Microsoft said in its quarterly report filed on 28 October 2026 that revenue allocated to the commercial portion of its remaining performance obligation was $677 billion as of 30 September. Its fiscal 2026 annual report put the same figure at $678 billion as of 30 June.
The filing says Microsoft expects to recognise approximately 30% of that commercial backlog over the next 12 months. By our arithmetic, that is about $203 billion; the other roughly $474 billion falls further out.
A vertical news Short narrated from the published headlines and opening lines of this piece and two related FourWeekMBA pieces on Microsoft.
Business Pill · Free Cash Flow
An evergreen Business Engineer explainer on free cash flow, the cash a company has left after capital expenditures. It explains the general idea only and does not discuss Microsoft’s backlog.
The key insight: By our arithmetic from Microsoft’s filings, about $203 billion of its $677 billion commercial backlog is expected to be recognised within the next 12 months.
Remaining performance obligation is contracted revenue that Microsoft has not yet recognised; the filings say it includes unearned revenue and amounts to be invoiced in future periods. Microsoft’s filings put the commercial portion at $368 billion on 30 June 2025, $392 billion on 30 September 2025, $625 billion on 31 December 2025, $627 billion on 31 March 2026, $678 billion on 30 June 2026 and $677 billion on 30 September 2026.
The results release published the same day says commercial remaining performance obligation increased 73% to $677 billion. By our arithmetic, $233 billion of the $285 billion added over those twelve months came in the single quarter to 31 December 2025. The three quarters since added $52 billion.
Microsoft total remaining performance obligation and the portion it expects to recognise within 12 months, $ billions, June 2025 to September 2026. The 12-month line and the year-on-year changes are our arithmetic: total RPO multiplied by the approximate 12-month share given in each filing. Sources: Microsoft Forms 10-K and 10-Q, revenue note.
The Part Due Within a Year
Each filing also gives the approximate share Microsoft expects to recognise in the next 12 months. For the total company, that share was approximately 40% in June and September 2025, 25% in December 2025, and 30% in March, June and September 2026.
Applied to total remaining performance obligation, which the filings put at $398 billion a year ago and $683 billion now, those shares give about $159 billion due within a year in September 2025 and about $205 billion in September 2026, by our arithmetic. That is a rise of about 29%, against about 72% for the total.
The filings also give a weighted average duration for the commercial backlog: approximately 2.5 years in December 2025 and March 2026, and approximately 2.3 years in June and September 2026.
Update, 28 Oct: what the call added on the backlog. A machine transcript of Microsoft’s earnings webcast (Microsoft’s official transcript was not yet available) has Amy Hood saying commercial remaining performance obligation “grew 73% to $677 billion, with a smaller sequential decline relative to historical seasonality due to the large Azure commitment this quarter.” She said roughly 30% will be recognized in revenue in the next 12 months, “up 29% year over year,” and that “the remaining portion, recognized beyond the next 12 months, increased 98%.”
Commercial bookings decreased 12%, which she put down to “the impact from large Azure commitments in the prior year, partially offset by healthy growth in our commercial sales motions, including a large Azure commitment this quarter.” Answering an analyst, Satya Nadella said he wants enterprise breadth “as opposed to four customers who buy a lot of capacity from you, and you can show a few quarters of growth. And that’s not a business, as far as I’m concerned.”
As we read the filings, most of the year’s growth arrived at once: by our arithmetic, $233 billion of the $285 billion added between September 2025 and September 2026 came in the quarter to 31 December 2025.
By our arithmetic, the total-company amount due within a year rose about 29% over those twelve months, to about $205 billion, while total remaining performance obligation rose about 72%, to $683 billion.
The filings put the weighted average duration of the commercial backlog at approximately 2.5 years in December 2025 and March 2026, and approximately 2.3 years in June and September 2026.
Microsoft Form 10-Q, quarter to 31 March 2026, revenue note
“Estimating revenue that will be allocated to remaining performance obligations can involve significant judgments, including identifying and assessing variable consideration and potential renegotiation of commitments”
Three Implications
FOR THE HEADLINE FIGURE Commercial remaining performance obligation was $677 billion on 30 September 2026 and $678 billion on 30 June 2026, according to Microsoft’s filings; the release says it was up 73% from a year earlier.
FOR THE NEAR TERM By our arithmetic, about $203 billion of the commercial backlog is due within 12 months and roughly $474 billion after that.
FOR CONCENTRATION The September quarterly report does not say how much of the backlog comes from any one customer.
The framework argues: “The $1T capex cycle is being underwritten by a $1T concentrated demand commitment from two counterparties whose combined free cash flow is deeply negative.” It names those counterparties as OpenAI and Anthropic.
Microsoft’s filings give the size and timing of its commercial backlog, $677 billion with about 30% due within a year, but not its customer mix. The framework was published in May 2026 and does not discuss these figures.
What Is Not Established
The 12-month percentages are approximate in the filings, so the dollar amounts derived from them are approximate too. Before December 2025 the filings give the 12-month share only for the total company, which is why our year-on-year comparison uses total, not commercial, figures.
Microsoft’s release says it gives forward-looking guidance on its earnings call; any backlog commentary from the call is not included here.
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Microsoft’s commercial backlog was $677 billion at the end of September, against $678 billion at the end of June, according to its filings. About $203 billion of it, by our arithmetic, is expected to be recognised within a year. By our arithmetic, the total-company portion due within a year rose about 29% since September 2025, against about 72% for total remaining performance obligation.
A note on sourcing. All backlog figures come from the revenue notes in Microsoft’s Forms 10-Q and 10-K for June 2025 through September 2026, the latest filed on 28 October 2026, and from its fiscal 2027 first-quarter results release (8-K, Exhibit 99.1). Dollar amounts due within 12 months, differences and growth rates are our arithmetic; linked earlier pieces carry their own sources.
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
