Transparency ⭐

I’m fascinated to see others in my industry finally wake up to the lack of transparency in Microsoft’s financial reports. After all, I’ve been complaining about this problem for several years, and while the company’s dealings with OpenAI and its unprecedented AI infrastructure spending are particularly notable, Microsoft’s lack of transparency in these matters is not in any way unique.

Granted, most tech bloggers, reporters, reviewers, and enthusiasts can’t be expected to understand the financial reports generated each quarter by the world’s largest companies. But many years of experience doing so helps, and though I was never formally trained in such matters, I feel like I do pretty well.

What I’ve noticed over the past two decades is a steady decline in transparency, as evidenced by a move away from hard numbers—the units sold by a particular product, say, or the number of corporate licenses—to softer numbers that do little help analysts, investors, shareholders, and onlookers understand where the money is coming from and, on the other side, where it’s going in terms of investments, staffing, or other initiatives.

For example, Microsoft used to report the number of Windows licenses that it sold it each quarter. But the financial finagling began in the Windows 7 era, when those licenses reached such outsized numbers that Microsoft took steps to smooth out its finances by recognizing those sales over longer periods of time. During this era, Windows license sales magically hit 20 million units per quarter over several years, allowing the software giant to avoid big downward spikes in the quarters and years between releases when those sales would normally cool down.

There are many factors that play into this dynamic. But the biggest is tied to enforcement. After all, it doesn’t matter if you break the speed limit while driving if the police never pull you over and give you a ticket.

Similarly, Microsoft’s legal responsibility to disclose its finances never changed, but regulatory oversight clearly fell by the wayside. And so Microsoft and other Big Tech companies started experimenting with how little they could disclose each quarter, quickly discovering that there were no negative ramifications. Today, we learn only how much Windows license sales improved or contracted in a given quarter by some percentage—a soft number—while the literal number of licenses sold—a hard number—has long since disappeared from the financial reports.

(Apple did similarly with its hardware sales in October 2018 as iPhone sales finally leveled off, making it impossible for anyone outside the company—shareholders, investors, analysts, whomever—to accurately determine the average selling price of the devices and the relative health of each business.)

The net result is that Big Tech financial reports have become marketing exercises in which these companies can tout the milestones they achieved even though none impacted revenues yet, cherry-pick the...