Strong sales of new and old products alike led Microsoft to its fastest first-quarter growth in seven years with the company reporting growth in all five business segments and both revenue and EPS (earnings per share) that beat analyst expectations.

Revenue for the fiscal quarter ended Sept. 30 was up 27 percent at $13.76 billion compared to $10.81 billion a year ago, Microsoft said Thursday. Consensus estimates from Thomson First Call analysts were for the company to generate revenue of $12.57 billion. Microsoft's EPS for the quarter was $0.45, which also soundly beat Thomson First Call consensus estimate of $0.39. Net income for the quarter was $4.29 billion, a 23 percent increase over the $3.48 billion reported a year ago.

At $5.92 billion, operating income for the quarter also had double-digit percentage growth: An increase of more than 25 percent over operating income reported for the same period last year of $4.47 billion.

Microsoft's first quarter was buoyed by the highly anticipated launch of the Xbox 360 game Halo 3 on Sept. 25, just days before the quarter's close. In its first 24 hours on sale, the game brought in $170 million in sales; it became the fastest selling video game in history after being in the market for just a week and a half, according to the company.

Strong performances from Microsoft's client, business, server and tools, and online divisions also contributed to revenue growth in the quarter. In particular, Microsoft said sales of its Windows Vista OS experienced double-digit growth through multi-year business contracts, and demand for Microsoft Office, Windows Server, and SQL Server was also high.

Looking ahead, Microsoft said it expects to report revenue in the range of $15.6 billion to $16.1 billion for its second quarter, which ends Dec. 31. Operating income is expected to be in the range of $5.9 billion to $6.1 billion, while diluted EPS are expected to be between $0.44 to $0.46 for the second quarter, the company said.

For its fiscal year 2008, Microsoft expects revenue in the range of $58.8 billion to $59.7 billion and operating income in the range of $23.3 billion to $23.7 billion. Diluted earnings per share are expected to be between $1.78 and $1.81 for the fiscal year, the company said. These new numbers were increases in Microsoft's guidance for the year from previous forecasts of $56.8 billion to $57.8 billion in revenue and $1.69 and $1.73 in EPS for the year.

On a conference call Thursday, Microsoft CFO Chris Liddell said the company raised its financial guidance for the year due to improved outlooks for Microsoft's client business, its server and tools operation, and the Microsoft Business division.

Sales of Vista seem to be on an uptick, and the fact that many long-term contracts Microsoft has with enterprise customers were up for renewal during the quarter helped fuel some of the revenue growth for the OS. Liddell expects that although companies have signed up for Vista in their contracts, many won't adopt it until the arrival of Vista Service Pack 1, expected in the first calendar quarter of 2008.

"It's still early days" for Vista adoption, he said.

Though analysts on the call gave Microsoft kudos for the quarter, there was still criticism about the performance of Microsoft's Online Services Division (OSD), the home of Microsoft's search and online advertising business. Revenue for the division grew only 25 percent year over year despite the close during the quarter of Microsoft's $6 billion acquisition of digital services agency aQuantive, a company expected to fuel growth in online advertising revenue.

Liddell acknowledged on the call that this kind of growth for OSD is "acceptable, but not stellar," saying, "we'd like to see it higher."

This story was updated on October 25, 2007