Microsoft Revises Cloud Revenue Forecast, Raises Outlook for Office Software

SAN FRANCISCO, Aug. 22 — Microsoft yesterday cut its unit revenue forecast for cloud computing in an accounting move to shift money to its “productivity” software business.

The accounting rule change comes amid investor concerns about whether the billions Microsoft and its tech rivals are pouring into artificial intelligence will help or hurt their bottom lines.

AFP contacted Microsoft, which said the change was intended to better align revenue reporting with how the company operates cloud services related to its business intelligence unit.

In an update to investors, the tech giant said it now expects intelligent cloud revenue to be between US$23.80 billion (RM104 billion) and US$24.10 billion in the current quarter, which runs from July to September.

That compares with prior expectations of $28.6 billion and $28.9 billion, respectively.

The revenue forecast for the productivity and business unit was raised from $20.3 billion to $20.6 billion to about $28 billion.

This division specifically includes subscriptions to Microsoft 365 office software such as Word and Excel, as well as a growing number of generative AI tools.

The change in accounting rules also led to lower revenue expectations for the personal computer division.

Intelligent Cloud is one of Microsoft’s fastest-growing and most profitable businesses, generating significant revenue through the rapid adoption of Azure and other cloud services.

It primarily competes with cloud platforms such as Amazon Web Services, Google Cloud and IBM Cloud, which offer generative AI services to attract customers and increase revenue.

Microsoft is one of the main competitors in the race to create artificial intelligence systems, investing billions of dollars in this technology in the hope that it will bring benefits.

The company founded by Bill Gates is looking to monetize generative AI, becoming the first to adopt it across its products and investing $13 billion in OpenAI, the startup behind ChatGPT.

Following the earnings update, Microsoft shares remained virtually unchanged in after-market trading.

Microsoft last month reported solid quarterly profits, but the company’s shares fell on data showing its key cloud computing business was not growing as quickly as expected.

Cloud computing money has fueled record profits quarter after quarter, and the suggestion that the impressive growth could slow was enough to give investors pause. — AFP