Microsoft's $678 Billion Backlog Has Investors Recalculating the AI Risk Equation
Published on 08/02/2026 at 12:12 | Redaktion boerse-global.de
The debate that has dogged Microsoft's stock for months — whether its staggering AI infrastructure spending would ever translate into earnings — effectively ended on Friday. Shares closed at €403.00, up 3.03 percent on the day, capping a seven-session run that has added roughly 20 percent to the company's market value. The catalyst: fiscal fourth-quarter 2026 results that showed Azure growing at 43 percent year over year, comfortably ahead of the roughly 40 percent analysts had penciled in.
That growth figure alone would have been enough to shift sentiment. But the number doing the heaviest lifting in the bull case is the company's Remaining Performance Obligations — the contractual backlog of business not yet booked as revenue. That figure now stands at $678 billion, an 84 percent jump from the prior year. For investors who had spent months fretting over whether Microsoft's capital expenditure program was a value-destroying black hole, the backlog offers a concrete answer: the demand is contracted, not hypothetical.
The Monetization Machine Kicks In
The operational picture supports the optimism. Microsoft's cloud division surpassed $100 billion in annualized revenue for the first time, with the broader cloud business growing 27 percent to $59.3 billion in the quarter. Total revenue reached $90 billion. Underpinning the margin story is the second-generation Maia 200 chip, manufactured by TSMC on a 3-nanometer process, which delivers 30 percent more performance at the same cost. The chip powers Microsoft 365 Copilot, which has crossed 30 million paying users — a signal that enterprise customers are moving beyond pilot programs and into full-scale deployment of generative AI tools.
The valuation math is also cooperating. The forward price-to-earnings ratio sits at 23.4, below the company's five-year average, while the average analyst price target of €486.78 implies roughly 20 percent upside from current levels. That target, if reached, would still leave the stock below its October 2025 high of €478.10.
Should investors sell immediately? Or is it worth buying Microsoft?
The Technical Picture Says: Pause
The fundamental story may be intact, but the chart is flashing caution. The 14-day Relative Strength Index stands at 73.8, firmly in overbought territory. The stock trades 16.26 percent above its 50-day moving average of €346.64 — a distance that historically invites profit-taking. A pullback toward that average, or toward the 200-day line at €371.94, would not be surprising in the near term.
Context matters here. Despite the recent surge, Microsoft remains 2.46 percent below its start-of-year level and roughly 13.79 percent lower over twelve months. The stock has recovered more than 31 percent from its June low of €307.10, but it is still trading nearly 16 percent below its 52-week peak. This is a recovery in progress, not a breakout to new highs.
The Bear Case Hasn't Fully Retreated
Skeptics point to a less visible liability: media reports suggest Microsoft carries approximately $557 billion in off-balance-sheet purchase and lease commitments for AI infrastructure. If AI product revenue growth stalls, those obligations could weigh on free cash flow. The company's annual capex run rate of roughly $175 billion — which the backlog now needs to convert into margin-rich revenue — remains the central question for coming quarters.
There is also a legal overhang. A shareholder class action is pending, with the deadline to file as lead plaintiff set for August 11. The suit alleges the company overstated Copilot conversion rates and its competitive position in AI between May 2025 and January 2026. The case is procedurally early-stage, but adverse developments could dent sentiment.
Microsoft at a turning point? This analysis reveals what investors need to know now.
What Moves the Stock Next
Two dates stand out. On August 4, AMD reports quarterly results; commentary on enterprise GPU demand will directly inform how investors view the durability of Microsoft's infrastructure cycle. Then on August 11, the class action filing deadline passes, potentially bringing more detailed allegations into the open.
The technical threshold to watch is €400. Holding above that level keeps the rally structure intact; losing it opens the door to a retest of the 200-day average. With annualized volatility above 52 percent, the coming week looks more like a digestion period than the start of another leg higher. But with a $678 billion backlog and Azure growth accelerating, the fundamental case for owning Microsoft through short-term noise has rarely looked stronger.
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Disclaimer regarding our articles: No investment advice, no buy or sell recommendation. Information on prices, companies, and markets is provided without guarantee; changes are possible at any time. Stock market transactions can lead to substantial losses. Our articles are created and reviewed in whole or in part automatically with the support of AI.
