Microsoft Stock Hinges on Capacity Buildout

Microsoft's stock has outperformed the market over the past three months, returning 15.5% compared to 3.1% for the S&P 500.

However, its performance over the trailing twelve months shows a decline of 3.5%, and it is about 10% below its 52-week high.

The company's commercial remaining performance obligation reached $678 billion in fiscal Q4 2026, which represents roughly two years' worth of sales at current rates.

Microsoft's constraint is not demand, but rather the available capacity to meet that demand. The company has a significant backlog of orders, with about 30% expected to be fulfilled within twelve months.