Microsoft’s $625B Backlog Bombshell: OpenAI Now 45% of Future Revenue

Microsoft delivered what looked like a blowout earnings report on Wednesday, January 28, 2026, posting $81.3 billion in revenue and shattering profit expectations. Yet, Wall Street responded by sending the stock tumbling over 5% in after-hours trading. The catalyst for this sell-off wasn't a miss on the top line, but a stunning revelation buried in the details: OpenAI now accounts for roughly 45% of Microsoft’s massive $625 billion commercial backlog. This unprecedented concentration of future revenue in a single, non-controlled partner has ignited fears about the tech giant's exposure to execution risks in the volatile AI sector.

The $625 Billion Question: Microsoft's OpenAI Dependency

The headline number from Microsoft’s fiscal Q2 2026 report was a jaw-dropping 110% year-over-year increase in Remaining Performance Obligations (RPO)—essentially the backlog of contracted future revenue—which hit $625 billion. For context, this figure dwarfs the GDP of many mid-sized nations.

However, the gloss faded quickly when CFO Amy Hood revealed that nearly half of this backlog—approximately $280 billion—is tied directly to OpenAI. This massive sum represents long-term commitments from the ChatGPT maker to consume Azure cloud services. While this validates the demand for AI infrastructure, it also signals a perilous level of dependency. If OpenAI faces regulatory hurdles, funding crunches, or fails to monetize its models effectively, a massive chunk of Microsoft’s projected growth could evaporate overnight.

Analysts are now grappling with a new reality: Microsoft isn't just a partner to OpenAI; its future financial health is increasingly leveraged on the startup's success. As Jefferies analyst Brent Thill noted, this raises critical questions about whether OpenAI can achieve the financial scale necessary to honor these hundreds of billions in commitments.

The $10 Billion "Paper" Profit Explained

Adding to the complexity of the report was a significant accounting anomaly that distorted the bottom-line figures. Microsoft reported a net income surge of 60% to $38.5 billion, or $5.16 per share. However, this included a massive $10 billion non-cash accounting gain ($7.6 billion after-tax) linked to OpenAI’s October recapitalization.

Because Microsoft’s stake in OpenAI was diluted during the restructuring, accounting rules required the company to revalue its investment, resulting in a one-time paper profit. When stripped of this gain, Microsoft’s adjusted earnings were $4.14 per share. While this still beat Wall Street’s expectation of $3.92, the reliance on a one-time accounting quirk to boost GAAP numbers gave investors pause, reinforcing the narrative that the "real" business growth might be less explosive than the headlines suggest.

Azure Growth Slows Despite Record AI Spending

The most immediate concern for traders was the deceleration in Microsoft's crown jewel: the Azure cloud platform. Azure revenue growth clocked in at 39% (38% in constant currency). While this technically met the company's guidance, it missed the "whisper numbers"—unofficial expectations from buy-side analysts who were hoping for growth north of 40% to justify the company's valuation.

Capital Expenditures Hit $37.5 Billion

The slowing growth comes at a staggering price. Microsoft’s capital expenditures (CapEx) for the quarter skyrocketed 66% year-over-year to $37.5 billion. The company is pouring tens of billions into data centers and NVIDIA GPUs to build the infrastructure for the AI era. Investors are beginning to ask a tough question: If spending is growing this fast, why isn't revenue growth accelerating to match it?

This "CapEx anxiety" is spreading across the Big Tech landscape. With Google and Amazon also ramping up spending, the market is becoming increasingly intolerant of AI investments that don't deliver immediate, outsized returns. For Microsoft, the 39% growth rate—while impressive for a business of its size—was interpreted as a sign that capacity constraints (a shortage of chips and power) are putting a speed limit on AI monetization.

Market Reaction: Is the AI Trade Cracking?

The 5% drop in Microsoft stock stands in sharp contrast to Meta, which saw its shares surge on the same day. This divergence suggests that investors are becoming more selective. They are no longer buying "AI" blindly; they are scrutinizing the quality of earnings and the path to profitability.

For long-term investors, the thesis remains intact: Microsoft is the undisputed leader in enterprise AI. However, the Q2 2026 report serves as a reality check. The path to AI dominance is expensive, and the risks are more concentrated than previously understood. With nearly half of its future book of business tied to a single startup, Microsoft has effectively bet the farm on OpenAI. The next few quarters will determine if that bet pays off or if the $625 billion backlog becomes a liability rather than an asset.