Microsoft’s early bet on OpenAI is weighing heavily on Azure, causing 45% of its backlog — but it’s finally starting to pay off

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Microsoft CEO Satya Nadella announced the company is innovating across all its artificial intelligence technologies to deliver more benefits to customers and partners, as part of the company’s recent financial report for the second quarter of fiscal year 2026.

I was watching the earnings report for the big tech company, and they actually exceeded what Wall Street expected. They brought in $81.3 billion in revenue, which is a 17% increase compared to last year, and their operating income jumped 21% to $38.3 billion. Surprisingly, though, their stock price dropped around 6% in after-hours trading once the report was released.

This might be because the company spent more than anticipated on data centers and AI technology, and that level of investment isn’t quite keeping pace with the growth of its cloud services.

I found it particularly noteworthy that the company admitted to struggling with keeping up with demand. This has led to a significant buildup of orders, especially in their cloud computing division. In fact, their backlog has more than doubled in the last year, now totaling a massive $625 billion.

Microsoft revealed that about 45% of its previously announced investments are related to OpenAI. However, the company didn’t share how much OpenAI contributed to those investments last quarter, according to Business Insider.

Microsoft and OpenAI have formalized a new agreement that allows OpenAI to become a for-profit company. This change will enable OpenAI to attract more investment, especially following recent concerns about the company’s financial stability.

I’ve been watching OpenAI’s growth, and it’s clear Microsoft stands to gain a lot from its success. In fact, Microsoft recently reported a $7.6 billion increase in net income directly tied to its investment in OpenAI, according to TechCrunch.

Although Microsoft and OpenAI haven’t officially stated it, reports suggest OpenAI shares 20% of its revenue with Microsoft. Satya Nadella emphasized the need to attract more customers to Azure, but stressed the importance of continuing to support their other services as well.

Getting new customers for Azure is a high priority, but so are customers for M365, GitHub, and Dragon Copilot – all of which represent additional growth opportunities for us. We’re focused on growing all of our businesses, not just one.

Microsoft CEO, Satya Nadella

Microsoft’s CFO, Amy Hood, explained that deciding how to use new GPUs and CPUs is complex. A major factor is the company’s significant capital expenditures. They also need to balance investments in developing their own applications, such as Copilot, with the GPUs needed for research and development, and supporting their growing team.

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2026-01-29 16:11