Microsoft Reports Significant Backlog and Challenges Ahead
Microsoft’s commercial remaining performance obligations (RPOs) surged to $625 billion in its fiscal second quarter of 2026, marking a 110% year-over-year increase. However, 45% of this backlog is attributed to a single customer, OpenAI, raising concerns about concentration risk. Despite the growth, Microsoft’s Azure and other cloud services revenue saw a deceleration, increasing only 38% year over year, down from 39% the previous quarter.
The company faces fierce competition from Amazon and Alphabet, which have reported cloud revenue growth of 24% and 48%, respectively, in their latest quarters. Microsoft’s capital expenditures reached $37.5 billion in Q2, a 66% increase year over year, as it invests heavily to support its backlog, but the reliance on one major partner and slowing cloud growth pose significant risks for investors.
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