Microsoft Corp (MSFT.O) on Tuesday met analysts' quarterly sales expectations and beat profit estimates, but its shares fell slightly reflecting some skepticism about one-off benefits included in the results and high hopes after a year-long rally.

By grabbing market share in the booming market for cloud computing and expanding business services such as its Teams collaboration service and LinkedIn social network, the Redmond, Washington company has become one of the world's most valuable companies, worth close to $2 trillion after a 50% stock runup over the past year.

Those services were still in demand during the pandemic, with Microsoft's Azure cloud service closing ground on market-share leader Amazon Web Services (AMZN.O) and growing 50% in the quarter. People working and studying from home bought new PCs and video consoles, spurring Microsoft Windows operating system and video game businesses.

Net income for the third quarter ended March 31 jumped 44% on a year ago to $15.5 billion. Revenue and adjusted earnings per share were $41.7 billion and $1.95 per share, above analysts' estimates of $41.03 billion and $1.78 per share, according to data from Refinitiv.

Shares fell 2.5%, paring some deeper losses after executives gave a better-than-expected forecast during a conference call with investors.

"One-off tax and currency advantages have boosted Microsoft's third-quarter numbers, and as a result the market isn't being quite as welcoming of expectation-beating numbers as you might expect," said Nicholas Hyett, equity analyst at Hargreaves Lansdown. Net profit had included a favorable $620 million tax benefit from court rulings in India.

"That is the danger of trading on the kind of valuation Microsoft enjoys, 32.8 times next year's earnings. Disappoint even a little and the market will be unforgiving."

Sales for what Microsoft calls its "commercial cloud" - which contains server infrastructure such as Azure along with cloud-based versions of its Office software - was up 33% at $17.7 billion. Sales for Dynamics 365 customer management, which competes directly with Salesforce.com (CRM.N), rose 45% and the business version of Office 365 added 15% more users.

"That's the fourth consecutive quarter of 15% seat growth on a very large base," Microsoft Chief Financial Officer Amy Hood said of the Office 365 results for commercial customers.

Microsoft has continued to double down on cloud-base software and said earlier this month it would buy artificial intelligence software firm Nuance Communications Inc (NUAN.O) for $16 billion, excluding net debt, to bolster its healthcare business. read more

Microsoft said Azure, its closely watched cloud computing business that competes with Amazon.com Inc's (AMZN.O) Amazon Web Services and Alphabet Inc's (GOOGL.O) Google Cloud, grew 50% in the quarter, or 46% when adjusted for currency variations. This is down from a currency-adjusted 48% the quarter before but in line with analysts' expectations of 46.3% growth, according to data from Visible Alpha.

Overall sales at Microsoft's "intelligent cloud" unit that contains Azure were $15.1 billion, above analysts' estimates of $14.92 billion, according to Refinitiv data.

Microsoft Teams has 145 million daily users, up from 115 million in October, Microsoft said. Sales for Microsoft's productivity software unit, which includes Office and Teams, were $13.6 billion, compared with estimates of $13.49 billion, according to Refinitiv.

Sales for its LinkedIn social network were up 23% on a currency adjusted basis, slightly above Visible Alpha estimates of 21.9%, as revenue continued to recover from a sharp decline in job listings and hiring at the onset of the pandemic.

Microsoft's personal computing unit, which contains its Windows operating system and Xbox gaming console, had $13.0 billion in sales, compared with analysts' expectations of $12.57 billion, according to Refinitiv data. Sales of Windows to PC makers were up 10%, compared to a 1% rise the quarter earlier.

On a call with investors, Microsoft forecast fiscal fourth-quarter productivity segment revenue with a midpoint of $13.93 billion, above Refinitiv estimates of $13.57 billion. Its sales forecasts for its intelligent cloud and personal computing businesses had midpoints of $16.32 billion and $13.80 billion, respectively, above estimates of $16.0 billion and $13.26 billion, according to Refinitiv data.