Microsoft (NASDAQ: MSFT) optimized the reporting structure of its business segments to clearly show the growth advantages of AI.
Microsoft (NASDAQ) made changes to its earnings report structure this week to more clearly show investors how its AI technology is contributing to its business. The tech giant is moving some search and news ad revenue from its Intelligent Cloud unit into its Azure cloud computing unit.
Microsoft explained that the income from its Nuance unit, which includes AI and voice services, is now being reported in its Productivity and Business Processes segment, where the Office suite also resides. The productivity and business processes segment includes products such as Office, Exchange and SharePoint, while the intelligent cloud segment includes Azure and server products.
The changes are intended to align Microsoft’s reporting structure with its business management approach, and ensure that investors can more clearly see the company’s progress and results in the AI space. To that end, Microsoft reiterated the growth of its segments in the last fiscal year and made corresponding changes to its forecast for the July-to-September quarter.
In the AI space, large technology companies such as Microsoft and Google are under pressure from investors to show that their significant investments in AI infrastructure are paying off. Microsoft is one of a small number of companies that is reporting on the contribution of AI to its earnings in its quarterly reports, indicating that it is beginning to see the positive impact of its AI investments.
Last month, the Windows maker reported that while overall business growth slowed, AI contributed more to Azure in the June quarter. Microsoft expects Azure growth to accelerate in the second half of fiscal 2025.
For the coming quarter, Microsoft expects revenue from its Intelligent Cloud unit to be between $23.8bn and $24.1bn, below its previous forecast of $28.6bn to $28.9bn. Revenue from its Personal Computing segment is expected to be between $12.25bn and $12.65bn, below its previous forecast of $14.9bn to $15.3bn. Revenue from its productivity and business processes segment is expected to be between $27.75bn and $28.05bn, above the previous forecast of $20.3bn to $20.6bn.
The changes reflect not only Microsoft’s internal business structure optimisation, but also the company’s focus on the role of AI technology in driving business growth. By more precisely dividing the revenue sources of different segments, Microsoft hopes investors can better understand its strategic AI layout and commercial potential.