Microsoft Reports Earnings Wednesday as It Overhauls How It Shows Its AI Business
The company is restructuring its segments and disclosing Azure revenue in dollars for the first time in over a decade, right as it also offers buyouts to as many as 60,000 workers.
Microsoft reports fiscal first-quarter results after the close on Wednesday, and this time the numbers themselves aren't the only thing worth watching. The company is changing how it reports them.
Analysts polled by LSEG expect adjusted earnings of $4.73 per share on revenue of $90.69 billion for the quarter, which ended Sept. 30. But for the first time since 1998, Microsoft will present its business in two operating segments rather than three. For 11 years, the company split results across Azure, Office and Windows. That three-way breakdown is going away.
Alongside the restructuring, Microsoft will start disclosing Azure cloud revenue as a dollar figure rather than folding it into a broader segment and reporting growth in percentage terms. Analysts surveyed by StreetAccount expect that figure to come in around $32.32 billion, which would mean growth of more than 44%.
Giving investors a hard dollar number for Azure, rather than a growth percentage layered inside a larger segment, makes it easier to size up Microsoft's cloud business against rivals like Amazon Web Services and Google Cloud, which already report revenue in dollars. It's a transparency shift that lands at a moment when every hyperscaler's AI spending is under a microscope.
The AI spending question
Microsoft has been pushing hard to position itself as a central player in AI, pouring money into data center infrastructure and layering AI features across its product lineup. What sets it apart from some of its biggest cloud competitors, according to the source reporting, is that it has kept generating positive free cash flow while doing it.
That matters because the picture elsewhere in the industry looks different. Alphabet and Amazon, which report results Wednesday and Thursday respectively, both posted negative free cash flow in the June quarter. Meta said last week that it went free cash flow negative in the third quarter. If Microsoft can show it's still cash-flow positive while scaling its AI buildout, that would separate it from peers who are burning more cash to keep pace with AI infrastructure demands.
Analysts surveyed by StreetAccount are projecting $50.67 billion in capital expenditures and finance leases for the quarter, a figure that underscores just how much money is going into AI infrastructure right now.
Job cuts and buyouts
The spending surge is colliding with cost-cutting on the workforce side. During the fiscal first quarter, Microsoft cut 4,800 jobs. Then, on Monday, the company said it's offering buyouts to as many as 60,000 employees. The timing lines up with a broader effort to fund a costly AI expansion while still running the business efficiently.
Microsoft also used the quarter to stand up a new AI implementation unit and introduced a Copilot AI "super app" that includes coding capabilities, part of a steady drumbeat of product moves meant to embed AI more deeply across its software lineup.
Where the stock stands
Microsoft shares were up almost 10% year to date as of Tuesday's close, trailing the S&P 500, which has gained about 13% over the same stretch. That gap puts some pressure on Wednesday's numbers: a market that's already lagging its benchmark will be looking for a sign that the AI investment is paying off, not just adding up.
Executives are set to walk through the results and offer guidance on a call with analysts starting at 5:30 p.m. ET. Beyond the headline earnings and revenue figures, the real story to watch is how the market reacts to Microsoft's new reporting format. If investors like having Azure's actual dollar figure to point to, don't be surprised if other cloud providers face more pressure to do the same.
