Microsoft reported an 11 percent rise in both revenue and operating income to $10.81 billion and $4.47 billion respectively for the first quarter of its fiscal year, which ended September 30.
The increases come on the back of strong demand for Xbox 360 consoles and SQL Server 2005.
The Redmond, Wash., software company released its first quarter results on Oct. 26 after the financial markets in New York had closed for the day.
It posted net income of $3.48 billion and diluted earnings of $0.35 per share in the quarter compared to the $3.14 billion net income and $0.29 in diluted earnings posted the same quarter of the previous year.
In the quarter to end June, Microsoft reported revenue of $10.16 billion, which helped propel its revenue for the full fiscal year, ending June 30, 2006, to a record $39.79 billion, an 8 percent rise over the $36.84 billion reported in 2005.
"The solid revenue results for the quarter were at the top end of our expectations and represent a very good start to the fiscal year," Chris Liddell, Microsofts chief financial officer, said in a statement.
Revenue for the companys server and tools business rose 17 percent over the comparable quarter for the previous year, helped along by SQL Server 2005, where revenue grew 30 percent on increased customer deployments, Visual Studio 2005 and BizTalk Server, he said.
The entertainment and devices division saw a 70 percent growth in revenue over the prior year, driven by demand for Xbox 360 consoles, software, peripherals, and Xbox Live, Liddell said, noting that 6 million Xbox 360 consoles have been sold worldwide to date, while Xbox Live passed the four million member mark during the quarter.
While not giving the final ship dates for Windows Vista and Office 2007, Liddell said that Microsoft had made "considerable progress" toward delivering Windows Vista and the 2007 Microsoft Office system to customers.
"During the quarter under review, the first release candidate for Windows Vista was made available to nearly 5 million customers worldwide, and the beta 2 version of the 2007 Microsoft Office system was in use by over 3 million customers.
Kevin Turner, Microsofts chief operating officer, said the results were a reflection of the companys "solid execution and ongoing focus on operational excellence. As we look to the upcoming releases of Windows Vista, the 2007 Microsoft Office system and Exchange Server 2007, we are excited about these products and believe they will deliver unprecedented levels of business value to our customers."
With regard to the companys business outlook, Microsoft management said that, for the fiscal second quarter ending December 31, 2006, it expects revenue of between $11.8 billion and $12.4 billion, which reflects some $1.5 billion of revenue deferrals that will be captured in the fiscal third quarter, primarily related to the technology guarantee programs announced on October 24, 2006 for Windows Vista and the 2007 Microsoft Office system.
Operating income is expected to be in the range of $2.9 billion to $3.1 billion, which also reflects the $1.5 billion of deferrals, with diluted earnings a share of $0.22 to $0.24 likely. This includes an $0.11 per share impact for deferrals.
Microsoft management also expects revenue for the full fiscal year ending June 30, 2007 in the range of $50 billion to $50.9 billion, with operating income of $19.1 billion to $19.5 billion and diluted earnings of $1.43 to $1.46 a share.