Microsoft's commercial backlog surged 84 percent to $678 billion in the fiscal fourth quarter, while Azure crossed the $100 billion annual revenue threshold, yet the stock trades at a forward multiple of 25 times earnings and has barely moved this year.
The backlog math
Cloud revenue climbed 27 percent year over year in the period, and the pile of contracted future sales is now growing at more than triple that pace. The company's commercial remaining performance obligations, the accounting line for that backlog, expanded faster than recognized revenue, meaning each quarter adds more to the future than it books in the present. Microsoft Cloud revenue represents 8.7 percent of those obligations, a ratio that underscores how much of the franchise is already spoken for.
Cloud share keeps expanding
The cloud segment now accounts for roughly two-thirds of total revenue and has been the primary driver of acceleration. Top-line growth compounded at 14.6 percent annually over the past decade and quickened to a 16.1 percent clip over the last three years. That trajectory has been consistent enough to make the forward multiple look modest on paper, provided the conversion from backlog to billings holds.
The hyperscaler pack is moving together
Microsoft is not alone in the acceleration. Amazon Web Services posted its strongest revenue growth rate in more than four years, while Google Cloud recorded an 82 percent year-over-year increase in the second quarter. The common thread is infrastructure demand from artificial intelligence workloads. Industry research projects the AI market will compound at 30.6 percent annually through 2033, and every incremental model deployment requires additional compute and storage capacity that the major clouds are racing to supply.
Valuation gap persists
Despite revenue and net income growth rates that comfortably exceed the stock's roughly 3 percent gain in 2026, the shares have largely missed the AI-driven rerating that lifted peers. The disconnect between fundamentals and price performance has happened before, and it rarely persists without a catalyst. A forward earnings multiple in the mid-20s, paired with a backlog that effectively pre-sells years of growth, frames the question plainly: either the market is mispricing the durability of the cloud transition, or it is pricing in a slowdown that the order book does not yet show.