Key Points
Microsoft's Azure business has been a major focus for growth investors this year.
The company recently announced reporting changes, and it will now disclose quarterly revenue from Azure.
The Azure business picked up steam last quarter, and that sent the stock soaring.
Microsoft (NASDAQ:MSFT)'s Azure business is a big driving force behind how the tech stock does. When its growth rate is strong, so too is the enthusiasm behind the stock. But if there are concerns about how the cloud business is doing, then there can be a pullback, as there was earlier this year when Azure's growth rate slowed.
The tech company recently announced a reporting change that will put even greater focus on Azure. And that could be a good thing for the stock.
Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »
Image source: Getty Images.
Microsoft will start reporting Azure's revenue
The big focus for investors in the past when it came to Microsoft's stock has centered around Azure's growth rate. And unsurprisingly, when it came in better than expected when the company posted its most recent results in July, the stock ended up rising sharply afterward.
Now, the company is going to start reporting the actual quarterly revenue it generates from Azure, rather than just the growth rate. It comes as the company reduces the number of reporting segments it has from three to two, with one particularly focused on artificial intelligence (AI): Agents and Infra. The other is Devices and Consumer. It's the Agents and Infra segment that is expected to be the much larger of the two, with its projected revenue for the first quarter of fiscal 2027 expected to be north of $75 billion, versus around $15 billion for Devices and Consumer.
Microsoft has been investing heavily in AI, and the strength of its Azure business benefits from that. Normally, when companies aren't doing well in a particular area, they may be tempted to obscure the numbers a bit. In Microsoft's case, with it putting Azure and its AI-related revenue more front and center, it's showing confidence in those areas of its business, and that's what investors likely want to see from the company as well: that its AI strategy is delivering strong results.
It's not too late to buy Microsoft's stock
Although Microsoft's stock has been rallying since it released its earnings numbers in July, it's still an attractive-looking buy right now. It's trading at 28 times its trailing earnings, which isn't all that expensive, especially given how pricey other tech stocks are; investors are paying 38 times earnings for a piece of Apple's business.
For long-term investors, now may be as good a time as any to buy Microsoft's stock. The business is doing well, and its AI strategy may be picking up steam. It can be an ideal investment to just buy and forget about.
David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Microsoft. The Motley Fool has a disclosure policy.