Alright, settle in, folks. Microsoft (MSFT 10.23%) just coughed up its latest earnings report, and let me tell you, it’s a doozy. A big number. $625 billion in “commercial remaining performance obligations.” That’s a lot of schmeckles! They’re promising us the moon, but are they gonna deliver? That, my friends, is the question. They’re spending like drunken sailors on shore leave to build up this AI cloud thing, so this backlog is supposed to be a good sign. But let’s not get our knickers in a twist just yet.
See, a backlog is like a promise. A very expensive promise. It’s all well and good to say you’ve got $625 billion worth of work lined up, but turning that into actual cash? That’s where the magic – or the chutzpah – comes in. Are they really going to be raking in the dough, or are they just shuffling numbers around like a two-bit hustler?
Microsoft’s Surging Backlog (or, The Numbers Don’t Lie… Much)
So, what is this “commercial RPO” thing, you ask? It’s basically IOUs. Microsoft gets a contract, they write it down, and then they hope the customer doesn’t bounce the check. It’s a decent indicator of demand, especially with this whole AI craze. Everyone and their bubbe wants AI now, apparently. It’s like Beanie Babies all over again, but with more processing power.
They say it jumped 110% year-over-year. 110%! That’s bigger than my Aunt Mildred’s hat collection. It’s more than doubled! And it’s growing faster than a teenager’s appetite. They went from $392 billion last quarter to $625 billion. That’s a lot of zeros, folks. A lot.
Four Reasons to Be a Little Suspicious (or, What Could Possibly Go Wrong?)
Now, hold on to your hats. Before you go mortgaging your house to buy Microsoft stock, let me point out a few things. Four things, actually. Four reasons why this whole thing might be a little… fishy.
First, it’s a contract, not a deposit. They haven’t seen the money yet. It’s like getting a promise from a politician – sounds good, but you don’t want to bet your life savings on it. And this money isn’t coming in all at once. It’s spread out over years. They said only 25% of this backlog is expected to turn into revenue in the next 12 months. That’s like waiting for a bus that never comes.
Second, and this is a big one, 45% of this backlog comes from one customer: OpenAI. One! That’s like building a skyscraper on a foundation of marshmallows. What happens if OpenAI decides they want to go with a competitor? Poof! Almost half your backlog vanishes into thin air. And the growth outside of OpenAI? A measly 28%. That’s barely a shlep!
Third, despite this booming backlog, their “Azure and other cloud services” revenue growth actually slowed down. It grew 38% instead of 39%. 38%! The horror! It’s like running a marathon and finishing one second slower than last time. It’s a tragedy! So, even though they’re promising us the world, they’re not exactly delivering it faster.
And finally, they’re spending money like it’s going out of style. $37.5 billion in capital expenditures. 66% more than last year! They’re building all these fancy data centers, but who’s going to pay for them? It’s a gamble, folks. A big, expensive gamble.
The optimists will tell you this spending will pay off. That it will accelerate revenue growth and boost profits. The pessimists will say it’s a black hole for cash. That they’ll be spending money for years without seeing a return. And you know what? They might both be right.
Look, the bottom line is this: Microsoft is a solid company. They grew revenue 17% and earnings 24%. That’s not bad. Not bad at all. The stock is trading at a reasonable price-to-earnings ratio of about 27. But don’t buy it because of the backlog. Buy it because of the results. And be careful. This is a high-risk stock. A little allocation is good, a lot is… well, let’s just say you might need a bigger wallet.
So, there you have it. Microsoft’s backlog: a promise, a gamble, and a whole lot of schmeckles. Now, if you’ll excuse me, I need a nap. All this number-crunching has worn me out.
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2026-01-30 06:12