Microsoft Corp.’s quarterly profits rose 85 percent, the company said Thursday, smashing Wall Street’s expectations and sending its stock sharply higher.

Many had expected Microsoft profits to increase about 45 percent, but Microsoft said strong sales of its Office 97 business software led the company to the steep increase.

The company earned $1.04 billion, or 79 cents a share, in the quarter ended March 31. Net earnings from the same period in 1996 were $562 million, or 44 cents a share.

Revenues for the quarter were $3.21 billion, up 45.5 percent from $2.21 billion a year ago.

In after-hours trading, Microsoft gained nearly $5 per share to trade at $103. The profit news was announced after Microsoft stock closed at $98.12-1/2 Thursday on the Nasdaq Stock Market.

“Worldwide acceptance of Microsoft Office 97 ignited these outstanding results,” said Mike Brown, chief financial officer. He said Microsoft also made solid gains in selling software to computer manufacturers, because of the continued popularity of its Windows family of operating systems.

Richard Fade, vice president of Microsoft’s desktop applications division, said Office 97 is selling at three times the rate of any previous version and that more than 700 of the country’s biggest companies are already using the software or actively considering it.

The package of business software includes the Microsoft Word word processor, Excel spreadsheet and Access database, along with other programs.

As is the company’s habit, executives sought to downplay expectations for upcoming results.

“Incredible results like these are seldom duplicated, and we are mindful of the very tough comparisons we will have in fiscal 1998,” Brown said.

Profits for the first nine months of the fiscal year were $2.4 billion, or $1.83 a share, on revenues of $8.18 billion, up from net earnings of $1.64 billion, or $1.28 a share, on revenues of $6.42 billion a year earlier.