Microsoft's fiscal third quarter was better than expected, as the company added 1 million Office 365 Home subscribers, benefited from the enterprise move away from Windows XP, rode its enterprise unit, and added cloud features.
Meanwhile, Microsoft Surface revenue was up 50 percent in the quarter compared with a year ago, to $500 million.
Overall, Microsoft reported third-quarter earnings of $6.97 billion, or 68 cents a share, on revenue of $20.4 billion, roughly flat with a year ago.
Wall Street was expecting the company to report earnings of 63 cents a share on revenue of $20.39 billion.
The quarter is notable for Microsoft since it's the first one with Satya Nadella as the company's leader. Nadella has made a few appearances, including at Microsoft's Build conference and the Office for iPad launch.
In addition, the quarter is the last one before Nokia is added into the revenue mix. Analysts widely expect Nokia to ding Microsoft's profit margins and earnings for the foreseeable future.
Microsoft's outlook for future quarters won't include Nokia, so the company will have to update when the deal closes on Friday.
Microsoft's business unit breakdown had a familiar storyline with recent quarters. The enterprise division, known as commercial licensing, delivered revenue of $10.32 billion, up from $9.98 billion a year ago.
Microsoft's commercial unit continues to execute well, as server product revenue was up 10 percent, SQL Server sales jumped more than 15 percent, and Windows volume licensing revenue was up 11 percent from a year ago. One notable tidbit: Microsoft estimates that about 90 percent of enterprise desktops are on Windows 7 or Windows 8.
In addition, Microsoft said its "commercial other" revenue, a proxy for cloud services such as Azure and Office 365, delivered third-quarter sales of $1.9 billion, up 31 percent from a year ago.
This story originally appeared as "Microsoft Q3 strong: Office 365 subscriptions surge, Windows upgrades pay off" on ZDNet.