Microsoft Backlog Surges to $678 Billion as Tech Sector Booms
Microsoft's commercial backlog has reached an astonishing $678 billion, approximately 7.5 times its latest quarterly revenue of $90 billion. The company's shares rose by about 1.4% to $503.12 on Thursday after Nvidia's outlook boosted the technology sector. This surge in hyperscaler spending still has room to run, according to investors.
The numbers are impressive: Microsoft's Azure and other cloud-services revenue grew by 43%, while its commercial remaining performance obligations expanded by 84%. However, execution remains a crucial factor for Microsoft to convert contracted AI demand into revenue and free cash flow. The cost of building data centers could potentially outrun the returns.
The valuation snapshot shows that Microsoft's share price is 13.18% below its $579.48 GF Value estimate. This discount seems enticing, especially considering the backlog. Nevertheless, investors must remember that execution is key to realizing this potential.