Microsoft says OpenAI accounts for 45% of $625B Azure backlog

Microsoft told investors that OpenAI accounts for roughly 45% of its commercial bookings backlog — a metric the company calls remaining performance obligations — which ballooned 110% year over year to $625 billion when Microsoft reported second-quarter results on Wednesday. Shares fell more than 6% in after-hours trading despite an earnings beat, as analysts pressed CEO Satya Nadella and CFO Amy Hood about slowing Azure revenue growth and the large share of the backlog tied to OpenAI.

Morgan Stanley’s Keith Weiss said some on Wall Street may be spooked by slower Azure growth and rising capex. Microsoft said it is facing capacity constraints and must be judicious in allocating compute. Nadella stressed that acquiring Azure customers is important but cautioned the company cannot focus on a single business, saying, "If you think about it, acquiring an Azure customer is super important to us, but so is acquiring an M365 or a GitHub or a Dragon Copilot...

And so we don't want to maximize just one business of ours." Capital expenditures rose 66% year over year to $37.5 billion in the quarter, another company record.

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