Reduced demand for Windows software due to sluggish PC sales has been blamed for Microsoft’s drop in profits, from $6.6bn to $5.9bn in the last three months of 2014.
However, the rise in sales of Surface tablets, smartphones, and software boosted its revenues by 8% to $26.5bn for the quarter ending December 2014.
Microsoft chief executive officer Satya Nadella said: "Microsoft is continuing to transform, executing against our strategic priorities and extending our cloud leadership."
"We are taking bold steps forward across our business, and specifically with Windows 10, to deliver new experiences, new categories, and new opportunities to our customers."
During the quarter, revenue generated by Surface tablets rose 24% to $1.1bn, with search advertising revenue increasing 23% and phone hardware revenue reaching $2.3bn. There was, however, a 13% drop in Windows OEM Pro revenue.
During the period, sales of its smartphones and Xbox consoles reached 10.5m and 6.6m respectively.
Microsoft’s commercial revenue rose by 5% to $13.3bn, with commercial cloud revenue rising by 114%. This surge in growth was mainly fuelled by Office 365, Azure and Dynamic CRM Online.
Microsoft shares experienced a drop by $0.17 (0.36%) to $46.97 after the announcement, having started at $47.01.
Microsoft chief operating officer Kevin Turner said: "We again saw enthusiasm and demand around our cloud offerings like Office 365, Dynamics CRM Online and Azure, as well as Surface Pro 3."
"Our sales engagement worldwide continues to focus on helping customers and partners transition to the cloud and navigate the shifting product mix related to our services and solutions."
