What Could Surprise Microsoft Stock Investors On The Upside? Trefis Team Mon, November 2, 2026 at 3:35 AM EST 4 min read MSFT -1.55% ^GSPC -1.82% GOOG -1.45% AMZN -1.41% AAPL -1.23% Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
For questions about this article or underlying research, email help@trefis.com.
Microsoft (MSFT) stock lost 2.8%, counting dividends, in the year to October 30, 2026, while the S&P 500 returned 11.3%. The business did not stall, with fiscal Q1 2027 revenue rising 18.8% from a year earlier. Microsoft's next upside may come from contracts customers have already signed, and from demand its data centers cannot yet meet. So how much work is Microsoft still waiting to deliver?
Microsoft Has $677 Billion Of Signed Work Still Ahead
Microsoft's commercial backlog, the contracted revenue it has not yet recognized, grew 73% from a year earlier to $677 billion in fiscal Q1 2027, management said on the October 28 call. One large Azure commitment signed in the quarter accounted for part of that total. Commercial bookings fell 12% from a year earlier, a decline management tied to large Azure commitments made in the prior year. Customer demand continues to exceed available supply, management said, which suggests Microsoft could sell more cloud capacity than it has built so far.
Microsoft's cloud computing service, Azure, provides the first proof that this demand turns into sales. Azure revenue grew 48% in the quarter despite delayed capacity, and management said the growth came from Foundry and from better use of its CPUs. Foundry, the platform on which customers build AI solutions with a choice of models, now has over 120,000 customers, and its revenue more than tripled from a year earlier.
How Big Is Microsoft's Cloud Business Now?
Microsoft's Intelligent Cloud segment made up 41.5% of company revenue in fiscal 2026, the year to June 30, 2026, against 37.7% a year earlier. Management also reports Microsoft Cloud revenue, which reached $63.9 billion in fiscal Q1 2027, up 30%.
The backlog is also large relative to the whole company. Management said roughly 30% of it will be recognized as revenue in the next 12 months. That works out to about $203 billion, against $346 billion of revenue in Microsoft's last twelve months.
The stock price appears to assume part of this already. Microsoft stock returned 26.4% from May 1 to October 30, 2026, against 5.4% for the S&P 500. On October 30, the stock closed 4.0% below its highest close of the past year.
What Could Slow Microsoft's Cloud Down?
Microsoft is already waiting on capacity. Some third-party capacity it expected in fiscal Q1 2027 was delayed, and management now expects those deliveries in the second half of the fiscal year.
Building that capacity is also expensive. Microsoft spent $45.2 billion on capital projects in fiscal Q1 2027, with $39.4 billion of that paid in cash. Management expects spending of about $170 billion for calendar 2026. A day after the call, Microsoft priced $25 billion of new debt as it pursues that AI buildout. Free cash flow fell to $18.6 billion in the quarter, down from $25.7 billion a year earlier, a drop management tied to the higher capital spending. Cash from operations still rose 29% to $58 billion, management said.
Paying for AI by use may also spread more slowly beyond software developers. Asked on the October 28 call whether Microsoft 365 customers will move quickly to usage-based billing, management said that shift will be slower outside of coding, though it still sees encouraging signs.
For the upside to show up, Microsoft must add capacity fast enough to turn more of its backlog into sales. When the company reports in January 2027, the number to watch will be Azure growth in constant currency, against management's guide of 49% to 50% for fiscal Q2 2027.
How Much Microsoft Do You Already Own?
If you own an S&P 500 or Nasdaq fund, you already own Microsoft, alongside the same few giants that lead those funds. The Trefis High Quality (HQ) Portfolio takes a different route: 30 quality companies in equal weight, so no single stock dominates. Since its inception in September 2020 it has returned 105%, ahead of a benchmark that combines the S&P 500, S&P Mid-cap and Russell 2000.
Spot an error or want more like this? Tell us in 10 seconds.
