Microsoft beats analyst expectations despite 18 percent drop in profits

Microsoft announced fiscal first-quarter revenue of $12.9 billion with a net profit of $3.57 billion, or 40 cents per share. Despite a 14 percent drop in sales and a 18 percent fall in profit the software giant performed a lot better than analysts anticipated, Wall Street analysts estimated Microsoft would report earnings of 32 cents per share on revenue of $12.4 billion.

Microsoft also revealed Windows 7 has nearly hit $1.5 billion in sales, although this revenue has been deferred to a future quarter as the operating system didn't start shipping until Thursday.

Microsoft's results don't include $1.47 billion in revenue deferred to a future quarter, related to its new Windows 7 operating-system software.

The deferred revenue reflected better-than-expected preorders for Windows 7, which wasn't officially released until Thursday.

Microsoft Chief Financial Officer Chris Liddell said during a conference call that the company's results were due to "consumer demand for our Windows and Xbox products, combined with excellent cost controls."

Liddell added that it appears that the broader economy is "showing signs of stabilization."