For the quarter, Microsoft had sales of $14.45 billion, flat relative to the same period a year ago. Profit was $4.39 billion, or 47 cents a share, beating the 44 cents Wall Street analysts expected on average.
Profit declined 11 percent, but the year-ago figures benefited from deferred revenue and income related to a "Technology Guarantee" program meant to spur holiday PC sales in light of the delayed launch of Windows Vista.
Also in the third quarter, Microsoft took a charge of $1.42 billion for its European Union antitrust fine. That was negated by a credit from the settlement of an Internal Revenue Service audit.
Adjusting for these accounting issues, revenue in the third quarter grew 14 percent and earnings per share increased 27 percent from a year ago.