The company, which released its new Windows 7 operating system this week, reported fiscal first-quarter profit of $3.57 billion, or 40 cents per share, compared with $4.37 billion, or 48 cents per share, in the year-ago quarter.
Wall Street expected profit of 32 cents per share, on average, according to Thomson Reuters I/B/E/S.
Sales fell 14 percent to $12.92 billion, partly reduced by a deferral of $1.47 billion in revenue to future quarters related to Microsoft offering a free upgrade to Windows 7 for recent buyers of the predecessor Vista system. That beat analysts' average forecast of $12.31 billion.
Microsoft shares rose 8 percent in pre-market trading to $28.68.
(Reporting by Bill Rigby; Editing by Derek Caney)