Microsoft's most mysterious business

Hi, it’s Dina. Don’t blame fickle investors for the multibillion-dollar swings in Microsoft’s market value. But first…Today’s top tech news: [View in browser]( [Bloomberg]( Hi, it’s Dina. Don’t blame fickle investors for the multibillion-dollar swings in Microsoft’s market value. But first… Today’s top tech news: - Tesla warned investors about [supply chain trouble]( ahead in 2022 - Amazon workers in Staten Island have [collected enough signatures]( to hold an election on whether to join a union - UBS agreed to buy [robo-adviser Wealthfront]( for $1.4 billion Live by the cloud, die by the cloud This week when Microsoft Corp. announced its financial results, the company gave dozens of numbers and performance indicators about the health of its business. But it felt like investors were only paying attention to one of them: the growth rate of its cloud unit. On Tuesday afternoon, even as Microsoft reported more than $50 billion in quarterly sales for the [first time ever](, investors were spooked by the mere 46% increase in sales in its cloud business, Microsoft Azure. Shares quickly tumbled more than 5%. Two hours later, Microsoft executives gave a positive forecast for expansion in the cloud unit, which rents computing power and storage space in Microsoft’s data centers. That sent shares back up as much as 3.9% after-hours, with the stock gaining 2.8% Wednesday. On the company’s earnings call, Microsoft Chief Financial Officer Amy Hood sounded almost bemused, explaining that there was broad global demand for Azure across a variety of sectors. Hood advised listeners that because Azure deals are often large, the metric may be volatile when considering individual quarters, but consistent over time. “I sort of continually remark that these can move around a few points here and there and yet have the consistent sign of consumption be steady,” she said. But fickle analysts and investors don’t deserve all the blame for the multibillion-dollar price swings in Microsoft’s stock. When it comes to gauging the health Azure, a critical unit, Microsoft discloses only one stand-alone number: the revenue growth rate. Never in the 12-year history of Azure has Microsoft unveiled the unit’s overall sales or profits or margins. The company does publish a quarterly measure of the sales and profit margin of all of its commercial cloud products, but that number includes a hefty dose of Office cloud revenue, as well as some other programs. Microsoft has said this method of reporting mirrors how it sells cloud services, frequently signing deals for several at once. However, Azure’s much larger rival, Amazon Web Services, has been reporting its sales for years (though to be fair, Amazon doesn’t have much to speak of in the office cloud area). For Microsoft, reliance on this solitary number leads to an excess of investor tea-leaf reading and an undue emphasis on whether the metric has moved, or by how much. The company can’t tell investors that Azure is the key to its future and then expect them not to scrutinize the heck out of whatever meager information they get. It was all fine and dandy when Azure was roughly doubling every quarter, but now that the growth rate is below 50%, the company should expect Wall Street agita if it goes down slightly more than hoped. Microsoft will argue the business is larger in total revenue now, so it’s only logical that growth rates are smaller. But since the company’s executives won’t tell us how big it is, we’ll have to trust them on that. —[Dina Bass](mailto:dbass2@bloomberg.net) If you read one thing What happens when Russian hackers come for the electrical grid? Emergency training at a restricted facility off Long Island is aimed at minimizing the [potentially catastrophic effects]( of a cyberattack on U.S. power infrastructure. Here’s what you need to know Spotify is taking down Neil Young’s music after the singer delivered the company an ultimatum, complaining that it hosts Covid misinformation from [podcast host Joe Rogan](. Intel’s spending spree is taking a toll on its [profit forecasts](. A cryptocurrency skeptic is joining the Consumer Financial Protection Bureau, a sign the agency may [ratchet up scrutiny](. Follow Us More from Bloomberg Dig gadgets or video games? [Sign up for Power On]( to get Apple scoops, consumer tech news and more in your inbox on Sundays. [Sign up for Game On]( to go deep inside the video game business, delivered on Fridays. Why not try both? Like Fully Charged? | [Get unlimited access to Bloomberg.com](, where you'll find trusted, data-based journalism in 120 countries around the world and expert analysis from exclusive daily newsletters. You received this message because you are subscribed to Bloomberg's Fully Charged newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. [Unsubscribe]( [Bloomberg.com]( [Contact Us]( Bloomberg L.P. 731 Lexington Avenue, New York, NY 10022 [Ads Powered By Liveintent]( [Ad Choices](