Ballmer's idea of game consoles, cloud software proves a hit.
Microsoft Corp's customers flocked to game consoles and cloud software last quarter, helping Steve Ballmer deliver results that topped projections in his last months as chief executive officer.
Revenue climbed 14 per cent to a record $24.5 billion in the fiscal second quarter, which ended on December 31, Microsoft said in a statement on Thursday.
Analysts had predicted on average $23.7 billion in sales, according to data compiled by Bloomberg. The shares rose.
Ballmer, who has said he would retire by this August, has kicked off Microsoft's biggest transition in more than a decade. The world's largest software maker is in the middle of implementing a reorganisation and is working to close the acquisition of Nokia's handset unit. Microsoft introduced the new Xbox One game machine in the holiday quarter and boosted sales of Web-based software such as Azure and Office 365, even as its traditional programs continue to languish along with personal-computer shipments, which posted a record drop in 2013.
"They continue to defy the skeptics," said Brent Thill, an analyst at UBS AG in San Francisco who has a buy rating on the stock. "This company is outpacing every other large-cap enterprise company by miles. They're doing the right things. The last part of this is you have to get the right head coach."
Shares of Redmond, Washington-based Microsoft climbed 3.4 per cent to the equivalent of $37.27 in German trading at 9:04amFrankfurt time. They rose as much as 5.5 per cent on Thursday in extended trading following the report, after closing at $36.06 in New York. The stock added 40 per cent in 2013, compared with a 30 per cent increase in the Standard & Poor's 500 Index.
Net income in the second quarter rose 2.8 percent to $6.56 billion, or 78 cents a share, from $6.38 billion, or 76 cents, a year earlier. Analysts had projected on average profit of 69 cents.
Unearned revenue, which comes from sales of multiyear deals that will be recognised in the future, was $19.5 billion for the quarter, compared with the $20.5 billion average analyst projection, according to data. Sales of commercial cloud programs like Azure and Office 365 more than doubled from the year-ago quarter and the company sold twice as many Surface tablets as it did in the fiscal first quarter, according to Chief Financial Officer Amy Hood.
"We exceeded expectations in both the commercial unit and the devices and consumer segment and we saw improvement in areas where frankly we needed to get better," Hood said in an interview, citing Surface and tablets as examples.
The PC market is stabilizing, she said, with corporate shipments rising for the third consecutive quarter and consumer PCs performing better than Microsoft anticipated, although she said demand remains soft as customers choose other devices.
Most investors are more focused on the CEO search than earnings results, according to Daniel Ives, an analyst at FBR Capital Markets & Co.