Changes in Segment Disclosure: What They Do and Do Not Reveal

Thursday, October 8, 2026

On September 2, 2026, Microsoft announced changes to its segment disclosure. Beginning with fiscal 2027, it will separately disclose Azure revenue for the first time and recast historical amounts for comparison. The additional disclosure is a welcome development because it will make Azure’s scale and growth easier to evaluate.

Microsoft will also reduce its reportable segments from three to two: Agents and Infra, and Devices and Consumer. Azure will remain within Agents and Infra, alongside Microsoft 365 Cloud, productivity and server licensing, industry solutions, and support services. Because the disclosure changes will not make Azure a stand-alone reportable segment, investors will receive separate Azure revenue figures, but not separate information about Azure’s costs, profitability, or capital spending.

The announcement came amid investor calls for more information about Microsoft’s AI economics. Analysts had identified Azure growth as a critical measure, while media coverage questioned whether Microsoft’s existing disclosures allowed investors to assess the costs and margins associated with the business. That information gap was also the subject of my earlier article, “The AI Revenue Puzzle,” which focused on the absence of a separately disclosed Azure revenue figure. Microsoft’s new disclosure addresses the missing revenue figure, but it still does not show Azure’s costs or capital spending.

Amid Microsoft’s disclosure change, we were curious about a broader question: how often do companies change segment-related disclosures, and what do those changes allow investors to see? If disclosure changes are prompted by investors’ demand for more information during periods of growth or business transformation, we are likely to see an increase in AI-exposed companies providing more granular segment disclosures. 

The accounting framework

ASC 280 generally follows a management approach. Reportable segments reflect how management organizes the business and how the chief operating decision maker (CODM) reviews performance and allocates resources. Companies must disclose each reportable segment’s products and services, a measure of profit or loss, significant revenues and expenses reviewed by the CODM, and reconciliations to consolidated amounts.

ASC 280 also requires company-wide disclosures of revenue by product or service, revenue and long-lived assets by geography, and reliance on major customers. Segment reporting therefore covers more than the number of reportable segments. It also encompasses performance measures, expense and asset definitions, and product and geographic categories. (See Deloitte’s guidance for more information.)

Methodology and findings

We reviewed 665 10-K filings submitted in 2026 by companies with market capitalizations of at least $10 billion. We used Terrain’s AI agents and information infrastructure to identify filings that recast prior-period information after changes in segment composition or segment-related disaggregation. We then manually reviewed the results to remove false positives and validate the output.

We focused on recast disclosures for two reasons. ASC 280 requires recasting when an internal reorganization changes the composition of reportable segments, when a segment becomes separately reportable, or when changes in information provided to the CODM affect significant expense categories. Recasting is not expressly required for every change in product or geographic presentation, but companies often recast those disclosures to preserve comparability. We therefore treat recasting as an indicator that management considered the change material. This method has limitations: a material change may not appear in our sample if the company did not recast prior periods.

We identified 137 segment-related disclosure changes. Because a single filing could contain more than one type of change, the categories overlap:

• Reportable-segment composition. In 86 cases, companies added, eliminated, or combined reportable segments, or moved businesses or revenue streams between segments.
• Revenue by product. In 24 cases, companies changed how they disaggregated and presented revenue by product.
• CODM performance measures. In 10 cases, companies changed the measure used by the CODM to evaluate segment performance or changed how that measure was calculated.
• Geographic revenue. In 7 cases, companies changed how they attributed or presented revenue by geographic location.
• Other segment information. In 20 cases, companies changed expenses or asset allocations or revised other within-segment presentations.

AI-exposed companies

Several companies with significant exposure to AI computing or infrastructure changed their disclosures.

• Flex, IREN, and TeraWulf created reportable segments that made data center, AI-cloud, or high-performance-computing activities separately visible.
• Dell and Modine expanded product-level revenue disclosure by separately identifying AI-optimized servers and data-center sales within existing reportable segments.
• Fabrinet replaced broad optical and non-optical categories with market-based categories that separately identify data-center revenue. It also changed its geographic attribution from bill-to to ship-to location.
• AMD combined Client and Gaming into one reportable segment while continuing to disclose revenue for the two businesses separately.

Modine also announced a prospective reorganization effective April 1, 2026, that will split Climate Solutions into Data Centers and Commercial HVAC. Because the change occurred after March 31, 2026, fiscal year end and was not yet effective, it is described here but is not included in the table.

These examples do not show that AI caused the changes. However, they arguably lend some support to our hypothesis that rapid growth in AI-related businesses can affect segment composition, product revenue, and geographic disclosure.

Why companies change their disclosures

SEC review is one reason segment disclosures change. Moreover, PwC notes that the SEC may expect companies to reassess their segments after significant acquisitions or dispositions, changes in organizational structure, or changes in key personnel. The staff may also compare a company’s segment conclusions with its earnings calls, website disclosures, and the internal reporting package used by CODM. 

Our sample supports PwC’s observation that corporate events often trigger segment reassessments. Many changes followed acquisitions, divestitures, or other reorganizations. In other cases, a business has grown large enough to meet the quantitative criteria for separate reporting. 

Controversial changes

Not every change is routine, however. Beginning in the third quarter of fiscal 2026, Nvidia changed how it attributed revenue to geographic markets by shifting from customers’ billing locations to the headquarters locations of its direct customers. Nvidia recast prior periods for comparability.

The new method is permitted under ASC 280 and, according to Nvidia, better represents its geographic revenue profile. However, the change removed Singapore as a separately visible geographic category. The development is notable because it eliminated visibility into a location that came under scrutiny in investigations into the alleged movement of advanced Nvidia-powered servers to China through Southeast Asia. Under the former method, Singapore represented 18% of fiscal 2025 revenue, although Nvidia reported that shipments to Singapore accounted for less than 2%.

Following the change, FT Alphaville questioned the disappearance of the Singapore line and placed it alongside reported U.S. investigations into whether Singapore-linked intermediaries were helping Chinese companies circumvent restrictions on advanced-chip exports. A DOJ indictment described a similar route, alleging that in 2023 and 2024 export-controlled servers containing advanced GPUs were shipped through Malaysia and Singapore before being re-exported to China. Importantly, the DOJ indictment charges the owner of Earthmade Computer and alleged co-conspirators — not Nvidia — with smuggling export-controlled servers to China.

Additional considerations

Segment reporting reflects a longstanding tension. Investors want enough detail to evaluate individual businesses, while companies argue that more disclosure bears preparation costs and may expose competitively sensitive information. A CFA Institute survey found that 75% of respondents considered segment information very important, but only 13.4% were satisfied with existing disclosures. Academic research likewise finds that greater disaggregation can improve the information environment, while proprietary and agency incentives can encourage managers to combine or withhold information (Berger and Hann 2003; Botosan and Stanford 2005). 

That debate led to ASU 2023-07, the FASB’s expanded segment-disclosure standard. Effective for public companies’ fiscal years beginning after December 15, 2023, the standard was intended to give investors more insight into how management evaluates segment performance. It requires companies to disclose significant expenses regularly provided to the CODM and included in the reported measure of segment profit or loss, describe other segment items, identify the CODM and explain how that person uses segment measures, and provide certain annual segment information in interim reports. ASU 2023-07 adds disclosure requirements but does not change the rules for identifying or aggregating reportable segments. 

However, in our sample, some companies adopted the new requirements while simultaneously realigning their segment structures and reporting fewer segments. Those changes may reflect genuine changes in how management organizes the business. But they also raise another possibility: some companies realigned their segments opportunistically to limit the information reported under the new requirements.

We are not saying or implying that any company did anything wrong. The pattern nevertheless raises a hypothetical research question: did segment reductions become more common around the adoption of ASU 2023-07, and, if so, were they primarily responses to changes in the business or did they also reflect incentives to limit the information reported under the new requirements? We leave this question to academics.

This is an abridged version of the article written in collaboration with Terrain, which runs agentic investigations of SEC filings. Full version of the article is available on Deep Quarry’s Substack. 

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