Microsoft reported earnings excluding items that beat analysts' expectations though it posted a net loss - the first since it went public in 1986 - and delivered revenue that fell short of expectations.
The loss was attributed to a previously announced charge for writing down the value of its ailing online unit.
Still, its shares rose after-hours trading on Thursday. Click here to get the latest quote.
Excluding the write-down, but factoring in deferred revenue, Microsoft (MSFT)said it earned 67 cents per share in the quarter, down from 69 cents a share in the year-earlier period.
Microsoft also deferred $540 million of Windows revenue due to an upgrade discount it is offering customers who buy machines running Windows 7 before the launch of Windows 8 in late October.
The company reported a net loss of $492 million, or 6 cents per share, compared with a profit of $5.87 billion, or 69 cents per share, in the year-ago quarter.
Revenue was $18.06 billion, an increase from $17.37 billion a year ago but short of expectations as slowing PC sales have taken a toll on sales of the company's flagship Windows operating system.
Analysts had expected the company to report earnings excluding items of 62 cents per share on revenue of $18.12 billion, according to Thomson Reuters.
Amid the pressure from other tech giants like Google (GOOG) and Facebook (FB), there has been some buzz questioning Microsoft's mojo.
Thomson Reuters contributed to this report.
CORRECTION:
An earlier version of this story incorrectly said that earnings excluding items were 73 cents a share. In fact, they were 67 cents a share.
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