Much of Microsoft's recent growth has been fuelled by its cloud computing business as more enterprises seek to cut data storage costs by adopting cloud-based software and moving their applications to data centres.
The company's flagship cloud product Azure, which competes with Amazon's
Azure's growth has propelled Microsoft to the No. 2 position in the US$15.6 billion cloud computing market with a 14 percent share, behind AWS, which holds a 32 percent slice of the market, research firm Canalys estimated in February.
Revenue at Microsoft's productivity and business processes unit, which includes Office 365, rose 17 percent to US$9 billion, topping analysts' average expectation of US$8.73 billion, according to Thomson Reuters I/B/E/S.
Overall, the software giant's revenue rose 16 percent to US$26.82 billion, ahead of expectations of US$25.77 billion.
Microsoft said net income rose to US$7.42 billion or 95 US cents per share in the third quarter ending March 31, from US$5.49 billion or 70 US cents per share, a year earlier.
Analysts had expected earnings of 85 US cents per share.
Microsoft's shares fell about 1 percent in after-hours trading on Thursday.
Reporting by Laharee Chatterjee. Editing by Sai Sachin Ravikumar