The company reported $23.4 billion in revenue and earnings of $0.55 per share. Despite beating expectations of $23bn for the quarter from April to June, it fell short on the profit front, with analysts having forecasted earnings per share around $0.60.
Profits fell seven percent, partly due to the cost of incorporating the handset business of Nokia, which became part of the company in late April.
Revenue on Microsoft's Windows product climbed three per cent on the back of strong sales of the operating system to corporate customers.
Bing search ad revenue is up 40 per cent Microsoft reported, saying that it now has almost one fifth, 19.2 per cent, of the US search market share.
The company sold 5.8 million Windows phone-based Lumia devices in the period, which is reported to have cost the company $0.08 in earnings per share and saw it lose $692 million in the quarter. Techcrunch reports that had Microsoft not bought the asset, it would have hit its profit mark.
Microsoft, one of the world's most entrenched technology companies, pointed to strong performance of its cloud computing division, whose revenues had doubled in the past year to an estimated run rate of $4.4 billion, as the real positive sign coming out of this quarter.
"We are galvanized around our core as a productivity and platform company for the mobile-first and cloud-first world, and we are driving growth with disciplined decisions, bold innovation, and focused execution," said Satya Nadella, the company's chief executive.
Last week, Nadella kick-started one of the largest round of job cuts in tech history when he announced the software giant would slash 18,000 jobs, mostly from its Nokia division. Investors appeared to stand behind the decision, as the software company's shares soared to a 14-year high.
The new chief executive, who was appointed earlier this year to replace controversial figure Steve Ballmer at the helm, is spearheading a period of transition for the company as it moves to take advantage in the growth of cloud computing.
Analysts anticipate that the some areas of the company not part of the vision for the future will shrink in the coming months.