Microsoft said its net profit climbed on record first-quarter revenue as businesses snapped up the latest offerings from the US software titan.
Microsoft reported net profit of $5.74 billion on revenue of $17.37 billion for the quarter ended September 30.
"We saw customer demand across the breadth of our products, resulting in record first-quarter revenue and another quarter of solid EPS (earnings per share) growth," said Microsoft chief financial officer Peter Klein.
"Our product portfolio is performing well," Klein added.
While Microsoft nailed Wall Street expectations, its stock price slipped slightly to $26.78 in after-hours trading as investors focused on slight misses in performance at the Windows and business Servers divisions.
Demand for Microsoft software offered for purchase or as services hosted in the Internet "cloud" lifted the Redmond, Washington-based company's revenue in the quarter.
Microsoft said its consumer-oriented offerings, including its hot-selling Xbox 360 video game consoles and the Xbox Live online community connected to the device, positioned it for a winning holiday shopping season.
"We had another strong quarter for Office, SharePoint, Exchange, and Lync, and saw growing demand for our public and private cloud services," said Microsoft chief operating officer Kevin Turner.
"With a great set of consumer products like Windows 7 PCs, Windows Phone 7.5, Xbox and Kinect, we are excited about the holiday buying season," he added.
Xbox has been the top-selling videogame console in the United States for the past nine months, and exclusive shooter title "Gears of War 3" sold more than three million copies in the week after its release in September.
Microsoft is also beefing up television content offered for viewing at the Xbox Live online entertainment network for console owners.
Bing was gaining ground on Internet search leader Google and claimed about 27 percent of the US market, taking into account online queries Microsoft's search engine handles at Yahoo! websites.
Klein said that a top priority at Microsoft is working with Yahoo! to fix problems integrating Bing search and, more importantly, maximizing revenue from ads associated with query results.
"In search, monetization of our ad platform remains below our expectations," Klein said during an earning conference call.
"We continue to partner closely with Yahoo to address the platform gaps and inefficiencies," he continued.
Klein said that Microsoft remained strongly committed to its online search and advertising alliance with Yahoo!, which is searching for a new leader after the recent ouster of chief executive Carol Bartz.
Microsoft is considered to be among suitors interested in buying the faded Internet star.
"If Yahoo! isn't generating as much revenue as Microsoft thinks it should, that could be another reason to buy them," said independent Silicon Valley analyst Rob Enderle.
Yahoo! rejected a $47 billion takeover bid by Microsoft in 2008. Microsoft chief executive Steve Ballmer said this week that his company "got lucky."
Microsoft this month closed its acquisition of Skype and is hard at work merging the Internet telephony technology into offerings such as Xbox Live and smartphones running on freshly released Windows 7 mobile software, he added.
Microsoft is also looking into ways to make more money from Skype with advertising and premium services, according to executives.
On October 7, European antitrust officials approved Microsoft's $8.5-billion takeover of Internet voice and video leader Skype.
Microsoft's purchase is aimed at boosting its presence in an online arena dominated by Google and Facebook, both of whom were also believed to have been interested in Skype along with computing giant Cisco.
Skype users can make low-cost or free phone calls over the Internet using their computers or smartphones. Skype bypasses the standard telephone network by channeling voice and video calls over the Web.
One of the top applications on Apple's iPhone and on smartphones powered by Google's Android software, Skype has some 170 million users who will now be able to "Skype" using Windows-powered phones or even Xbox game consoles.
"The opportunities are exciting across all our products," Klein said of Skype.
"In the building, as we speak, we are working real hard on the integration."