Microsoft to stop telling investors about growth in server products
(2024/08/22)
- Reference: 1724311750
- News link: https://www.theregister.co.uk/2024/08/22/microsoft_financial_metrics_changes/
- Source link:
Microsoft has changed the way it reports its financial results.
The software giant on Wednesday published a [1]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.
[2]
The new segments look like this:
[3]
Microsoft's reporting segments for 2025 – Click to enlarge
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.
[4]Microsoft rolls out one Teams app to rule them all
[5]Top companies ground Microsoft Copilot over data governance concerns
[6]Microsoft tweaks fine print to warn everyone not to take its AI seriously
[7]China’s top Office clone copies Microsoft again - with an inconvenient outage
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.
[8]
[9]
Microsoft has also changed the metrics it will offer investors to help them measure growth, as follows:
Old metric
New metric
Office Commercial products and cloud services revenue growth
M356 Commercial cloud revenue growth
Office Consumer products and cloud services revenue growth
M356 Consumer cloud revenue growth
Dynamics products and cloud services growth
Dynamics 365 revenue growth
Server products and cloud services revenue growth
Azure and other cloud services revenue growth
As you can see from the table above, 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:
[10]
Microsoft's new metrics for 2025 – Click to enlarge
Investors may not care about unpicking the above, as Microsoft’s top-line metrics – [11]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. ®
Get our [12]Tech Resources
[1] https://microsoft.gcs-web.com/static-files/dc50633a-2880-4303-bebb-bdca89149f65
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZscMRfFDMakn8JOTZBMregAAAAk&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://regmedia.co.uk/2024/08/22/supplied_microsoft_reporting_segments_2025.jpg
[4] https://www.theregister.com/2024/08/21/microsoft_unifies_teams_apps/
[5] https://www.theregister.com/2024/08/21/microsoft_ai_copilots/
[6] https://www.theregister.com/2024/08/14/microsoft_services_agreement_update_warns/
[7] https://www.theregister.com/2024/08/22/kingsoft_wps_office_outage_china/
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZscMRfFDMakn8JOTZBMregAAAAk&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[9] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZscMRfFDMakn8JOTZBMregAAAAk&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[10] https://regmedia.co.uk/2024/08/22/supplied_microsoft_new_metric_impact.jpg
[11] https://www.theregister.com/2024/07/31/microsoft_q4_2024/
[12] https://whitepapers.theregister.com/
The software giant on Wednesday published a [1]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.
[2]
The new segments look like this:
[3]
Microsoft's reporting segments for 2025 – Click to enlarge
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.
[4]Microsoft rolls out one Teams app to rule them all
[5]Top companies ground Microsoft Copilot over data governance concerns
[6]Microsoft tweaks fine print to warn everyone not to take its AI seriously
[7]China’s top Office clone copies Microsoft again - with an inconvenient outage
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.
[8]
[9]
Microsoft has also changed the metrics it will offer investors to help them measure growth, as follows:
Old metric
New metric
Office Commercial products and cloud services revenue growth
M356 Commercial cloud revenue growth
Office Consumer products and cloud services revenue growth
M356 Consumer cloud revenue growth
Dynamics products and cloud services growth
Dynamics 365 revenue growth
Server products and cloud services revenue growth
Azure and other cloud services revenue growth
As you can see from the table above, 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:
[10]
Microsoft's new metrics for 2025 – Click to enlarge
Investors may not care about unpicking the above, as Microsoft’s top-line metrics – [11]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. ®
Get our [12]Tech Resources
[1] https://microsoft.gcs-web.com/static-files/dc50633a-2880-4303-bebb-bdca89149f65
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZscMRfFDMakn8JOTZBMregAAAAk&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://regmedia.co.uk/2024/08/22/supplied_microsoft_reporting_segments_2025.jpg
[4] https://www.theregister.com/2024/08/21/microsoft_unifies_teams_apps/
[5] https://www.theregister.com/2024/08/21/microsoft_ai_copilots/
[6] https://www.theregister.com/2024/08/14/microsoft_services_agreement_update_warns/
[7] https://www.theregister.com/2024/08/22/kingsoft_wps_office_outage_china/
[8] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZscMRfFDMakn8JOTZBMregAAAAk&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[9] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_software/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZscMRfFDMakn8JOTZBMregAAAAk&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[10] https://regmedia.co.uk/2024/08/22/supplied_microsoft_new_metric_impact.jpg
[11] https://www.theregister.com/2024/07/31/microsoft_q4_2024/
[12] https://whitepapers.theregister.com/
"M356 Consumer"
Dan 55
Is correct.
Zippy´s Sausage Factory
"Microsoft to stop telling investors about growth in server products"
In other words: we're changing things so investors can't see year-on-year performance. This isn't to hide anything, of course - hahaha, why would it be. We're not hiding anything. Are we?
IGotOut
They don't care if server sales are tanking. That brings in money off a customer every few years. M355 brings in money every month.
"eloquent statements of its performance"
Indeed.
With numbers like that, it's no wonder Redmond doesn't give a shit about a few pitty little bugs and zero-days, or downtime for that matter.