Azure Held at 39% While Microsoft Fed Its Own AI

Azure held 39% growth for four quarters while UBS still rated Microsoft a buy, arguing AI demand, not the spending bill, is the constraint. The same June 7, 2026 note put the three big public clouds at $84.8 billion of combined first-quarter revenue, up 39% from a year earlier and 15 points faster than that year-ago pace.

Microsoft had been sending scarce racks to OpenAI and to its own Copilot fleet, so Google Cloud took the loud growth number. Extra capacity then showed up in the quarter ended June 30, 2026, and Azure printed 43%.

UBS Held Buy Ratings After an $84.8 Billion Quarter

UBS kept buy ratings on the three major cloud providers after that first-quarter haul, which it tied to AI computing demand rather than a fading cycle. Microsoft, Amazon, and Oracle added $6.5 billion of sequential revenue in the quarter, 196% more than the sequential step a year earlier, and UBS counted four straight quarters of those large additions.

The brokerage said the next sequential step should rise to $8.5 billion in the second quarter of 2026. Street forecasts for the group ran from $8.1 billion to $9.8 billion through year-end.

THE Q1 2026 CLOUD PRINT

• Combined revenue: The three major public clouds took in $84.8 billion, up 39% year over year, a 15-point acceleration from the year-ago growth rate.
• Sequential step: Microsoft, Amazon, and Oracle added $6.5 billion, 196% above the sequential gain a year earlier.
• Cloud margin: AWS, Microsoft’s Intelligent Cloud segment, and Google Cloud held a combined 37% operating margin, unchanged from the fourth quarter of 2025, with AWS at 38%.

Those figures are why UBS treated the spending scare as a conversion problem. Orders were still arriving faster than the buildings could open.

Azure’s Growth Rate Stopped Moving for a Year

Google Cloud led the acceleration, with revenue of $20.03 billion, up 63%, a 35-point jump from first-quarter 2025. AWS grew 28% to $37.59 billion, an 11-point acceleration. Azure, on UBS’s scorecard, held at 39% for four straight quarters.

Microsoft’s own filing for the quarter ended March 31, 2026, is the same story with more decimal places. Azure and other cloud services grew 40% as reported and 39% in constant currency, against a year-earlier period that already included faster AI demand. The company’s published quarterly series shows how tight that band was before the June breakout.

AZURE GROWTH, QUARTER BY QUARTER

UBS’s explanation was blunt: Microsoft redirected capacity toward internal needs. That is not a demand miss. It is a queue.

Why Microsoft Fed Its Own AI First

On the April 29, 2026 call covering the March quarter, Satya Nadella, Microsoft’s chairman and chief executive, said the AI business had passed a $37 billion annual run rate, up 123%. Paid Microsoft 365 Copilot seats had already cleared 20 million. Those products run on the same GPU and custom-chip pool customers want to rent on Azure.

Commercial remaining performance obligation, the contracted work not yet in revenue, reached a commercial backlog of $627 billion, up 99% year over year. UBS noted that as of the December 2025 quarter, 45% of that backlog was tied to OpenAI. Microsoft said non-OpenAI remaining performance obligation still grew 26% in the March quarter, in line with historic seasonality, which is how a partner that large can dominate the stock of orders without being the only buyer.

Amy Hood, Microsoft’s chief financial officer, told investors that supply would stay tight at least through 2026 and that Azure growth should pick up only modestly in the second half of the calendar year. Calendar 2026 capital spending was pegged at $190 billion on that call, including $25 billion of higher component prices, with the fiscal fourth quarter alone seen at more than $40 billion. Nadella said the company added another gigawatt in the March quarter and was still on track to double its footprint in two years. The Fairwater site in Wisconsin came online six weeks early, which is how a capacity story leaks into a single quarter’s print.

We are focused on delivering cloud and AI infrastructure and solutions that empower every business to eval-max their outcomes in the agentic computing era.

Satya Nadella, Chairman and Chief Executive Officer, Microsoft fiscal third-quarter results post

A UBS survey of about 140 enterprises found Azure preferred by 69% of respondents for AI infrastructure, ahead of AWS at 53% and Google Cloud at 27%, the last of those down from 31% in October 2025. The most-wanted cloud was the one that could least afford to put every new rack on the public price list.

The 63% Quarter Went to Google Cloud

Google Cloud’s 63% growth to $20.03 billion is the screenshot Azure could not print while it was feeding itself. Sundar Pichai, Alphabet’s chief executive, said on the April 29, 2026 call that the company was compute constrained in the near term, and that cloud revenue would have been higher if it had been able to meet demand. That is the same bottleneck, with a different growth rate attached.

Alphabet put Google Cloud operating income at $6.6 billion. UBS showed Google Cloud’s operating margin at 33%, up from 18% in the first quarter of 2025. Pichai said revenue from products built on the company’s generative AI models grew nearly 800% year over year, and that enterprise AI had become Cloud’s primary growth driver for the first time. The backlog nearly doubled sequentially, to $462 billion, with just over 50% expected to convert to revenue within 24 months.

AWS, still the largest of the three on revenue, grew 28% to $37.59 billion. Andy Jassy, Amazon’s chief executive, wrote after the print that the AWS AI revenue run rate is over $15 billion, almost 260 times what AWS itself was doing three years after launch. UBS said that AI line was up more than 100% year over year. The slower percentage is the installed-base math of a $37.59 billion run rate, not a lack of AI work.

Preference and growth parted company. Azure kept the survey. Google Cloud kept the acceleration. AWS kept the scale. UBS’s buy list still covered the group because the constraint in each case was power and chips, not a customer strike.

$2.10 Trillion in Orders Against $673 Billion of Build

The combined committed backlog of Amazon, Microsoft, Google, Oracle, and CoreWeave reached $2.10 trillion at the end of the first quarter of 2026, up 184% year over year, UBS said, citing company filings. The five added $400 billion to $450 billion of new backlog in each of the prior three quarters. CoreWeave, the smallest name in that five, told investors it had grown contracted revenue backlog to nearly $100 billion after more than $40 billion of new commitments in the quarter.

COMMITTED BACKLOG AT THE END OF 1Q26

UBS’s combined 2026 capital spending of $673.14 billion for those five names is up 76% from $382.66 billion in 2025. That is the figure investors keep calling a warning. Against $2.10 trillion of already-signed work, it reads more like a construction schedule. Google, UBS said, had already indicated that 2027 capital spending would “significantly increase” from 2026 levels.

The leftover worry is not that the orders vanish tomorrow. It is that too much of the Microsoft pile still traces to one lab, and that depreciation on short-lived chips will hit earnings before the backlog becomes cash. Microsoft’s own later quarter cut against the first half of that fear, which is why the June numbers belong in this story.

Chip Commitments Inside the Order Book

A growing share of what looks like cloud backlog is silicon. Amazon’s $364 billion backlog included $225 billion of Trainium chip commitments, 62% of the book, UBS said. Jassy put Trainium commitments above $225 billion on the first-quarter call and said the chips business, including Graviton and Nitro, had passed a $20 billion annual run rate. Trainium2, he said, had about 30% better price performance than comparable GPUs and was largely sold out. Trainium3, which had started shipping, was nearly fully subscribed.

Google’s $222 billion sequential backlog jump was driven in part by TPU sale agreements with external customers, a stream Alphabet said it would start recognizing later in 2026, with the majority converting in 2027. Pichai said the company would deliver TPUs directly to select customers’ data centers. That is a hardware sale sitting inside a cloud backlog, which is why Google Cloud can post a 63% growth rate and still tell investors that most of a new order will not hit revenue until the following year.

WHERE THE BACKLOG IS NO LONGER JUST RENTAL TIME

• Trainium: $225 billion of Amazon’s $364 billion backlog is chip commitments, 62% of the book.
• TPU sales: External TPU deals helped lift Google Cloud’s backlog by $222 billion sequentially, with most of that hardware revenue due in 2027.
• OpenAI on Azure: 45% of Microsoft’s December 2025 commercial backlog was tied to one partner, even as non-OpenAI remaining performance obligation kept growing.
• Bedrock: Amazon said more than 125,000 customers use the model platform, covering nearly 80% of the Fortune 100, with customer spend up 170% quarter over quarter.

Amazon called Bedrock a multi-billion-dollar annualized run-rate business on its fourth-quarter 2025 call. Microsoft is on a parallel path with Maia 200 accelerators live in Iowa and Arizona, and with Foundry hosting OpenAI, Anthropic, and open-source models side by side. The hyperscalers are no longer only landlords of Nvidia time. They are selling their own chips into the same contracts that bulls use to defend the spend.

Extra Racks Showed Up in the June Quarter

Microsoft reported fiscal fourth-quarter results on July 29, 2026, for the period ended June 30. Revenue was $90.0 billion, up 18%. Azure and other cloud services grew 43%. Nadella said Azure revenue surpassed $100 billion for the fiscal year, and that Microsoft 365 Copilot had reached more than 30 million paid seats, up from more than 20 million in the March quarter.

https://x.com/Microsoft/status/2082559027708412340

Microsoft Cloud revenue was $59.3 billion, up 27%. Commercial remaining performance obligation rose 84% to $678 billion. Hood said all of the sequential backlog growth came from customers outside frontier model companies, and that remaining performance obligation still increased 25% with OpenAI excluded. About 30% of the book, including OpenAI, is due as revenue in the next 12 months, with a weighted average duration of 2.3 years.

Intelligent Cloud revenue was $39.3 billion, up 32%. Hood said customer demand continues to exceed available capacity, and that the 43% Azure print beat expectations because of efficiency gains across the CPU and GPU fleet and earlier delivery of new capacity. For the quarter ending September 30, 2026, Microsoft said it expects Azure growth of about 45% in constant currency.

We are advancing the frontier on the cost-to-outcome curve, ensuring every customer can turn tokens into business results. This year, Azure revenue surpassed $100 billion for the first time, and Microsoft 365 Copilot reached over 30 million paid seats, reflecting the confidence customers are placing in us to power their AI transformation.

Satya Nadella, Chairman and Chief Executive Officer, Microsoft fiscal fourth-quarter earnings release

The June quarter is the test UBS described in June without having the print yet. Azure did not find a new class of customer in 90 days. Microsoft found more racks, kept Copilot and OpenAI running, and still lifted the public cloud growth rate four points. The concentration objection does not disappear: a 25% increase in the non-OpenAI backlog is healthy, and it is not the same thing as a book that no longer leans on one lab. Hood’s own line after the 43% print was that demand still exceeds supply.

UBS’s buy case was that $2.10 trillion of signed work would pull $673.14 billion of 2026 spending through the income statement. Azure’s year stuck near 39% showed what happens when the preferred vendor consumes its own inventory. The 43% quarter showed what happens when the inventory finally shows up.

Disclaimer: This article is news reporting and analysis of brokerage research and company filings, and it is for information only. It is not investment advice, a recommendation to buy or sell any security, or a forecast of Microsoft, Amazon, Alphabet, Oracle, or CoreWeave shares. Readers should consult a licensed financial adviser or investment professional who can review their own holdings, time horizon, and risk tolerance before acting on any figure in this piece. Revenue, backlog, margin, and capital-spending numbers are taken from the June 7, 2026 UBS note and from company results covering the quarters ended March 31, 2026 and June 30, 2026, and those figures can change in later reports.