Microsoft and Amazon Earnings Reports: Investors Are More Worried About AI-Driven Order Backlogs Than Revenue Growth Rate

As Microsoft and Amazon released their earnings reports after the US stock market closed on Wednesday, Wall Street began turning its attention to a metric that usually doesn't appear in press releases—"Remaining Performance Obligations", which refers to the sales backlog that cloud computing companies will recognize in the future from multi-year contracts. This figure is becoming a new yardstick for measuring whether the AI frenzy is overheated.

Since the launch of ChatGPT, AI companies like OpenAI and Anthropic have made hundreds of billions of dollars in long-term commitments to cloud providers, and these huge contracts are reshaping the competitive landscape of the cloud computing market. Data shows that Microsoft’s newly added order backlog has surpassed Amazon’s AWS cloud business, while Google has nearly caught up with the largest cloud provider.

But concerns among investors are rising: Can these committed sales revenues really be realized? The case of Oracle offers a warning—even though its order backlog soared to $460 billion due to OpenAI's $300 billion commitment, its stock price fell by a quarter, as the market doubts the profitability and feasibility of this business.

BofA analyst Justin Post stated that order backlog "is a good leading indicator," especially when it diverges from the direction of revenue growth, investors tend to pay more attention to it. How the market reacts when these commitments translate into revenue for cloud companies will be an important signal in assessing the risk of an AI bubble.

Order Backlog Metric Emerges

During cloud computing earnings seasons, investors typically focus on the revenue growth of AWS, Microsoft Azure, and Google Cloud Platform. But the financial metric of "Remaining Performance Obligations" is gaining more attention.

This figure represents the sales revenue cloud providers will recognize in the future based on multi-year contracts. As AI companies like OpenAI and Anthropic make huge long-term commitments to cloud vendors—whose servers support their AI models—the scale and changes in order backlog are revealing new dynamics in AI-era competition.

BofA analyst Justin Post pointed out that when order backlog diverges from revenue growth trends, investors pay close attention to this metric. Data as of September 30th last year show that this usually low-profile indicator has become key to understanding the shifting cloud computing market landscape.

Competitive Landscape is Changing

Although Amazon’s cloud division pioneered the business model of selling computing infrastructure on demand and still holds the largest market share, since ChatGPT was launched in late 2022, Amazon has fallen behind second-place Microsoft in the amount of newly added order backlog, and is even slightly behind Google.

Google previously lagged in the cloud computing market but has now risen to become a formidable competitor to larger rivals, thanks to its cutting-edge AI technology. Justin Post said, "Google is a huge success story," as it successfully attracted AI companies to pay for leases on its custom AI chips.

This dynamic, along with Amazon’s slower growth rate, explains investors’ relatively downbeat view of AWS last year. As OpenAI’s primary cloud provider, Microsoft holds an edge in order backlog growth, while Google’s strong rise has reshaped the triangular competitive pattern of the cloud computing market.

Concerns Behind the Numbers

Order backlog data itself has limitations. Each company uses slightly different standards: Microsoft’s figures include enterprise commitments for its vast Windows and Office businesses, and Google’s metrics also cover productivity suites and other divisions.

The bigger risk is whether this cash will materialize as promised. During the pandemic, businesses renegotiated contracts with cloud vendors, deferring spending to future years. Now, huge deals from single cloud customers—usually OpenAI—can single-handedly drive big swings in this number.

Francine McKenna, professor at Montclair State University and publisher of a newsletter on accounting issues, said:

"The issue is, of these reported remaining performance obligations, how much is for business far in the future, which may or may not be delivered, and may or may not be recognized as revenue."

In the fourth quarter of last year, more large commitments poured in. OpenAI said it will spend an additional $250 billion on Microsoft Azure and $38 billion on AWS. Anthropic pledged to purchase $30 billion in computing capacity from Azure, as part of an investment agreement.

Oracle’s Warning

Oracle’s experience has sounded an alarm for the market. Since late 2022, its order backlog has soared by $460 billion, almost entirely relying on OpenAI’s $300 billion commitment to rent space at Oracle data centers in the future.

But the company’s stock price has dropped by a quarter, as investors doubted whether the business would be profitable and if the full deal would actually come to fruition. This market response shows that even if order backlog numbers are staggering, without visibility into profits or certainty of execution, investors may still vote with their feet.

As the latest commitments from Microsoft, Amazon, and Google show up in each company's order backlog, the market’s reaction will become an important gauge of how concerned investors are about a potential AI bubble. These numbers not only reflect the scale of AI demand but also test the market’s confidence in the sustainability of this technological revolution.

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