Microsoft changes its financial reporting structure for the first time in more than ten years, cloud computing becomes a separate force

Abstract:

Global cloud computing giant Microsoft announced after the market close on Wednesday that it will adjust its financial reporting structure starting from this quarter and begin to independently disclose quarterly sales data for its cloud computing business Azure. In a presentation material, Microsoft CEO Nadella said: "Artificial intelligence is bringing a profound change to technology and business. It is changing what products we build and how we operate them. It is also blurring the boundaries between different products and reshaping our business model."

Therefore, starting from this quarter, Microsoft's financial report will reduce its operating segments from three to two. This is also the company's first major adjustment to its financial reporting structure since

2015

In the future, Microsoft will divide its business into two divisions: Agents and Infra (agents and infrastructure) and Devices and Consumer (devices and consumers).

Among them, the "Intelligence and Infrastructure" segment will include Azure cloud and Microsoft 365 cloud products, as well as productivity software and server licensing, industry solutions, cutting-edge business and support services. As mentioned earlier, core businesses such as Azure Cloud and 365 Cloud will disclose revenue separately.

Nadella explained: "Under the new reporting structure, Azure will more purely reflect our usage-based platform and infrastructure business."

The "Devices & Consumer" segment will include Search & Advertising, Xbox, as well as revenue from device sales and revenue from selling Windows operating system licenses to device manufacturers.

As the eldest of the three cloud computing giants, Amazon began to separately disclose AWS revenue as early as 2015. Alphabet, ranked third, will begin to disclose the total revenue of Google Cloud and Workspace productivity subscription business in 2020.

In contrast, Microsoft used to only disclose the year-on-year growth rate of its Azure cloud business, and it was not until last year that it began to provide actual sales data for Azure on an annual basis.

According to the new reporting standards,

In the quarter ending in June, Azure revenue increased 42% year-on-year to $29.42 billion

Azure revenue reached US$101.938 billion, accounting for nearly one-third of Microsoft's total revenue

Microsoft management said that based on fixed exchange rates, Azure revenue in the first quarter of fiscal year 2027 is expected to increase by 44% to 45%.

Adjusted Q1 revenue guidance for fiscal year 2027 shows that the "intelligent and infrastructure" segment revenue will reach 75.15 billion to 75.75 billion US dollars; the "equipment and consumer" segment revenue is expected to be 14.7 billion to 15.2 billion US dollars. In addition, the company's performance outlook for overall revenue, costs and operating expenses has not changed.