Microsoft on Wednesday reported that its quarterly profit dipped as revenue increased with help from sales of Surface tablets, Xbox One consoles and cloud services.

Profit fell 10 percent from a year ago to $5.9 billion while revenue hit $26.5 billion in the quarter ended on December 31, and chief executive Satya Nadella said the company's transformation is on target.

"We are taking bold steps forward across our business, and specifically with Windows 10, to deliver new experiences, new categories, and new opportunities to our customers," Nadella said.

Microsoft shares were down slightly more than three percent to $45.53 in after-market trading that followed release of the earnings figures.

In the recently ended quarter, revenue from business cloud services including Office 365 and Azure more than doubled to hit an annualized rate of $5.5 billion.

Meanwhile, subscriptions to home versions of Office 365 and Personal climbed more than 30 percent to 9.2 million as Microsoft continued to adapt to lifestyles in which software is rented online as a service instead of bought and installed on people's machines.

"We again saw enthusiasm and demand around our cloud offerings like Office 365, Dynamics CRM Online and Azure, as well as Surface Pro 3," said Microsoft chief operating officer Kevin Turner.

"Our sales engagement worldwide continues to focus on helping customers and partners transition to the cloud."

Microsoft's Bing saw its share of the US online search advertising market grow to just shy of 20 percent, and sales of Xbox video game consoles climbed to a total of 6.6 million units due to strong performance during the year-end holiday season, according to Microsoft.

Revenue from sales of Surface tablets and accessories rose 24 percent to $1.1 billion in the quarter.

The gains helped offset a 13 percent drop in revenue from licensing of the WIndows operating system, which has long been a mainstay at Microsoft.

Microsoft pulled back the curtain last week on the upcoming Windows 10 operating system focused on seamlessly connected devices such as computers, tablets and smartphones.

Microsoft hopes Windows 10 will renew its relevance in an age of mobile computing dominated by Apple and Google-backed Android software.

And in order to boost its takeup by the approximately 1.5 billion people around the world who use Windows-powered computers, in a change of policy Microsoft will allow free upgrades.

Microsoft also unveiled its virtual reality headgear called HoloLens that will debut with Windows 10 later this year.

HoloLens was touted as an entry to "the world's first holographic computing platform" which enables users to place three-dimensional holograms in the physical world.