But the real story is the massive backlog surge amidst AI boom, signaling we're only in the "middle innings" of cloud adoption.

The Azure Growth Engine Fired on All Cylinders

Microsoft's Cloud reached a $168B run rate, while Azure itself grew significantly ahead of expectations.

CEO Satya Nadella highlighted 3 key drivers: migrations, cloud native applications that are scaling, and new AI workloads – all building on each other.

The migration story remains massive. Nadella emphasized they're "not anywhere close to the finish line – if at best maybe in the middle innings" of cloud adoption. Nestle's recent move of "200 SAP instances, 10,000+ servers, 1.2 petabytes of data to Azure" exemplifies the scale of shift and what’s still ahead.

Commercial remaining performance obligation jumped to $368B, up 37% – representing $53B in new contracted business this quarter alone.

Assuming Azure's proportional share mirrors its ~45% of Microsoft Cloud revenue, that suggests a new high of ~$165B in Azure commits.

AI Platform Reaching True Scale

AI momentum now extends far beyond hype. Microsoft processed "over 500 trillion tokens this year, up over 7x" through Azure AI Foundry APIs – what Nadella called "a good indicator of true platform diffusion beyond a few head apps."

Copilot applications now serve 100M+ monthly active users across commercial and consumer segments.

Capex Investment Matching Unprecedented Demand

Microsoft guided Q1 CapEx to "over $30 billion" – a significant jump from $24.2B last quarter.

CFO Amy Hood justified this with a contracted backlog: "we have $368 billion of contracted backlog we need to deliver." Even after building "more than 2 gigawatts of new capacity over the past 12 months," demand remains constrained through H1 of this calendar year and they expect this to be the case until January at least.

What this means for Cloud GTM Leaders

• Migrations window is wide open – Microsoft sees "middle innings" opportunity across migrating to cloud VMware, SAP, and on-premises workloads

• AI workloads driving cloud consumption – companies "come for AI but stay for more than AI" highlighted CEO

• Contract sizes expanding – growth in both "$10 million and $100 million plus contracts"

• Platform stickiness increasing – multi-model AI strategy through Foundry creates deeper customer integration

• Record value of cloud commits and customers' ability to use 100% of them on Microsoft Marketplace for eligible solutions, there is a unique opportunity to grow on this platform

After-hours trading on the earning call day pushed Microsoft's market cap toward the $4T threshold. With Azure alone a $75B business growing 39% in Q4, hyperscaler dominance in enterprise AI transformation continues accelerating.

If Azure were a standalone company, it would rank among the world's fastest-growing mega-corporations.

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