The software giant on Wednesday published a regulatory filing in which it revealed the creation of a segment named “Microsoft 365 Commercial products and cloud services” which will recognize revenue from Office 365 Commercial, the Enterprise Mobility and Security (EMS) range, and Windows Commercial Cloud.
Microsoft’s “Productivity and Business Processes” segment therefore emerges with four sub-categories: M365 Commercial, M365 Consumer, Dynamics, and LinkedIn.
One reason for the change is that all Copilot Pro revenue was previously attributed to M356 Consumer – obviously that won’t do at a time markets are nervous about whether hyperscalers hyper-spending on AI infrastructure will pay off.
Moving EMS and some PowerBI revenue into M365 Commercial will also mean Redmond’s reporting of Azure revenue will more closely align to consumption growth.
Some of the changes in this re-org were done to reflect Microsoft’s current branding properly. However, this sort of change is commonly implemented to group sources of revenue so they produce nicer numbers.
That’s not entirely the case here. Forecast quarterly revenue for Microsoft’s Intelligent Cloud segment will drop from a projected $28.6–$28.9 billion to between $23.8 and $24.1 billion, while projected More Personal Computing revenue goes from $14.9–$15.3 billion to $12.25–$12.65 billion.
Microsoft will no longer use growth of server products as a metric for investors. If you needed any further evidence Redmond is now all about the cloud, there it is.
Those changes necessitated a change in forecasts to reflect the new monikers, as follows:
Investors may not care about unpicking the above, as Microsoft’s top-line metrics – annual revenue of $245.1 billion and net income of $88 billion, up 16 and 22 percent respectively – are already eloquent statements of its performance. In its Q4 and FY 2024 results the software behemoth also offered guidance of growth at between 10 and 29 percent across its various segments. ®