Microsoft has changed how it reports its business earnings on Wednesday. It has moved some of the revenue made from search and news ads to its Azure cloud computing unit. This change is reportedly aimed at helping investors better understand how much artificial intelligence (AI) is contributing to the company's profits.
The revenue generated from AI and speech technology services offered under the Nuance unit will now be clubbed with productivity business with other office suite apps rather than intelligent cloud division.
These changes led to a restatement of revenue growth for Microsoft's divisions in the previous fiscal year. It also revised the company's forecast for the July-September quarter.
The recent restructuring by Microsoft aims to align its financial reporting with the actual operational management of its business units. This move is particularly significant as it occurs during a period when big tech companies, including Microsoft, are under intense scrutiny from investors to demonstrate that their substantial investments in artificial intelligence (AI) are yielding tangible returns.
Investors have been pressing the tech giants to justify the billions of dollars being spent on AI infrastructure, seeking clear evidence that these investments are translating into meaningful revenue growth and profitability.
Microsoft reported slowing growth in its cloud business in July but expects acceleration in the second half of fiscal 2025. The company now forecasts intelligent cloud revenue between USD 23.80-24.10 billion, down from its prior USD 28.6-28.9 billion outlook.
Microsoft also cut its more personal computing segment forecast to USD 12.25-12.65 billion, from USD 14.9-15.3 billion previously. However, it raised productivity and business processes outlook to USD 27.75-28.05 billion, up from USD 20.3-20.6 billion.
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