Microsoft Is Reshaping Its Financial Reporting as AI Blurs Product Lines

Microsoft is replacing its three reporting segments with two starting in fiscal year 2027, reorganizing how it reports revenue as AI increasingly cuts across its products and services.

The company will move from Productivity and Business Processes, Intelligent Cloud, and More Personal Computing to two new segments called Agents and Infra, and Devices and Consumer.

Microsoft says the change better reflects how the company now operates and allocates resources. Satya Nadella has also pointed to AI as a major reason for the restructuring, with traditional boundaries between products becoming less distinct.

Microsoft detailed the new fiscal year 2027 reporting structure ahead of the transition.

Agents and Infra becomes Microsoft’s biggest business segment

Agents and Infra will combine most of Microsoft’s enterprise cloud, productivity, licensing, and services businesses.

The segment will include:

• Azure
• Microsoft 365 Cloud
• Productivity and server licensing
• Industry Solutions
• Frontier and support services

Based on Microsoft’s FY26 figures, Agents and Infra generated $268.1 billion of the company’s total $331.8 billion in annual revenue.

That makes it by far the larger of Microsoft’s two new reporting segments.

Microsoft is changing what counts as Azure revenue

Microsoft is also narrowing how it defines Azure. Azure will more closely represent Microsoft’s consumption-based cloud platform and infrastructure business rather than serving as a broader home for several cloud products.

GitHub Cloud services, other developer cloud services, and Security Copilot will move from Azure into Microsoft 365 Commercial Cloud.

Microsoft’s Healthcare and Life Sciences cloud business will also leave Azure and become part of Industry Solutions.

Azure generated $101.9 billion in FY26 revenue, including $29.4 billion during the fourth quarter.

The reporting change should make Azure’s core cloud infrastructure performance easier to separate from other Microsoft cloud businesses.

LinkedIn revenue will be split between different businesses

Microsoft is also dividing LinkedIn’s businesses across its new reporting categories.

LinkedIn Talent Solutions and Sales Solutions will become part of Industry Solutions.

Industry Solutions will also include Dynamics 365 and Microsoft’s Healthcare and Life Sciences cloud operations.

LinkedIn Marketing Solutions and Premium Subscriptions, meanwhile, will move into Search and Advertising.

The changes mean LinkedIn will no longer appear as one consolidated business when Microsoft breaks down revenue across its major operations.

Devices and Consumer brings Windows, Xbox, and advertising together

Microsoft’s second new segment, Devices and Consumer, will combine several of its largest consumer-facing businesses.

It will include Windows, Xbox, and Microsoft’s advertising operations.

Xbox reporting will remain largely unchanged, while Microsoft will introduce a Windows OEM and Devices category to replace its previous Windows and Devices reporting line.

Devices and Consumer generated $63.7 billion in FY26 revenue.

Microsoft will reveal quarterly Azure revenue

The restructuring also brings more detailed financial disclosures.

Microsoft plans to report quarterly revenue for several major businesses, including Azure, Microsoft 365 Cloud, Industry Solutions, and Search and Advertising.

That represents a notable change for Azure. Microsoft has traditionally focused on reporting Azure’s year-over-year percentage growth rather than providing a specific quarterly revenue figure.

Microsoft 365 Cloud generated $100.3 billion in FY26, putting it close to Azure’s $101.9 billion annual revenue.

The additional disclosures should make it easier to track the absolute size and growth of Microsoft’s biggest cloud businesses from quarter to quarter.

Microsoft gives its first FY27 outlook under the new structure

Microsoft expects Agents and Infra to generate between $75.15 billion and $75.75 billion in revenue during the first quarter of FY27.

Devices and Consumer revenue is expected to reach between $14.7 billion and $15.2 billion during the same period.

The new reporting structure follows another strong quarter for Microsoft. The company previously reported $90 billion in FY26 Q4 earnings, although Xbox content revenue dropped 10%.

Via Neowin