.
Analysts had forecast adjusted earnings of 54 cents a share, compared with 53 cents in the year-ago quarter, according to Thomson Reuters. They expected revenue to jump 11%, to $17.8 billion, for the three months ended Sept. 30.
Profit is growing more slowly because the software giant is spending more to market newer products like the Surface tablet and to build more data centers for Web services.
The results, reported after markets closed, sent Microsoft shares to $35.79in after-hours trading.
Investors are particularly keen as Microsoft's revenue increasingly comes from tablets, online software and smartphones to offset dips in traditional PC software. That task will fall to the successor to CEO Steve Ballmer, who said in August he will retire within 12 months.
Two historic cash cows – the Windows operating system and Microsoft Office — are dependent on sales of new PCs, which have tumbled year-over-year six straight quarters.
"Microsoft's revenue used to be linked to OS, but that is no longer the case," Forrester Research analyst Ted Schadler says.
Profit, meanwhile, is growing more slowly because the software giant is spending more to market newer products like the Surface tablet and to build more data centers for Web services.
Microsoft remains a profit-making machine, which gives it the ability to catch rivals Amazon.com, Google and Apple in faster-growing businesses such as smartphones, tablets, entertainment and cloud computing, says Jeff Maling, co-CEO of Roundarch Isobar, a digital agency that builds consumer experiences for companies like HBO and Comedy Central.
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"I think everyone is waiting to see if the post-Steve Balmer Microsoft can use its cash cow (OS) to fuel a renaissance at the company," Maling says.
The quarter marked the first since a companywide reorganization. Microsoft's financial scorecard is divided into "Devices and Consumer" and a "Commercial" to offer investors a clearer picture on the performance of Microsoft's software sales to companies versus its consumer-product sales.
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