Major tech companies including Microsoft and Google are facing pressure from investors to show returns on multibillion-dollar investments in AI infrastructure. Today, Microsoft is one of the few major companies to highlight the contributions of AI in its quarterly reports. The company has now changed the structure of its reports to provide investors with the clearest possible picture of AI’s contribution to the profitability of each division.
A portion of search and news advertising revenue is now allocated to Azure’s cloud computing division. And revenue from AI and speech technology services offered by the Nuance division is now allocated to the productivity business, which represents the Office suite of productivity applications.
The changes will allow Microsoft to align its reporting structure with how its business is run, the company said. The company reallocated revenue for the most recent fiscal year and revised its guidance for the third quarter.
Microsoft said AI had a greater impact on growth in its cloud unit Azure in the second quarter, even as the overall business slowed. The company expects Azure growth to accelerate in the second half of fiscal 2025. Intelligent cloud revenue is expected to range from $23.80 billion to $24.10 billion in the first quarter of next year, down markedly from previous forecasts of $28.6 billion to $28.9 billion.
The forecast for profitability in the personal computer segment was also reduced – from $12.25 billion to $12.65 billion, compared with the previous forecast of $14.9 billion to $15.3 billion.
The decrease in the expected profitability of these divisions is due precisely to the change in the reporting structure, which is confirmed by significantly increased expectations from the productivity division. Its revenue forecast rose to a range of $27.75 billion to $28.05 billion, up $8 billion from previous guidance.