Microsoft will provide three new financial metrics for the first time when it releases Q1 FY2017 earnings on Oct. 20, but the move falls short of measures called for by former Microsoft CEO Steve Ballmer, the company’s largest individual shareholder.
In response to what a spokesperson called “feedback directly received from investors over the course of the fiscal year,” the company says that it will now regularly disclose:
- Commercial Cloud gross margin percentage. This is the selling price of an item, less its production or acquisition costs, expressed as a percentage. “Commercial cloud” is not a single, separately reported segment but a grouping that includes Office 365, Azure, Dynamics Online, and other commercial cloud-based services.
- Gaming revenue. This represents sales of the Xbox console; Xbox Live subscriptions and transactions; all games, whether first-, second- or third-party; and accessories.
- Windows commercial products and cloud services revenue. This includes Windows volume licensing, Windows cloud services and other Windows commercial offerings aimed at specific customers, such as academics. It’s intended to present a comprehensive view of the entire commercial Windows business.
After stepping down as Microsoft’s CEO in 2014, Steve Ballmer at last year’s shareholders’ meeting criticized some of the company’s accounting practices. The company’s largest individual shareholder, with about 4 percent of Microsoft’s outstanding shares, he told Bloomberg News reporter Dina Bass at the meeting that he thought the company should release profit margins and sales numbers. Instead, Microsoft talks a lot about its annual run rate, which extrapolates the annual revenue of the business based on the most recent quarter’s revenue.
Through a spokesperson today, Ballmer declined to comment on Microsoft’s financial reporting changes.
Though revealing the commercial cloud’s gross margin is a step toward greater disclosure, Microsoft still doesn’t share revenue numbers for its Azure cloud service. It only provides year-over-year revenue changes expressed as a percentage.
Differences in financial reporting practices at Amazon, Google, IBM, Microsoft and other cloud contenders make it difficult to accurately compare their market shares, and various providers — including Microsoft and Oracle — have faced skepticism as to the accuracy of their reported cloud revenue.
Ballmer became Microsoft’s largest individual shareholder in 2014, as Microsoft co-founder Bill Gates reduced his stake through stock sales.