Key Points
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Microsoft’s commercial backlog surged 110% year over year to $625 billion in fiscal Q2, with OpenAI accounting for 45% of this backlog.
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The company’s gross profit margin narrowed to 68% due to aggressive spending on AI infrastructure, reflecting a drop from 68.7% the previous year.
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Competition in cloud computing intensified, as Amazon’s AWS revenue rose 24% to $35.6 billion, while Google’s Cloud revenue increased by 48% year over year.
Microsoft (NASDAQ: MSFT) reported fiscal Q2 results in late January, revealing a 17% year-over-year revenue increase to $81.3 billion and a 24% rise in non-GAAP earnings per share to $4.14. Despite these gains, the company is facing challenges, as a single partner, OpenAI, constitutes nearly half of its commercial backlog, raising concerns about reliance on one customer.
As Microsoft invests heavily in AI—totaling $37.5 billion in capital expenditures during Q2 compared to $22.6 billion a year ago—margins are under pressure. In contrast, Amazon and Alphabet are ramping up their capital expenditures, forecasting about $200 billion and between $175 billion to $185 billion, respectively, in 2026 to capture AI workloads.
