Azure grows 48% with $677B backlog as Microsoft tightens control of AI data centers

Microsoft's cloud is still accelerating. Azure revenue grew 48% year over year in the first quarter of fiscal 2027, and guidance calls for 49-50% in the second quarter. Commercial remaining performance obligations, the contracted backlog, reached $677B, and Microsoft says demand continues to outrun supply.

Capacity is the constraint, and Microsoft is changing how it builds. It is tightening oversight of external AI data center projects, such as leases and third-party builds, and favoring infrastructure it owns. It also unveiled the Maia 300 AI chip, slated for production in 2027, part of reducing dependence on NVIDIA.

The growth rate compares favorably with AWS, which grew 39% in Q3 while reporting Fortune 500 Bedrock spend up nearly 7X. But the competitive map is shifting: OpenAI, Microsoft's closest partner, just put ChatGPT Enterprise on AWS Marketplace, and Bedrock carries OpenAI models. Microsoft is responding with Copilot consumption billing, where 100 Copilot Business seats can draw up to 400,000 credits monthly, and Sweden reportedly kept Copilot while blocking ChatGPT and Claude in government offices.

Caveats: backlog includes multi-year commitments that depend on Microsoft actually delivering capacity. Ignite 2026 opens November 17, where announcements on Maia and agents are expected.