Vignettes: Change in Depreciation Expense

In fiscal-year 2023, Microsoft changed the useful life on its servers and network equipment from 4 years to 6 years. The effect on operating income before tax from the lower depreciation was to increase it by $3.4 billion, net income by $3 billion, and EPS by $0.40. With $211.9 billion in revenue, that is a 1.6% effect on operating profit margin before tax.

Amazon did the same in 2022, reducing depreciation expense by $3.6 billion and increasing net income by $2.8 billion. In early 2024, it said it would again reduce depreciation by further extending useful lives, increasing operating income before tax by $3.1 billion for the 2024 year.