Microsoft’s recent earnings report for Q2 FY2026 reveals impressive figures, with revenue hitting $81.3 billion, a 17% increase, and Azure growing by 39%. However, the stock dropped 11% despite these strong results. CFO Amy Hood highlighted a significant issue: demand for Azure services is outstripping Microsoft’s capacity to fulfill it, as the company faces infrastructure constraints. This growing demand is evident, with Azure’s quarterly revenue reaching $32.9 billion, but growth has slightly slowed from the previous quarter due to capacity limitations. The article points out that Microsoft has over 250 customers expected to process more than 1 trillion tokens on its Foundry platform this year. At an average of $5 per million tokens, this translates to roughly $5 billion in annual revenue. Despite having 900 million monthly active users across AI features and 150 million using first-party Copilots, the revenue from these AI services remains a small portion of the overall Microsoft Cloud revenue, which surpassed $51 billion in Q2. Operating income increased by 21% to $38.3 billion, bolstered by a substantial $37.5 billion in capital expenditures, indicating a commitment to infrastructure growth. Microsoft’s commercial remaining performance obligation jumped 110% to $625 billion, with a staggering $281 billion attributed to OpenAI alone. This concentration on a single customer poses significant risk, highlighting both the massive demand for AI services and the potential vulnerabilities in Microsoft’s business model.