Microsoft (NASDAQ:MSFT) delivered a strong Q2 for fiscal 2026, with revenue rising 17% year over year and beating analyst estimates. Performance was robust across most segments, though More Personal Computing lagged due to softer than expected gaming revenue. Forward looking metrics were particularly striking, as commercial bookings surged 230% and remaining performance obligation (RPO) reached $625 billion. It should be noted that a significant portion of this RPO is tied to OpenAI, which also contributed a $7.6 billion gain to income following its recent recapitalization.
Despite the beat, investor anxiety is high due to a perceived “paradox” between record spending and cooling cloud momentum. Quarterly capital expenditure reached a breathtaking $37.5 billion to support AI, yet Azure growth slowed slightly to 39% (down from 40% last quarter) and is projected to decelerate further to 37-38% in the coming months.
This slowdown is compounded by severe capacity constraints, as management admitted they are currently unable to meet full cloud demand due to a lack of available hardware. This creates a dual risk: that supply shortages will drive customers to better equipped competitors, or that Microsoft’s massive infrastructure buildout will finally come online just as peak AI demand begins to normalize.
For more details, key highlights, and commentary, check out the high-level earnings summary.
