Microsoft restructures financial reporting to disclose Azure revenue quarterly and reorganizes business into two segments
The company is consolidating its reporting from three segments to two and making Azure's performance transparent on a quarterly basis for the first time, citing AI's impact on its operations.
What happened
Microsoft announced a major change to its financial reporting structure effective in its first quarter fiscal 2027 earnings (late October). The company will split its business from three segments into two: "Agents and Infra" (Azure, Microsoft 365 Cloud, server products, industry solutions, and enterprise services) and "Devices and Consumer" (Xbox, Windows, LinkedIn search and advertising). Most significantly, Microsoft will now disclose Azure's quarterly revenue separately, having previously reported only year-over-year growth rates. Azure's reported revenue will exclude GitHub cloud services, other developer cloud services, Security Copilot, and Healthcare and Life Sciences cloud revenues, making it a "more purely consumption-based platform and infrastructure business," according to CEO Satya Nadella.
Context
Microsoft frames these changes as a reflection of AI's reshaping of both its technology and business model, stating that AI is "blurring the boundaries between products and reshaping business models." The new structure aims to provide investors with greater transparency into Microsoft's key business lines including Azure, M365 Cloud, industry solutions, and advertising revenue. Azure's disaggregation from other cloud services creates a clearer picture of the company's core infrastructure and consumption-based platform performance.