Microsoft Has $678 Billion of Revenue Already Under Contract. That's More Than 2 Years of Sales.

Microsoft's (NASDAQ: MSFT) fiscal fourth-quarter report, released Wednesday afternoon, was full of big numbers. But one of them towers over the rest. Commercial remaining performance obligations came in at $678 billion, up 84% year over year.

That figure represents contracted work Microsoft has signed but not yet delivered -- revenue that customers have committed to but that hasn't reached the income statement. The revenue shows up only as Microsoft delivers the computing power and software those contracts cover, so the total speaks to how much demand exists, not when it arrives. Still, its scale is easier to appreciate with some context. Microsoft's revenue for all of fiscal 2026 (the year ended June 30) was $331.8 billion. In other words, the software giant has already booked more than two full years' worth of sales.

For a company that poured $115.9 billion into capital expenditures during the fiscal year, largely on the data centers behind its cloud and AI (artificial intelligence) services, that much signed demand is arguably the most important number in the report.

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Two years of sales, already signed

A year ago, Microsoft's commercial backlog stood at about $368 billion. Today, it's at $678 billion -- that's an impressive 84% year-over-year growth rate.

And the quarter's financials were strong, too. Fiscal fourth-quarter revenue rose 18% year over year to $90.0 billion, and "Azure and other cloud services" revenue grew 43% -- an acceleration from 40% growth in fiscal Q3. Microsoft Cloud revenue came in at $59.3 billion, up 27%, while the intelligent cloud segment, which houses the Azure cloud computing business, grew revenue 32% to $39.3 billion. Profitability kept pace with all of it: Operating income climbed 18% to $40.6 billion, net income rose 31%, and earnings per share jumped 32% to $4.81 on a GAAP basis (up 23% to $4.74 excluding the OpenAI investment impact).

Growth is strong on a full-year basis, too. For the full fiscal year, Microsoft's revenue grew 18% while GAAP earnings per share rose 32%.

And demand isn't letting up. On the earnings call, chief financial officer Amy Hood said customer demand "continues to exceed available capacity," even after Microsoft added another gigawatt of data center capacity during the quarter. The company says it remains on track to roughly double its overall capacity in just two years.

How fast the backlog turns into revenue

Of course, a backlog is a promise about the future, not revenue today. And Microsoft's own disclosures show that this one converts slowly.

On Wednesday's earnings call, chief financial officer Amy Hood said the backlog, including OpenAI, carries "a weighted average duration of 2.3 years," and that roughly 30% of it will be recognized as revenue in the next 12 months. That works out to something in the neighborhood of $200 billion of contracted work flowing through over the coming year -- and the rest arrives on a multiyear schedule. The near-term slice is up 37% from a year ago, while the portion due beyond 12 months more than doubled.

The OpenAI factor deserves attention, too. Hood said the backlog grew 25% year over year when excluding OpenAI. Set that against the headline 84% growth, and it's clear that a large share of the backlog's year-over-year growth traces to a single customer. That concentration doesn't make the backlog less real, but it does mean a meaningful piece of Microsoft's future rides on OpenAI's ability to keep paying for what it has ordered. And because OpenAI is private, investors can't examine its finances the way they could a public customer's.

That said, the quarter offered an encouraging signal on exactly this front. Hood noted that all of the backlog's sequential growth -- the increase from the prior quarter -- "was driven by commitments from customers outside of frontier model companies."

In other words, the quarter's sequential backlog growth came from customers outside frontier model companies, not OpenAI. She also cautioned that the large OpenAI contracts signed last year will make bookings and backlog growth rates bumpy from quarter to quarter, so the headline growth figure will swing as those deals move through the comparisons.

What the backlog tells investors is that Microsoft has substantial signed demand behind its spending. What an 84% increase can't say is how profitably that demand converts.

That's why I'd rest the investment case on the results themselves. A company growing revenue 18% and earnings per share 32%, with two years of sales under contract, is about as sturdy as large-cap growth gets.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool has a disclosure policy.