Microsoft lately made some important changes to how it reports revenue. It basically aims to provide investors a clearer view of its growing cloud infrastructure business. The update is about its quarterly revenue guidance for three of its main business segments. It is said that this is to bring more transparency to its cloud services.
One notable change is reshuffling of services between segments. Microsoft is moving some of its services including Azure into the Productivity and Business Processes segment. These were traditionally part of the Intelligent Cloud segment.
The segment now includes Office productivity software. It has also gained Windows commercial products and cloud services from the More Personal Computing segment. Moreover, the Productivity and Business Processes segment will now house revenue from Microsoft’s 2022 acquisition of Nuance Communications.
The tech giant is also removing popular data analytics tool Power BI, and Enterprise Mobility and Security group from the Azure growth metric. The adjustment is intended to focus the Azure reporting more on consumption-based revenue. This reflects how much businesses are actively using Azure’s computing and storage services. The shift aims to give a more precise picture of Azure’s growth by excluding the per-user elements that have previously complicated the understanding of its performance.
The restructuring comes with a revised growth forecast for Azure. Microsoft now expects 33% constant-currency revenue growth for Azure and other cloud services in the fiscal first quarter, slightly down from the previous quarter’s forecast.
Analysts have come up with mixed reactions. The new reporting method offers greater clarity into Azure’s consumption-based growth while it is also being argued that the movement of various services into different segments might make it harder to gauge the performance of specific products like Office.
