Microsoft’s new disclosure makes it clear that Azure has the fastest growth among hyperscalers by Investing.com

Microsoft’s (NASDAQ: ) latest financial disclosure proves that Azure is the fastest-growing cloud service among hyperscalers, Wells Fargo analysts said in a note on Sunday.

The updated figures, released by Microsoft, exclude per-user company contributions such as Enterprise Mobility and Security (EMS) and PowerBI to focus on core Azure growth. This review reveals that Azure revenue rose 33% year-over-year in constant currency (cc) for fiscal 2024, compared to the previously reported 30%.

“Microsoft’s updated financial disclosures provide much-needed detail on core Azure, although they come at the expense of previous Office 365 Commercial figures,” the analysts said, noting that the revised measurement reflects a clearer representation of Azure’s performance, isolating it from segments with slower growth. .

As a result, first-quarter guidance for fiscal 2025 has been adjusted to reflect 33% growth in constant currency, up from the previous range of 28-29%.

Azure’s new revenue metric now implies an annual run rate of about $62 billion starting in June 2024, compared to about $80 billion when companies per user are included.

The report also addresses the wider implications of these disclosures, particularly with regard to AI.

While Wells Fargo’s estimates for Azure AI remain unchanged, the new data suggests that AI’s contribution to Azure’s growth is more significant than previously thought, now accounting for nearly 9% of Azure’s revenue in Q4FY24, up from from previous estimates of 7%.

Moreover, the revised figures indicate potential future impacts on the margin profile of Microsoft’s Intelligent Cloud segment, as the exclusion of high-margin businesses such as EMS and PowerBI may result in a decline in gross margins.

Still, analysts at Wells Fargo reiterated an overweight rating on Microsoft shares with a $515 price target, citing the “sustainability” of the tech giant’s business and “long-term tailwinds.”