Sales of its flagship cloud product doubled in its first quarter, propelling earnings above analysts' estimates and sending its shares to an all-time high overnight, breaking past a level hit in 1999 at the peak of the tech stock bubble.

Microsoft shares jumped as much as 6.2 percent to $US60.79 in US after-hours trading. They later pared gains to $US60.63, still adding more than $US26 billion ($34.5 billion) to its market value.

The company's shares have doubled since August 2013, with Chief Executive Satya Nadella restoring investor confidence by focusing on mobile and cloud computing rather than PCs.

The last time Microsoft's stock was this valuable was back in 1999, when Bill Clinton was still president, Mark Zuckerberg was in high school and the company was heading toward an antitrust showdown with the Justice Department.

Shifting into the cloud

Long known for its Windows software, Microsoft has shifted focus to the cloud where it is duelling with larger rival Amazon.com to control the still fledgling market. Its jump in revenue underscores how businesses around the world are turning to new applications in the cloud and leaving once critical software programs and other hardware in the dust.

Cloud computing represents a big change in the way businesses get access to and purchase software and computing resources because it lets customers rent what they need as they go.

For outfits like Microsoft, the method is not as profitable as the old-fashioned way of selling copies of software, a business with gross profit margins above 90 per cent - that's the total profit a company can make off a product once the cost of making and selling it is subtracted.

But the cloud has other advantages, including more dependable flows of revenue. Tech companies like Microsoft also believe cloud computing will help make the overall technology market far bigger over time.

'Coming of age'

On Thursday, Microsoft said its gross profit margin from its commercial cloud business was 49 per cent, much lower than its traditional software business, but still attractive and growing quickly. Microsoft has shared gross profit margins for its cloud business on occasion before, but recently said it would do so more explicitly in its earnings statements.

"The more details you get, the better," said Colin Gillis, an analyst at BGC Partners. "It also shows the business is coming of age."

Microsoft was initially slow to recognise the importance of cloud computing, while Amazon built a large business serving startups and big corporate customers. But after spending billions on data centres, Microsoft is finally recognised as a credible No. 2 in the market.

Microsoft said net income for the company's fiscal first quarter, which ended September 30, was $US4.69 billion, or US60¢ a share, compared with $US4.9 billion, or US61¢ a share, a year earlier. Revenue was $US20.45 billion compared with $US20.38 billion a year ago.

Yet investors focus on a different set of figures that exclude the effect of large revenue deferrals related to Windows 10, the Microsoft operating system from which the company recognises revenue over time because of accounting rules governing software delivered as a service.

Without those deferrals, Microsoft earned nearly $US6 billion, or US76¢ a share, compared with $US5.66 billion, or US70¢ cents a share, a year earlier. Revenue of $US22.33 billion was up from revenue of $US21.66 billion a year ago. The results were well ahead of the US68¢ cents a share in earnings and $US21.71 billion in revenue that represent the average estimate of analysts surveyed by Thomson Reuters.

There were blemishes on Microsoft's quarter. The revenue it gets from PC makers who put Windows on their systems did not grow, a reflection of the stagnant PC market. Its revenue from selling phones, a market Microsoft has backed away from, fell 72 per cent. And its revenue from games declined 5 per cent because of falling Xbox game console sales.

Coming back 

Microsoft had an effective monopoly on computing software in the 1990s and was for some time the world's most valuable publicly traded company.

But its power waned in the 2000s after a bruising battle with the U.S. Department of Justice over how it used its monopoly power to squeeze competitors.

Co-founder Bill Gates - still the world's richest man with an estimated net worth of $US88 billion - stepped down as CEO early in 2000 and Microsoft spent the next decade and a half in a strategic dilemma as it clung to its PC-centric view of the computing world while it was outflanked by Google in the internet and Apple Inc in smartphones.

Earlier this year, Nadella made headlines when he orchestrated Microsoft's biggest-ever deal, agreeing in June to buy the social network for professionals LinkedIn for $US26.2 billion.

The New York Times, Reuters