Smartphone is seen in front of Microsoft logo displayed in this illustration taken, July 26, 2021.
Smartphone is seen in front of Microsoft logo displayed in this illustration taken, July 26, 2021. Reuters / DADO RUVIC

Microsoft Corp beat Wall Street profit and revenue expectations on Tuesday, benefiting from demand for the software giant's cloud-based services from the pandemic-triggered shift to hybrid work models.

Shares were up less than 1% in after-hours trade.

Individuals and organizations turned to Microsoft's diverse products, such as Outlook and Teams workplace messaging app, to communicate during the switch to working and learning from home, making the company a pandemic winner.

Now as economies reopen, businesses are increasingly shifting to a hybrid model of allowing staff to alternatively work from office and home. That's also helping drive up revenue of Windows products, said Brett Iversen, general manager of investor relations. "Strength in the commercial PC market drove Windows OEM revenue up 11%," he told Reuters. The hybrid work trend is resulting in a continued strength for Microsoft's cloud services, including its flagship cloud offering Azure.

Third-quarter Azure annual growth of 46.0% was steady from the previous quarter and in line with estimates of 45.6% growth compiled by Visible Alpha. Still, Azure growth has showed a steady drop from fiscal 2020 when growth was in the 60% range.

Iversen said that Azure Microsoft had better-than-expected growth in long-term Azure contracts, although he did not provide specific numbers.

"These numbers show that customers continue to turn to Microsoft as they accelerate their shift to cloud computing and the current unsettling economic environment has not yet impacted the company's main growth driver," said Haris Anwar, senior analyst at Investing.com.

The company reported revenue of $49.36 billion in the third quarter, compared with $41.7 billion a year earlier. Analysts on average had expected revenue of $49.05 billion, according to Refinitiv IBES data.

Net income rose to $16.73 billion, or $2.22 per share, in the quarter ended March 31, from $15.46 billion, or $2.03 per share, a year earlier. That topped analyst targets of $2.19.