Microsoft Restructures Reporting Structure Due to AI Impact
As artificial intelligence technologies transform operations, Microsoft has announced a new financial reporting structure that reduces its three operational segments into two: Agents and Infra, and Devices and Consumer.
Microsoft has announced a major change to its financial reporting structure, consolidating its existing three business segments into two categories due to artificial intelligence transforming the ways business is done. Under this new structure, which will take effect in fiscal year 2027, Azure revenue will also be reported separately on a quarterly basis for the first time.
New Reporting Structure
Leaving behind the three distinct categories used since 2015, Microsoft has grouped its operational segments under two main headings: Agents and Infra, and Devices and Consumer. This comprehensive change will officially take effect as of fiscal year 2027.
Scope of the Segments
The Agents and Infra segment includes Azure cloud infrastructure, Microsoft 365, GitHub, productivity and server licensing, and industry solutions. The Devices and Consumer segment covers search and advertising, Xbox, Windows operating system licenses, and device sales.
Management's Assessments
Microsoft Chairman and Chief Executive Officer Satya Nadella stated in his presentation that artificial intelligence represents a profound shift in technology and the business world. Nadella noted that artificial intelligence blurs the boundaries between products and reshapes business models.
Azure Revenue Reporting
As part of the changes, Microsoft will begin disclosing quarterly Azure revenue figures separately, in a practice it has not done before. Under a narrowed definition that excludes areas such as GitHub and life sciences cloud products, Azure revenue increased 42 percent in the June quarter to reach $29.42 billion.
Future Outlook
The company projected Azure revenue growth of 44 percent to 45 percent in constant currency for the first quarter of fiscal year 2027. For the new segments, Agents and Infra revenue is estimated to be between $75.15 billion and $75.75 billion.