Microsoft’s recent restructuring of its business units has caused a significant shift in how the tech giant reports its financial results. The company announced that it would be moving some search and news advertising revenue under the Azure cloud-computing unit in an effort to provide investors with a clearer picture of the contributions of artificial intelligence (AI) technologies.
In addition to this change, Microsoft also decided to move revenue from the AI and speech technology services Nuance to its productivity business, which is responsible for the popular Office suite of apps, including Word and PowerPoint. These adjustments have led to a restatement of revenue growth at these divisions for the last fiscal year and a revision to the company’s forecast for the September quarter.
The decision to restructure its reporting comes at a time when big tech companies, including Microsoft, are facing increasing pressure from investors to demonstrate that their investments in AI technologies will yield positive results. With billions of dollars being poured into AI research and development, shareholders are eager to see tangible returns on these investments.
Microsoft had previously reported slowing growth in its cloud business in July but had anticipated an acceleration in the second half of fiscal 2025. However, the company’s revised forecasts now show a more conservative outlook for its intelligent cloud revenue, which is expected to be between $23.80 billion and $24.10 billion, compared to the previous expectations of $28.6 billion and $28.9 billion.
Similarly, Microsoft has adjusted its quarterly forecast for its more personal computing segment, lowering it to between $12.25 billion and $12.65 billion from the earlier expectation of $14.9 billion and $15.3 billion. On the other hand, the company has raised its outlook for productivity and business processes revenue to between $27.75 billion and $28.05 billion, up from $20.3 billion and $20.6 billion.
Overall, Microsoft’s restructuring of its business units and the subsequent changes to its revenue reporting reflect the company’s ongoing efforts to adapt to the evolving landscape of the tech industry. By providing investors with a more transparent view of its AI contributions and revenue streams, Microsoft aims to build trust and confidence in its long-term growth prospects.