Moving to reassure investors, the world’s largest software company added that it would complete a remaining $19 billion (£10.7billion) share buyback plan by the end of next year – twice as quickly as previously planned.

"We’re very confident about our growth outlook - so confident that we announced today we’re accelerating our stock-buyback plans," Steve Ballmer, Microsoft's chief executive, said in an internal memo to staff.

Microsoft said profits for the three months to the end of September climbed to $3.14 billion, in line with forecasts and up from $2.53 billion a year ago. Revenues rose to $9.74 billion, up 6 per cent from $9.19 billion during the same period a year ago, but slightly below analyst estimates.

Strong performances in PC software and business servers drove the improved figures.

The results come at a key time for Microsoft, which faces increased competition from rivals such as Google. Microsoft is preparing to launch a string of important products in the next year, including an updated version of its Xbox video game console - the Xbox 360 - in November and the first major update to its flagship Windows operating system in five years, expected late next year.

Microsoft today said that its home and entertainment business posted a 17 per cent drop in revenue in the first quarter as the expected launch late next month of the Xbox 360 apparently dampened sales of the older model.

However, Microsoft warned Wall Street not to expect a large initial sales spike in the sales of the Xbox 360, insisting that it was developing a measured marketing strategy. The company said it would use a "rolling thunder" campaign that will aim to create a consistent ramp in revenue over a 12-month period, rather than an immediate jump during the launch, which coincides with the run-up to Christmas.

"The analysts were expecting more of a launch spike than we were," a spokesman for the company said.

Sales of the company’s Windows operating system, which runs most personal computers, rose 7.1 per cent to $3.19 billion. Revenue at the company’s server and tools business climbed 13 per cent to $2.53 billion, while Microsoft’s unit responsible for its widely used Office software boosted revenue by 4.1 per cent to $2.68 billion.

Looking ahead, Microsoft predicted fiscal second-quarter earnings of 32 cents to 33 cents a share on revenue of $11.9 billion to $12 billion. Analysts, on average, had been expecting the company to earn 35 cents a share on revenue of $12.29 billion.

For the year, Microsoft forecast earnings of between $1.26 and $1.30, including the just-ended quarter’s legal charge, on revenue ranging from $43.7 billion to $44.5 billion -- marking growth of 10 per cent to 12 per cent and accelerating from full-year growth of 8 per cent for the prior year.

The outlook for the year was in line with an earlier forecast by the company.

Microsoft shares fell 40 cents, or 1.6 per cent, to $24.45, in after-hours trading in New York.

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