Microsoft’s quarterly profits met Wall Street expectations, riding strong results in its Microsoft Business and Server & Tools groups, even as the Windows division continued to feel the effects of sluggish PC sales.

The company this afternoon reported profits of $5.74 billion, or 68 cents a share, matching the consensus of analysts polled in advance by Thomson Reuters. Microsoft’s sales for the quarter were $17.37 billion, up 7 percent from a year ago and a record for the quarter.

Microsoft shares are down about 1 percent in after-hours trading.

The Microsoft Business Division’s sales of $5.62 billion, up 8 percent, were notable in part because Office 2010 was launched a year ago, making for a tough comparable this quarter.

“We had another strong quarter for Office, SharePoint, Exchange, and Lync, and saw growing demand for our public and private cloud services including Office 365, Dynamics CRM Online, and Windows Azure,” said Kevin Turner, Microsoft chief operating officer, in the company’s earnings release.

Windows didn’t fare as well. Sales of the Microsoft operating system come primarily through new PCs, which have been experiencing meager growth. Revenue in the Windows & Windows Live Division rose 2 percent, to $4.87 billion, while profits fell 1 percent, to $3.25 billion, due in part to higher sales and marketing expenses for Windows and Windows Live.

In a sign of modest progress for Microsoft’s web search initiatives, the company’s Online Services Business reported a slightly narrower loss of $494 million, compared with a loss of $558 million in the same quarter last year. Microsoft’s Bing search engine has been spending heavily on distribution deals and promotions to catch up to Google, but it reported lower sales and marketing expenses in the recent quarter.

Server & Tools Division sales grew 10 percent, to $4.25 billion, while profits were up 4 percent, to $1.56 billion. Server & Tools includes Windows Server, SQL Server, Windows Azure and related products.

Entertainment and Devices Divison, which includes the Xbox 360, reported sales of $1.96 billion, up 9 percent. However, profits declined 9 percent, to $352 million. The company cited higher royalty costs related to Xbox Live content.

Follow-up: Microsoft results show how iPad is cutting into Windows PC sales

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Comments

  • Guest

    If you ignore the hype, and actually look at the financial .xls, you find that there is not a lot of good news.  Windows and E&D income down year over year, S&T flat, what little improvement Y/Y came from Bing & OSD loosing less money ($100m less this year than last) and BizDiv (which had a great quarter, relative to the other divs).

  • Guest

    Just 7% growth in revenue and 1% growth in operating income.

    After Hours: 26.74 0.30 (1.11%) 4:40PM EDT

    “We love our strategy. The board loves our strategy”
    - Steve Ballmer

    uh huh.

  • Guest

    No Mini-Microsoft earnings post. Did he finally quit or get found out?

    • Guest

      He has one up now.

    • Guest

      He has one up now.

  • Guest

    Congratulations to Microsoft on another killer quarter!

    • Guest

      Congratulations to Microsoft on running your business so poorly, for so long, that you’re now growing even slower than IBM!

  • Guest

    Looks like Ballmer’s various mistakes have finally caught up with him. Despite a decade of trying, he really hasn’t succeeded in diversifying the company away from its reliance on the PC. And now PC growth is mostly gone, in part due to recession but also a secular shift towards tablets and smartphones in lieu of a PC. And of course he managed to lose both those markets despite having a ten year head start over Apple and Google.

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