Microsoft backlog hits $678 billion as cloud revenue rises 27%

For investors, that combination is central. Microsoft’s remaining performance obligation jumped 84% to $678 billion, giving the stock a visibility profile that most large-cap software and cloud peers cannot match. It also helps explain why many long-only investors continue to favor Microsoft as a core holding even after its “melt-up” and subsequent volatility. The market is effectively paying for a business that can absorb AI capex, defend its cloud share and still sell software across productivity, security and enterprise services. That is a different proposition from a more valuation-sensitive story such as Alphabet, where search durability is still strong but investors remain more exposed to shifts in ad mix, AI monetization timing and capital intensity.

Microsoft’s price action underscores the tension between conviction and fatigue. The stock surged to $464.72 on July 31, putting it well above its 50-day average of $399.39, while the relative strength index at 47.7 suggests momentum is no longer overheated after July’s move. The technical picture is still supportive, but not frothy, which often fits a large-cap compounder that institutions can own through cycles rather than trade around them. Adalytica’s Microsoft earnings sentiment is neutral at 57, while awareness is at an extreme-greed reading of 96, implying the name is widely watched but not yet universally euphoric.

Alphabet tells a different valuation story. Google’s revenues rose 24% year over year to $119.8 billion in its latest 10-Q, with Google Cloud up 82%, yet the stock at $356.13 remains below its recent peak and trades with a more complicated market narrative. Investors still see a high-quality franchise, but one with more ambiguity around how quickly AI spending turns into durable margin expansion. Microsoft, by contrast, looks like the cleaner expression of enterprise AI infrastructure demand and software monetization. Its cloud business is large enough to matter, its backlog gives revenue visibility, and its balance of growth and resilience is what income and growth investors typically want in a volatile megacap tape.

None of that means Microsoft is cheap. The stock is still trading at elevated absolute levels, and its recent climb leaves less room for disappointment if AI spending produces only modest near-term margin leverage. A bear case would focus on the same issue flagged in the 10-K: margin pressure from AI infrastructure outlays and the risk that customers eventually push back on pricing or spending. But the bull case is stronger so long as enterprise demand holds and Microsoft keeps turning AI deployment into cloud usage, software adoption and long-dated contractual revenue.

For now, that is why Microsoft still screens as the better core holding in the Magnificent 7 cohort: it combines scale, visibility and monetization power in a way that remains easier to underwrite than Alphabet’s more valuation-sensitive AI transition. The next catalyst is not whether AI spending continues — it almost certainly will — but whether Microsoft can keep translating it into accelerating commercial cloud revenue without a meaningful break in margins or customer demand.