The tech firm handed in earnings of 54 cents per share on revenue of $23.20 billion, beating Wall Street estimates of 49 cents per share on revenue of $22.02 billion, according to a consensus estimate from Thomson Reuters.
The company's devices and consumer revenue grew 47 percent to $10.96 billion, beating forecasts of $10.07 billion, according to StreetAccount.
Computing and gaming hardware sales increased by $1 billion or 74 percent, while phone hardware revenue exceeded $2.6 billion, versus StreetAccount expectations of $2.12 billion.
Commercial revenue totaled $12.28 billion, also topping estimates, with gains of about 10 percent. The company said its lower-margin commercial cloud business grew some 128 percent, but it did not divulged the actual revenue.
We saw good margin structure for our cloud efforts, CEO Satya Nadella said on the firm's analyst conference call.
"I'm pleased with the progress we are making. ... We will be relentless for areas for future growth," Nadella said.
Investors cheered the upbeat results and the stock rose about 4 percent in after-hours trading.
"I loved the quarter. I think this is going to lift the stock to that 52-week high," said Jon Najarian of OptionMonster.com. "Last year was a 13 P/E, now it's a 17 P/E and part of the reason of that is excitement about Azure, with the cloud and so forth, what Microsoft's doing in gaming ... I think there's a lot to be happy and satisfied about the direction that Microsoft's going."
Revenue rose 25 percent, lifted by its recent Nokia Devices and Services integration, but operating income fell 8 percent "reflecting integration and restructuring expenses," the company said.
The S&P 500 IT sector is up some 19 percent, year-over-year, while the Nasdaq is up around 14 percent. Microsoft, which is up about 33 percent year-over-year, has managed to outperform both indexes.
Looking forward, Microsoft said it sees second-quarter consumer licensing revenue falling in range of revenue $4 billion and $4.2 billion, versus estimates of $5.16 billion, according to StreetAccount.
Computer and gaming revenue is expected to come in between $3.5 billion to $3.8 billion, due to an impact of "lower priced skews," Chief Financial Officer Amy Hood said on the call. Analysts were looking for $4.43 billion in the sector. Hood said she expects the PC refresh cycle to continue.
Finally, the company expects second-quarter phone hardware revenue to come in between $2 billion and $2.20 billion, shy of analysts' expectations of $2.37 billion.
Wall Street expects the firm to hand in fiscal second-quarter earnings of 75 cents per share, down 4 percent from a year ago, on $27.87 in revenue.
-CNBC's Michelle Fox contributed to this report.