Microsoft's fiscal fourth-quarter report arrived with the usual cascade of growth metrics, revenue up 18%, Azure accelerating to 43%, earnings per share jumping 32%, but the number that matters sits off the income statement entirely. Commercial remaining performance obligations hit $678 billion, an 84% year-over-year surge that represents contracted work not yet delivered. For context, Microsoft generated $331.8 billion in revenue for all of fiscal 2026. The company has effectively signed more than two full years of sales before the first dollar of it has been recognized.
The capacity constraint is real
The backlog explains why Microsoft poured $115.9 billion into capital expenditures during the fiscal year, almost entirely on data centers. On the earnings call, chief financial officer Amy Hood said customer demand "continues to exceed available capacity," even after the company added another gigawatt of data center capacity in the quarter. Microsoft says it remains on track to roughly double overall capacity in two years. The intelligent cloud segment grew 32% to $39.3 billion, and Microsoft Cloud revenue reached $59.3 billion, up 27%. The infrastructure spend is not speculative; it is spoken for.
The conversion math is slow
A backlog is a promise, not revenue, and Microsoft's own disclosures show this one converts at a deliberate pace. Hood said the backlog carries a weighted average duration of 2.3 years, with roughly 30%, something in the neighborhood of $200 billion, expected to be recognized in the next 12 months. That near-term slice is up 37% from a year ago, while the portion due beyond 12 months more than doubled. The revenue will arrive, but it arrives on a multiyear schedule that smooths the lumpiness of hyperscale build-outs.
The OpenAI concentration deserves scrutiny
Strip out OpenAI and the backlog grew 25% year over year, not 84%. A single private customer accounts for the majority of the headline acceleration. That concentration doesn't make the contracts less real, but it does mean a meaningful piece of Microsoft's future revenue rides on OpenAI's ability to keep paying for what it has ordered. Investors cannot examine OpenAI's finances the way they could a public customer's. The encouraging signal this quarter was sequential: Hood noted that all of the backlog's quarter-over-quarter growth came from customers outside frontier model companies. The base is broadening, even if the headline still leans heavily on one name.