The strengthening US dollar had a "significant impact" on results, the software firm said.
It also took a a charge of $190m during the quarter to reorganise its business which includes the costs of merging Nokia's handset division.
However, sales from cloud computing services doubled, beating expectations and sending shares higher.
Microsoft says that business is expected to generate $6.3bn in annual sales.
"We saw incredible growth across our cloud services this quarter," said Satya Nadella, chief executive officer at Microsoft in a statement with the earnings release.
Investors were further pleased by an increase in the firm's hardware sales, which offset declines in its Windows software business.
Overall, revenue increased by 6% to $21.7bn in the third quarter. Microsoft reports its financial earnings on a calendar year that begins in .July.
Microsoft has reported a 12% fall in profits to $5bn (Â£3.3bn) in the first three months of 2015.