Microsoft changes reporting to improve cloud consumption visibility | Wilnesh News

Microsoft It updated quarterly revenue guidance for three of its business units on Wednesday, a shift that will give investors a closer look at the software maker’s growing cloud infrastructure business.

The company is expanding its productivity and business process segment to include Office productivity software subscriptions and services that have been available for years in smart cloud units featuring Azure.

The Productivity and Business Processes group will also get Windows Business Products and Cloud Services, part of a larger personal computing segment that includes a broad range of licenses for the Windows operating system and cloud-based Windows tools.

Microsoft is removing its Power BI data analysis tool and enterprise mobility and security product groups from closely watched annual growth metrics for Azure and other cloud services.

Microsoft said in a statement that with the relocation of the two companies, the new Azure Digital “is now even closer to consumer businesses.” Investor introduction Summarize the changes. Consumption reflects active use of compute and storage services in Azure by business customers.

But Microsoft is adding revenue from its search and news advertising categories, which were previously classified as “more personal computing,” to Azure and other cloud services.

The company said it expects constant currency revenue under the new definition of Azure and other cloud services to grow 33% in the first fiscal quarter, down 1 to 2 percentage points from the fourth fiscal quarter. In late July, the company had called for growth of 28% to 29% in constant currency, based on Azure’s previous definition. Historically, consumption has driven the growth of Azure and other cloud services, rather than growth of tools per user, where seat growth has slowed.

“Our focus on Azure has increased,” said William Blair analyst Jason Ader, who has a buy-equivalent rating on Microsoft stock. He noted that Microsoft had been factoring in every user of Azure’s growth for years, but removed that factor, making it harder to understand consumption.

Amazon Microsoft reveals revenue for its market-leading Amazon Web Services unit, but Microsoft Azure’s financial reporting approach features a per-user approach, meaning comparisons aren’t straightforward.

In addition, Microsoft said it will provide some revenue from its 2022 acquisition of Nuance Communications, which already appears under Smart Cloud, to productivity and business processes. Each quarter the company reveals combined Windows and device growth rates, rather than breaking them out separately, since they are all specific to PCs.

A new metric called Microsoft 365 Commercial will appear in the Productivity and Business Processes section. It will include revenue from Office business products and cloud services, Power BI, enterprise mobility and security, and Windows business products and cloud services. Microsoft said in the presentation that the change “is about adjusting the way the business is managed.”

But with so much invested in productivity and business processes, Ader said the company could make it harder for investors to understand the health of its core business subscriptions for Office productivity software. Ade said slowing growth was a “secondary concern” for investors.

More revenue in the personal computing space comes from subscriptions to Copilot Pro, which brings generative artificial intelligence capabilities to consumers’ Word, Excel and other applications. Since the launch of Copilot Pro earlier this year, this revenue has been reflected in productivity and business processes.

After multiple adjustments, Microsoft now expects first-quarter revenue for its productivity and business process segment to be US$27.75 billion to US$28.05 billion, up from the US$20.3 billion to US$20.6 billion provided at the end of July.

Smart cloud revenue is forecast to be between US$23.8 billion and US$24.1 billion, down from US$28.6 billion to US$28.9 billion. The report showed that more personal computing revenue was between $12.25 billion and $12.65 billion, compared with the previous range of $14.9 billion to $15.3 billion.

But Microsoft still expects overall revenue of about $64.3 billion. and no changes are expected to cost of revenues, operating expenses, other income and expenses, or tax rates.

watch: Jefferies’ Brent Thill says a shift from AI infrastructure to software is expected later in 2024