• by Laurie Sullivan , 47 minutes ago

Artificial intelligence (AI) is so deeply embedded in Microsoft’s business that the company says it will reorganize its reporting structure from three segments into two -- Agents and Infra, and Devices and Consumer.

For advertisers, Microsoft’s reorganization into two segments from three means the company is unifying its ad businesses into one consumer technology stack. This change signals that Microsoft is shifting from a platform-by-platform advertising sales approach to an AI-integrated ecosystem.

Satya Nadella, chairman and chief executive officer, said AI represents a “profound shift” in technology and business, and is changing what the company builds and how it operates. 

The financial reporting shift comes in part from how AI is blurring product boundaries and reshaping corporate business models.

Under this new reporting structure, Microsoft eliminates boundaries, allowing AI to act as the connective tissue between destinations.

The change, which begins starting in fiscal year 2027, which begins in September 2026, is in response to how it uses AI for a variety of services including advertising. The prior long-standing three-segment reporting structure consisted of Productivity and Business Processes, Intelligent Cloud, and More Personal Computing.

Agents and Infra will bring together Microsoft's cloud and productivity platforms to include Azure core cloud computing services, Microsoft 365 and traditional business and productivity software subscriptions and GitHub and other enterprise software ecosystems.

The Device and Consumers segment will consist of Search and Advertising, which includes Bing and LinkedIn's ad business, the Windows operating system licenses and device sales, and Xbox gaming hardware, software, and services.

This marks Microsoft's first major reorganization for its segments since 2015, with the goal to more effectively demonstrate AI-driven economics to investors.

The old way of grouping Microsoft’s businesses no longer follows how modern technology works.

By collapsing three segments into two, Microsoft is matching its corporate structure to the AI era because it proves AI return on investments to Wall Street and matches how its customers use the technology.