Microsoft shares rose six per cent in after-hours trading as profits positive performance in its cloud computing sales offset declining sales elsewhere.
Microsoft reported $20.4bn (£13.2bn) in revenue in the three months to September, down 12.1 per cent from $23.2bn in the same period last year.
Earnings per share came in at $0.58 from last years $0.55.
Revenue from sales of its software and PCs to businesses declined three per cent despite the number of business Office 365 subscribers climbing to 18.2m, three million more than last in the previous three months. It was hit by the strong dollar as constant currency sales grew four per cent.
PC and phone sales to consumers declined 17 per cent, while its cloud business saw sales grow eight per cent, with cloud revenues now standing at $5.9bn.
"We are making strong progress across each of our three ambitions by delivering innovation people love," said Satya Nadella, chief executive officer at Microsoft. “Customer excitement for new devices, Windows 10, Office 365 and Azure is increasing as we bring together the best Microsoft experiences to empower people to achieve more."