SAN MATEO, Calif. -- Microsoft's third-quarter results were in the clouds.
Propelled by strong sales in the fledgling cloud-computing market, the software behemoth on Thursday reported $20.4 billion in revenue on profits of nearly $7 billion (68 cents per share).
Analysts expected Microsoft to report revenue of $20.4 billion and a profit of $5.3 billion (63 cents per share).
The news sent Microsoft shares up almost 2%, to $40.54 in after-hours trading – near the company's 52-week high of $41.66.
The results offered a mix bag -- promise in Microsoft's cloud offerings offset by softness in its Windows franchise, which is vulnerable to the whims of a balky PC market.
The results "demonstrate the strength of our business, as well as the opportunities we see in a mobile-first, cloud-first world," Microsoft CEO Satya Nadella said in a statement.
Nadella, a 22-year veteran of Microsoft, has spread the corporate gospel since he took over as CEO in February. His sermon: To turn the software giant into a devices and services company.
Market researcher Forrester estimates the public cloud market will soar to $191 billion by 2020, up from $58 billion in 2013.
Microsoft is pinning its hopes on Windows 8 and updates to its operating system, though consumers increasingly are buying tablets instead of PCs. Market researcher FBR expects PC shipments to dip 3% this year.
Microsoft closes its $7.2 billion acquisition of smartphone maker Nokia Friday.
The merger is likely to reverse slippage from Microsoft in the U.S. mobile market, where Windows-enabled smartphones are expected to nab 4.6% this year, down from 4.8% in 2013, according to eMarketer.
"He has articulated subtle changes that were in progress (before he succeeded former CEO Steve Ballmer)," says David Smith, an analyst at market researcher Gartner. "There has been more openness to things not tied directly to Windows, such as putting Office on iPad."