The globe's largest software maker said net profits were $3.70bn (£2.11bn) for the financial period ending 30 June.

That was compared to $2.69bn (£1.54bn) in the same period in 2004.

Chief financial officer Chris Liddell said Microsoft would benefit greatly in the next financial year from a new Xbox video game console and new products.

He said recent strong revenue growth was "driven by healthy, broad-based demand across all customer segments and channels".

Revenue during the period rose to $10.16bn from $9.29bn.

'Product pipeline'

"These results provide solid momentum heading into fiscal 2006, which is shaping up to be a strong year for growth and investment," said Mr Liddell.

"We expect double digit revenue growth next year, kicking off the strongest multi-year product pipeline in the company's history."

The company announced record revenue of $39.79bn for the fiscal year ending on 30 June, an 8% increase over the $36.84 billion reported last year.

The main drivers of sales for Microsoft's Windows, Office and Server software products - PC makers and Asian component manufacturers - have reported healthy demand for PCs.

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"During the fourth quarter, continued strong PC and server shipment growth and improved information technology spending compared to fiscal year 2004 contributed to our overall revenue growth," said a statement issued by Microsoft's headquarters in Redmond, Washington.

However despite the strong results and positive vision of the future shares in the firm fell in after-the-bell trading in New York.

"There's a lot of investors in this market who think the company won't be able to sustain this type of performance in the future and that is why we are seeing such a lukewarm response to the results," said Fred Burke, a fund manager at Johnson Lemon Asset Management in Washington.

Chinese battleground

On Wednesday Microsoft said it was suing Google for hiring one of its vice presidents to set up a research centre in China.

The country is a new battleground for the two firms, which offer online and desktop search tools.

However, when asked about China's revaluation of its currency on Thursday, Mr Liddell replied: "That's not a significant issue for us.

"We do have revenues coming in internationally and Europe is the most significant (source of overseas revenue)."