Microsoft revamps reporting structure to give better visibility into cloud consumption revenue

Microsoft on Wednesday updated quarterly revenue guidance for its three business segments in a shift that stands to give investors better visibility into the software maker's growing cloud infrastructure business.

The company is bulking up the Productivity and Business Processes segment that includes Office productivity software subscriptions with services that have for years appeared inside the Intelligent Cloud unit that features Azure.

Productivity and Business Processes will also gain Windows commercial products and cloud services, a part of the More Personal Computing segment that includes volume licensing of the Windows operating system and cloud-based Windows tools.

Microsoft is removing the Power BI data analytics tool and the Enterprise Mobility and Security group of products from a closely watched year-over-year growth metric called Azure and other cloud services.

With those two moving out, the new Azure number "now more closely aligns to consumption business," Microsoft said in an investor presentation summarizing the changes. Consumption reflects commercial clients actively using computing and storage services in Azure.

But Microsoft is adding revenue from its search and news advertising category — which until now was under More Personal Computing — into Azure and other cloud services.

The company said it expects 33% constant-currency revenue growth for Azure and other cloud services under the new definition for the fiscal first quarter, down 1 to 2 percentage points from the fiscal fourth quarter. In late July, based on the prior Azure definition, the company had called for growth of 28% to 29% at constant currency. Historically, consumption has driven growth in Azure and other cloud services, rather than the