Microsoft's Commercial Backlog Doubles Amid AI Investments and Competition
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Mar 25 2026
0mins
Should l Buy MSFT?
Source: NASDAQ.COM
- Commercial Backlog Surge: Microsoft's commercial remaining performance obligations (RPOs) soared 110% year-over-year to $625 billion in fiscal Q2, with OpenAI accounting for nearly half, indicating strong demand in AI but also raising customer concentration risks.
- Margin Compression: The company's gross margin narrowed from 68.7% to 68% year-over-year, primarily due to aggressive investments in AI infrastructure, with capital expenditures jumping from $22.6 billion to $37.5 billion, highlighting the high cost pressures in technology competition.
- Intensifying Cloud Competition: Azure's revenue growth of 38% in fiscal Q2 slightly decelerated from 39% in the prior quarter, while Amazon's AWS revenue rose 24% to $35.6 billion, underscoring the fierce competition in the cloud market.
- Cautious Future Outlook: While AI investments may yield long-term benefits, the competitive landscape and margin pressures could significantly impact Microsoft's profitability over the next five years, prompting investors to carefully assess current market valuations and potential risks.
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Analyst Views on MSFT
Wall Street analysts forecast MSFT stock price to rise
34 Analyst Rating
32 Buy
2 Hold
0 Sell
Strong Buy
Current: 369.370
Low
500.00
Averages
631.36
High
678.00
Current: 369.370
Low
500.00
Averages
631.36
High
678.00
About MSFT
Microsoft Corporation is a technology company. The Company develops and supports software, services, devices, and solutions. The Company’s segments include Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The Productivity and Business Processes segment consists of products and services in its portfolio of productivity, communication, and information services. This segment primarily comprises: Office Commercial, Office Consumer, LinkedIn, and Dynamics business solutions. The Intelligent Cloud segment consists of server products and cloud services, including Azure and other cloud services, SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (CALs), and Nuance and GitHub; and Enterprise Services, including enterprise support services, industry solutions and Nuance professional services. The More Personal Computing segment primarily comprises Windows, Devices, Gaming, and search and news advertising.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Market Reaction Analysis: The video published on April 4, 2026, highlights investor interest in both companies, particularly in the current economic climate where investors are inclined to favor companies with stronger growth potential.
- Investor Decision Factors: When selecting investment targets, investors must consider factors such as financial health, market share, and future growth potential, as these will directly impact investment returns.
- Future Outlook: Although both companies exhibit solid market performance, investors should closely monitor their financial reports and market dynamics to make informed investment decisions.
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- Market Performance Analysis: Stock Advisor's total average return of 926% significantly outperforms the S&P 500's 185%, reflecting the effectiveness of its stock selection strategy and market outperformance.
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- Strategic Shift: Microsoft is transitioning Copilot to a multi-model agentic product, introducing new features like Council and Critique aimed at enhancing user experience and increasing market appeal, which could improve its performance among enterprise users.
- Stock Price Volatility: Microsoft shares currently trade at 23 times its trailing 12-month earnings, about 30% below its 10-year average, reflecting market concerns over future growth; however, analysts project a long-term annual growth rate of 13% to 14%, suggesting potential value for investors.
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See More
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- Optimistic Guidance: Management anticipates a 9% sequential revenue increase in the first quarter, projecting adjusted EPS of $0.79, indicating sustained growth potential in AI infrastructure, particularly within the data center segment.
- Collaboration with Nvidia: Nvidia's announcement of a $2 billion investment in Marvell, coupled with a product partnership, is expected to enhance Marvell's market position in AI infrastructure, particularly in the application of photonic networking technologies.
- Diversified Customer Base: Marvell has added Microsoft as a client, with Microsoft's Maia2 chip likely to drive further business growth in AI chips, demonstrating the company's adaptability and strategic positioning in a competitive market.
See More
