Microsoft's huge AI spending has investors worried – now the company is changing its financial reporting to highlight successes
The move comes as investors want more evidence that Microsoft’s AI investment will pay off


Microsoft is reorganizing its results to better highlight AI gains in its business as investors keep a close watch on the costs of rolling out the technology.
Last month, Microsoft posted its full year results, with revenue up 16% to more than $245 billion — but capital spending, largely on AI and cloud, also climbed by a whopping 77% to $19 billion in the fourth quarter alone.
Many were watching to see the impact of AI spending on its bottom line, in particular whether the technology was as yet contributing much to revenue.
Microsoft broke that down in detail in an earnings conference call, specifying that eight points of Azure's 29% growth was from AI services, for example.
Now, Microsoft is looking to clarify its results to highlight how AI is contributing to its various lines of business.
Microsoft reporting changes look to calm confusion
The key change, according to Microsoft in a slide deck posted to its investor relations site, is that revenue from commercial components of Microsoft 365 – notably Enterprise Mobility and security (previously in Azure) and Windows commercial products – will be included in the Productivity and Business Processes (PBP) segment.
Beyond lumping the segments together based on how they are managed, it means the Microsoft 356 aspects will now be reported in SEC filings, too.
Get the ITPro daily newsletter
Sign up today and you will receive a free copy of our Future Focus 2025 report - the leading guidance on AI, cybersecurity and other IT challenges as per 700+ senior executives
Additionally, Copilot Pro is being removed from Office Consumer to Search and news advertising, while the AI and speech recognition unit Nuance is shifting out of Server to the PBP segment. Windows revenue and devices revenue will be lumped together in SEC filings to highlight PC market-driven areas of the business. Meanwhile, some search revenue will shift to Azure.
Such detail may sound like something for accountants to ponder, and Microsoft itself said the purpose was to align reporting to reflect how the business is managed. But the move follows criticism that Microsoft wasn't being clear enough about its AI revenue — despite it being one of a few companies to actually break out the figure, according to Reuters.
Microsoft restated aspects of its last round of full year results under the new system, showing Microsoft 365 Commercial cloud revenue growth was up 18%, Azure and other cloud services revenue growth were up 33% rather than the 30% previously reported.
Similarly, search and advertising revenue were up 9% versus 12% previously while Windows OEM and Devices revenue growth was flat.
Investor worries
After the last round of results, analysts criticized Microsoft for not being clear enough with how the billions it was spending on AI would eventually pay off. At the time, Forrester principal analyst Lee Sustar told ITPro that the numbers were positive but lacked clarity — specifically around AI.
"Investors and customers wondering whether Microsoft's AI offerings are still hauling in revenue got some assurance amid lingering questions following the company's quarterly earnings," Sustar said.
"The company's 20% growth in its Intelligent Cloud earnings resulted in quarterly revenue of $28.5 billion. However, that segment includes both the Azure cloud as well as other properties, so there are no specific numbers to back Microsoft's claim that 'Azure and other cloud services' grew 29 percent."
"Given Microsoft's record in recent years, Wall Street hasn't much cared that precise Azure numbers aren't disclosed," Sustar continued.
RELATED WHITEPAPER
"However, the company noted that operating expenses for Intelligent Cloud grew 5% compared to the same period a year earlier due to the scale-out of AI infrastructure in Azure. Investors and Azure customers will be keeping an eye on that trend as an indicator of AI market success for Microsoft and the cloud providers generally."
The new format of reporting looks to address such complaints, at least in part.
More widely, investors are looking to companies for proof that AI is capable of benefiting bottom lines, rather than just expanding costs. The day after the company posted its most recent results, Microsoft's share price fell about 7 per cent, with Barron's pinning the blame on Microsoft saying AI investment would take a long time to pay off.
Freelance journalist Nicole Kobie first started writing for ITPro in 2007, with bylines in New Scientist, Wired, PC Pro and many more.
Nicole the author of a book about the history of technology, The Long History of the Future.
-
Bigger salaries, more burnout: Is the CISO role in crisis?
In-depth CISOs are more stressed than ever before – but why is this and what can be done?
By Kate O'Flaherty Published
-
Cheap cyber crime kits can be bought on the dark web for less than $25
News Research from NordVPN shows phishing kits are now widely available on the dark web and via messaging apps like Telegram, and are often selling for less than $25.
By Emma Woollacott Published
-
Microsoft justifies 365 price increases after MP concerns
News Microsoft’s UK VP of external affairs has defended the tech giant's price increases
By George Fitzmaurice Published
-
Microsoft is ending support for the Remote Desktop app – here are three alternatives you can try instead
News Microsoft has announced plans to end support for its Remote Desktop application in just over two months.
By George Fitzmaurice Published
-
GitHub just launched a new free tier for its Copilot coding assistant – but only for a select group of developers
News Limited access to GitHub Copilot in VS Code is now available free of charge
By Nicole Kobie Published
-
Recall arrives for Intel and AMD devices after months of controversy
News Microsoft's Recall feature is now available in preview for customers using AMD and Intel devices.
By Nicole Kobie Published
-
Everything you need to know about the Microsoft outage
News After a day of chaos, the worst of the Microsoft outage appears to have passed, but some problems still remain
By Emma Woollacott Published
-
With one year to go until Windows 10 end of life, here’s what businesses should do to prepare
News IT teams need to migrate soon or risk a plethora of security and sustainability issues
By George Fitzmaurice Published
-
Microsoft is doubling down on Widows Recall, adding new security and privacy features – will this help woo hesitant enterprise users?
News The controversial AI-powered snapshotting tool can be uninstalled, Microsoft says
By Nicole Kobie Published
-
Microsoft pulls Windows update after botched patch causes blue screens, reboot loops
News Microsoft has pulled a Windows 11 update ahead of next week's Patch Tuesday after encountering a raft of issues
By Nicole Kobie Published