Microsoft's commercial backlog hit $677 billion as Azure grew 48% and quarterly capex doubled to $39.4 billion

Microsoft reported its first quarter of fiscal 2027 on October 28, 2026, and the number that deserves the most attention is not revenue. It is the $677 billion of commercial remaining performance obligation, the amount of contracted business the company has signed but not yet recognized. That figure rose 73% in a year, and it is a better gauge of AI demand than any growth rate.

The quarter in numbers

According to Microsoft's press release for the quarter ended September 30, 2026, revenue was $92.3 billion, up 19%. Microsoft Cloud revenue was $63.9 billion, up 30% (31% in constant currency). Azure revenue increased 48%. Chief financial officer Amy Hood said the company delivered "a strong start to the fiscal year with Microsoft Cloud revenue of $63.9 billion."

Satya Nadella's line in the release was about breadth: "We are delivering greater capability, choice, control, and cost efficiency for customers across our entire stack." That is a statement about the product portfolio, not about AI specifically, and the release does not break out AI revenue.

The backlog is the signal

Commercial remaining performance obligation, usually shortened to RPO, is contracted revenue that has not yet been recognized. Microsoft reported it at $677 billion, up 73%. A rising RPO means customers are signing longer and larger commitments. It does not tell you who the customers are.

That gap matters because of what we know about concentration. We have reported on Microsoft's OpenAI revenue and receivables, which showed how much of Microsoft's AI position is tied to one partner. A backlog of this size is reassuring on demand and silent on concentration. The press release does not say how much of the $677 billion comes from any single customer, and we are not guessing.

The capital bill

The cash flow statement shows additions to property and equipment of $39,367 million in the quarter, compared with $19,394 million a year earlier. That is more than double. Net cash from operations was about $58.0 billion in the quarter; subtracting the additions leaves roughly $18.6 billion. That subtraction is ours, not a figure Microsoft reports, and it excludes finance leases, which Microsoft accounts for separately.

The release does not use the word capex and offers no guidance. It says Microsoft will provide forward looking guidance on its earnings call and webcast. We have seen press and aggregator accounts of a fiscal 2027 figure and of an accounting change affecting lease lives, but we could not confirm either in the primary documents we opened, so we are leaving them out until the transcript or filing is available.

Where Microsoft sits next to its peers

Put the same quarter side by side. Alphabet's purchases of property and equipment were $51.4 billion and its free cash flow was negative $9.1 billion. Amazon reported $77.3 billion and a trailing free cash flow outflow of $42.4 billion. Meta reported $34.9 billion and negative free cash flow of $2.1 billion. Microsoft's $39.4 billion of additions is the second smallest of the four in dollars. Alphabet and Meta posted negative free cash flow for the quarter, Amazon's trailing figure is negative, and Microsoft is the one that comes out positive on our arithmetic, with about $58.0 billion of operating cash flow behind the spending.

That makes the company look financially the strongest of the four on this single quarter. It also makes Azure's 48% growth easier to read as healthy rather than bought. The comparison has limits: definitions of capital spending differ, with Meta and Amazon including different lease and incentive treatments, and Microsoft's fiscal quarter lines up with the calendar quarter only because its year starts in July.

What the release leaves unsaid

Three questions the document does not answer. How much of Azure's growth comes from AI services versus conventional cloud? What share of the backlog is attributable to the largest customers? And what does Microsoft plan to spend next? The call may answer the third; the first two are the kind of detail the company has historically offered sparingly.

A reasonable skeptic would add a fourth. Backlog is contracted, not collected. Customers can renegotiate, and AI contracts signed at peak enthusiasm have no track record yet. A 73% increase in contracted business is a strong commitment signal, but a signed contract and a delivered, paid-for service are different events.

Why the fiscal calendar confuses comparisons

Microsoft's fiscal year starts in July, so the quarter it calls the first quarter of fiscal 2027 ended on September 30, 2026, the same date as the calendar third quarter reported by Alphabet, Amazon and Meta. That makes this one of the cleaner cross-company comparisons of the year, but it also means headlines that say 'Microsoft Q1' and 'Alphabet Q3' describe the same three months. When you see a number labeled with a fiscal quarter, check the end date before comparing it with anything else. ## What to watch

The first thing is the next RPO print. If it keeps climbing faster than revenue, the pipeline of AI demand is lengthening. The second is whether additions to property and equipment settle near $39 billion or step up again; a second quarter of doubling would change the free cash flow picture. The third is any disclosure of customer concentration, which would turn the biggest number in the release from a headline into an analysis.

Our take: this is a strong quarter on the evidence in the release, and the backlog is the most important line in it. Treat guidance numbers as unconfirmed until Microsoft's call transcript is public, and read the $677 billion alongside the question of who signed it.