This Number Tells Me The Microsoft Data Center Selloff Is Excessive, Prompting Me to Buy Alex Sirois Wed, November 11, 2026 at 12:45 PM EST 5 min read MSFT -2.36% AMZN -1.82% GOOGM +1.72% ANTH.PVT 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.
Microsoft (MSFT) shares sold off on data center fears, yet a 73% jump in commercial backlog to $677 billion shows spending chases locked-in revenue.
Amazon (AMZN) trades at 38 times earnings with a $42 billion free cash outflow, while Alphabet (GOOGL) raised $50 billion through equity, diluting shareholders.
Azure growth accelerated to 48%, and operating cash flow of $58 billion covers $39 billion of capex without tapping debt markets.
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I have added to my Microsoft (NASDAQ:MSFT) position after every dip this year, and today's drop sent me back to the numbers again. Shares fell 2.2% on Tuesday after Anthropic unveiled tools to rival Office. That came on top of the post-earnings drop from $532.60 at the filing to $521.91 one day later, as investors worried about data center spending.
Commercial remaining performance obligations (RPO) are revenue customers have already signed for but Microsoft has yet to recognize. That figure rose 73% to $677 billion. Fiscal 2026 capex totaled $115.95 billion. Wall Street treats the expansion like speculative cash burn.
I see the backlog as revenue that is already legally locked in, and the capex as the physical price of collecting it. Roughly 30% of RPO turns to revenue within 12 months, and the portion beyond that rose 98%. Management says "customer demand continues to exceed available supply." Microsoft sells the infrastructure enterprises need to run AI, and those customers are waiting for capacity.
First, growth is speeding up. Azure revenue rose 48% to $33.165 billion, up from 40% two quarters earlier. Management guided to 49% to 50% constant-currency Azure growth next quarter.
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Second, the business funds its own expansion. Operating cash flow reached $58.0 billion last quarter against capex of $39.37 billion. Operating margin stands at 46.78% and return on equity at 34.04%. CFO Amy Hood said Microsoft has not yet tapped the debt markets and expects to stay free cash flow positive in fiscal 2027.
Third, income compounds. The quarterly dividend rises to $0.98 from $0.91, after $0.46 in 2019. The yield is a modest 0.67%, but payments date back to 2003. EPS of $4.89 marked a sixth consecutive beat, and shares trade at 26 times forward earnings.
For Amazon (NASDAQ:AMZN), AWS grew 39%, yet the stock trades at 38 times earnings, carries a trailing free cash outflow of $42.4 billion, and pays no dividend.
Shares of Alphabet (NASDAQ:GOOGL) look cheaper at 13 times earnings, and Google Cloud grew 103%. Alphabet also posted free cash flow of negative $9.065 billion last quarter and raised $49.6 billion through equity and convertible preferred stock, diluting shareholders. Microsoft bought back $4.379 billion of stock in the same stretch.
Capex keeps climbing. Management expects over $50 billion next quarter and roughly $170 billion for the calendar year (the power, cooling and networking suppliers soaking up that spend are the subject of a free report we put together here). Free cash flow was $18.6 billion last quarter, and about three-quarters of capex goes to short-lived chips that will need replacing. Anthropic moving onto Office territory also threatens a franchise growing 18%.
The backlog carries a weighted average duration of 2.3 years, so the return runs on a visible schedule. Microsoft's Maia 200 chips deliver up to 1.7x more tokens per watt, which means each watt of capacity produces more output.
Shares sit below the $559.15 52-week high, while the backlog, Azure growth and the dividend keep rising. Satya Nadella calls enterprise AI a "decade-long" opportunity. That decade-long horizon lines up with $677 billion in signed contracts already on the books.
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