Microsoft "adjusts its financial statements" just to make AI growth "look better"
Microsoft is adjusting its financial reports, which has lowered the revenue outlook for its Intelligent Cloud division, but is expected to boost the growth rate of its highly anticipated cloud computing business
Microsoft announced on Wednesday that it will restructure its reporting format, with the most significant change being the reorganization of content within its Azure cloud computing business. Microsoft stated that this change will allow investors to have a clearer view of the actual situation of the Azure business.
According to a report by Wall Street News on Thursday, Microsoft announced that it will include some revenue from search and news advertising into Azure, and will transfer Office commercial products and cloud services, Power BI, and other businesses originally under Azure cloud to the Productivity and Business Processes division.
While this adjustment may seem insignificant as it will not impact the company's overall revenue and profit figures, the growth rate of Azure has been closely monitored to observe whether Microsoft's investments in artificial intelligence technology will lead to an increase in the usage of its cloud computing services.
Following the adjustment, the revenue of the Intelligent Cloud division is expected to be between $23.8 billion and $24.1 billion, lower than the previous outlook of $28.6 billion to $28.9 billion. However, this adjustment is expected to boost the growth rate of the cloud computing business.
Microsoft stated that under the new reporting structure, revenue from Azure and other cloud services is expected to grow by 33% this quarter compared to last year, whereas under the previous structure, the growth rate was 28% to 29%. Citigroup analysts wrote in a research report:
"While these changes are essentially mechanical and do not alter total revenue/operating income/earnings per share, they do indicate an enhanced stability of Azure consumer business."
More importantly, the contribution of artificial intelligence to Azure's growth may appear more significant. Under the new reporting structure, Microsoft's Azure business in the second quarter of this year will report a 35% growth, with 11 percentage points coming from AI services. In comparison, the previously reported figure was a 30% growth, with 8 percentage points from AI.
It is important to note that this restructuring will not change Microsoft's overall business, but it may make the growth of Microsoft's cloud computing business appear more favorable. Currently, investors are closely watching whether Microsoft, Amazon, Google, and other cloud computing platforms in the AI field gain an advantage