Microsoft's AI Play Puts Focus on Contracted Backlog

Microsoft's (NASDAQ:MSFT) recent Q4 results have left investors wondering if it's too late to buy shares. Despite ongoing concerns, the company's $678 billion contracted backlog for AI services could be a reason to take another look.

The stock has been under scrutiny due to its association with AI fears, but Microsoft's strategy might just have changed entirely. CEO Satya Nadella's relaxed attitude towards DeepSeek taking the lead in the LLM race was seen as interesting, and it appears that Microsoft is positioning itself as a platform that decides which models get used.

Azure AI Foundry now offers over 11,000 models, and the number of customers building with multiple providers at once has risen fivefold. This means that regardless of whether OpenAI, Anthropic, or Kimi K3 has the best model or lowest costs, Microsoft stands to benefit either way.

However, not all parts of Microsoft's business are doing well. The gaming sector saw a 10% decline in content and services revenue, with hardware revenue down 13%. The $70 billion deal for Activision Blizzard hasn't paid off yet, but the company is focusing on core names and restructuring costs.

Despite this, the AI market is where investors are focused right now. With $175 billion of AI spending expected, Microsoft's big bets don't always land on schedule, as seen with Xbox's struggles.