"Microsoft is facing capacity constraints, and OpenAI is driving a large portion of the backlog in its cloud computing business. The company said its backlog in commercial bookings, a metric referred to as remaining performance obligations, ballooned 110% year over year to $625 billion when it reported earnings for the second quarter on Wednesday. OpenAI accounts for roughly 45% of those commitments, Microsoft revealed."
"Morgan Stanley's Keith Weiss said during the call that some on Wall Street may be spooked by slower growth in overall Azure revenue and the increase in capex spending. Microsoft's capital expenditures rose 66% year over year to $37.5 billion in the second quarter, another record for the company and testament to the sheer amount of money tech companies are spending amid the AI race."
Microsoft beat overall earnings expectations but shares fell more than 6% in after-market trading as concerns mounted over slowing Azure revenue growth and heavy dependence on OpenAI. Capacity constraints affected cloud computing operations while the commercial backlog, measured as remaining performance obligations, grew 110% year over year to $625 billion, with OpenAI representing roughly 45% of commitments. Capital expenditures rose 66% to $37.5 billion as spending on GPUs and CPUs increased for AI workloads. Analysts flagged dependency risks and questioned allocation of cloud resources across Azure and other Microsoft services.
Read at Business Insider
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