Microsoft's Azure Growth and $678 Billion Backlog Set Up Key Moment for Investors

Microsoft, the world's second-largest company by market value at roughly $3.67 trillion, is sitting on a massive contracted backlog of $678 billion while its stock trails the broader market by nearly 900 basis points.

Azure, Microsoft's cloud computing platform, grew 43% year over year in the fourth quarter and management guided to roughly 45% in constant currency for the first quarter of fiscal 2027. The company also reported a full-year capex of $115.95 billion, up 79.62% year over year.

Bulls argue that Azure's growth is already baked in and that the capex cycle will persist for several quarters, which could be an opportunity for investors. However, bears point out that free cash flow fell to $66.99 billion for fiscal 2026, down 6.46%, and calendar 2026 capex expectations translate to roughly $175 billion.

Microsoft's stock has drifted lower through the fiscal year despite beating estimates, leaving it trailing the broad market. Analyst sentiment remains strong with 14 buy-equivalent calls versus 3 holds and no sells.