Microsoft posted earnings that fell short of expectations Tuesday while revenue topped Wall Street estimates.
The computer software maker earned 58 cents a share on revenues of $23.38 billion.
The company reported diluted EPS of 55 cents, but that figure included three cents worth of one-time charges. The 58-cent figure compares to analysts' estimate of 60 cents a share, according to a consensus estimate from Thomson Reuters.
During the same quarter a year ago, the company reported earnings of $4.96 billion, or 59 cents a share.
Shares initially fell as much as 3 percent in the wake of the news but soon recovered to trade near the flat line. (Click here to get the latest quotes.)
Microsoft's fiscal fourth-quarter revenue rose, but its profit fell, partly due to the effect of incorporating the handset business of Nokia, which it acquired in April.
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"I'm proud that our aggressive move to the cloud is paying off—our commercial cloud revenue doubled again this year to a $4.4 billion annual run rate," said Satya Nadella, CEO of Microsoft.
Last week, Microsoft said it would cut up to 18,000 jobs during the next year, with about 12,500 related to the company's acquisition of Nokia's phone business in April. The cuts represent more than 14 percent of Microsoft's 127,000-person workforce.
As a result of the dismissals, Microsoft said, it will incur pretax charges of up to $1.6 billion for severance and related costs over the next four quarters.
"Microsoft needs to detail what their strategy is," said Ross Gerber, CEO of Gerber Kawasaki, which has a stake in the tech firm. "Morale is down. They are firing a ton of people. The way he did it is very harsh. Nadella has to tell us where is Microsoft going, what's the future growth for this company."
The move is designed to help Microsoft shift from being a primarily software-focused company to one that sells online services, apps and devices that it hopes will make people and businesses more productive.
"This new sheriff in town is bringing something I like," said Kevin O'Leary, one of the stars of the reality show "Shark Tank."
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"He's focused on the bottom line, focused on cash flow," O'Leary said of Nadella. "He's basically telling us that he doesn't care anymore—he wants to change the direction whether you like it or not."
The company also plans to close its Xbox Entertainment Studios, making it the first major technology firm to give up on the battle to create original programming, Re/code reported last week.
"It's really the beginning of 2015 their fiscal year that's going to get us most interested," said Max Wolff, economist at Milano Graduate School.
—By CNBC.com. Reuters contributed to this copy.
Disclosure: Shark Tank is a prime time reality show that airs on CNBC.