MSFT's opaque reporting on Azure growth and costs is a major flaw; investors are left guessing about the primary growth engine despite detailed disclosures on minor businesses.

This article from the Wall Street Journal details how Microsoft is making it difficult for investors to understand what they're actually doing, what their CapEx costs are, what their financing costs are.

This one is from The Wall Street Journal. They say that Microsoft is leaving investors flying blind on its AI business across three critical drivers of the AI future, cloud computing, capital expenditures, and its relationship with OpenAI.

The company disclosures fall well short of what investors need.

Take Azure, Microsoft's flagship cloud platform and primary growth engine. Management should provide clear financial visibility, but instead keeps everyone in the dark. Microsoft on its latest annual report said that Azure and other cloud service revenue increased by 41% during the fiscal year ending in June 30th.

It gave no dollar amount for that revenue, nor the year earlier for that figure, nor any expense or profit data for Azure. Instead, Microsoft buries Azure inside a segment called Intelligent Cloud, forcing investors to guess where the legacy software products end and the real cloud growth begins.

Now, I was expecting to disagree with this article. I was looking at it saying, "Oh, they're they're launching a bunch of accusations against Microsoft." Uh but everything they say here is spot-on.

It is dead accurate. Microsoft is not They're they're not transparent with Azure's growth. A very very opaque For example, this is a a constant complaint I have when looking at the KPIs and trying to generate KPIs in Qualtrics for Microsoft.

I have my team, we're trying to put together the most informative KPIs possible, and I wish there was an Azure one.

So, the Azure results, the Microsoft cloud results themselves, are completely opaque, they're obfuscated, we have no way to really know what they are.

But by contrast, Microsoft has reported their Xbox numbers in granular detail. So, you have all the numbers about LinkedIn, Xbox, and all these smaller businesses that investors don't even care about.

Uh investors are They have to be reminded that Microsoft owns Xbox. That's how much they care about it. If you If you ask an investor, uh what do you think about Microsoft's Xbox business?

They'll go, "Huh? Oh, yeah, Microsoft owns Xbox. That's right." These are the ones that Microsoft gives lots of detail about. Granular reporting on these businesses.

So, everything that's said here is true. It's a giant omission in reporting standards by Microsoft that their peers are doing. It is a a massive, in fact, the most important business line by Microsoft, and they're not even giving us the the numbers of revenue.

They're not even giving us how much revenue Azure makes. And so, I would I would hope Microsoft changes this at some point. I know they have some strategic reason that they're not doing it.

Maybe they don't want to give data to other companies. Uh but Amazon is reporting it and they're doing just fine. So, hopefully they add more transparency.