Microsoft (MSFT) will report its fiscal second quarter earnings on Wednesday, and one number in particular will be on investors’ minds: remaining performance obligations (RPO).

The measurement, which refers to contracts Microsoft has with customers that haven’t been paid out yet, has become a major metric to help Wall Street get a better idea of overall AI demand.

In its prior quarter, Microsoft revealed that it had $392 billion in RPO, and according to Jefferies analyst Brent Thill, that will increase in Q2.

“[Fiscal Q2] RPO should show the largest sequential step-up ever, driven by inclusion of the $250 billion [OpenAI] commitment & Anthropic’s $30 billion Azure compute agreements, reinforcing unprecedented multi‑year demand visibility underpinning a strong durable growth outlook for Azure and [M365 Commercial],” Thill wrote in a note to investors.

Microsoft is seeing reaccelerating cloud revenue growth thanks to the AI explosion, which is boosting its Azure business.

But the company is also facing capacity constraints, meaning customer demand for AI services is outpacing Microsoft’s ability to supply it, putting an artificial cap on the Windows maker’s revenue.

That’s also why the company is pouring billions more into capital expenditures, with Microsoft CFO Amy Hood saying that the software firm expects to increase fiscal 2026 capex over last year’s $88.2 billion. The company already spent $34.9 billion in Q1.

For the quarter, Microsoft is expected to report earnings per share (EPS) of $3.92 on revenue of $80.3 billion, according to Bloomberg analyst consensus estimates. That’s up from an EPS of $3.23 and revenue of $69.6 billion the company saw in Q2 last year.

Commercial cloud revenue is expected to jump 25% to $51.2 billion, though gross margins are expected to decline 4.89%.

Microsoft’s Productivity and Business Processes is anticipated to hit $33.6 billion, up 14% year over year, while its Intelligent Cloud segment revenue is set to climb 26% to $32.2 billion. The company’s More Personal Computing business is set to bring in $14.3 billion.

Microsoft’s stock price is up just 4% over the past 12 months, slightly outpacing cloud rival Amazon (AMZN), which is up a mere 1.6% in the same time period.

Both companies, however, are being blown away by Google’s (GOOG, GOOGL) stock, which is up a stunning 64% over the last 12 months.

Much of that growth is tied to the debut of Google’s Gemini 3, which established the company as the AI model leader ahead of Microsoft ally OpenAI (OPAI.PVT) and its ChatGPT.

Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.

Microsoft (MSFT) will report its fiscal second quarter earnings on Wednesday, and one number in particular will be on investors’ minds: remaining performance obligations (RPO).

The measurement, which refers to contracts Microsoft has with customers that haven’t been paid out yet, has become a major metric to help Wall Street get a better idea of overall AI demand.

In its prior quarter, Microsoft revealed that it had $392 billion in RPO, and according to Jefferies analyst Brent Thill, that will increase in Q2.

“[Fiscal Q2] RPO should show the largest sequential step-up ever, driven by inclusion of the $250 billion [OpenAI] commitment & Anthropic’s $30 billion Azure compute agreements, reinforcing unprecedented multi‑year demand visibility underpinning a strong durable growth outlook for Azure and [M365 Commercial],” Thill wrote in a note to investors.

Microsoft is seeing reaccelerating cloud revenue growth thanks to the AI explosion, which is boosting its Azure business.

But the company is also facing capacity constraints, meaning customer demand for AI services is outpacing Microsoft’s ability to supply it, putting an artificial cap on the Windows maker’s revenue.

That’s also why the company is pouring billions more into capital expenditures, with Microsoft CFO Amy Hood saying that the software firm expects to increase fiscal 2026 capex over last year’s $88.2 billion. The company already spent $34.9 billion in Q1.

For the quarter, Microsoft is expected to report earnings per share (EPS) of $3.92 on revenue of $80.3 billion, according to Bloomberg analyst consensus estimates. That’s up from an EPS of $3.23 and revenue of $69.6 billion the company saw in Q2 last year.

Commercial cloud revenue is expected to jump 25% to $51.2 billion, though gross margins are expected to decline 4.89%.

Microsoft’s Productivity and Business Processes is anticipated to hit $33.6 billion, up 14% year over year, while its Intelligent Cloud segment revenue is set to climb 26% to $32.2 billion. The company’s More Personal Computing business is set to bring in $14.3 billion.

Microsoft’s stock price is up just 4% over the past 12 months, slightly outpacing cloud rival Amazon (AMZN), which is up a mere 1.6% in the same time period.

Both companies, however, are being blown away by Google’s (GOOG, GOOGL) stock, which is up a stunning 64% over the last 12 months.

Much of that growth is tied to the debut of Google’s Gemini 3, which established the company as the AI model leader ahead of Microsoft ally OpenAI (OPAI.PVT) and its ChatGPT.

Email Daniel Howley at dhowley@yahoofinance.com. Follow him on Twitter at @DanielHowley.