Microsoft's AI-fueled commercial backlog growth masks underlying concerns over profitability and competition in cloud computing.

Microsoft's commercial backlog doubled YoY in Q2, with a single customer accounting for nearly half of it. However, the company's gross profit margin narrowed due to aggressive AI infrastructure spending. Competition in cloud computing is intensifying, with Amazon's cloud growth reaccelerating. Microsoft's AI investments are pressuring margins, and the company guided for its operating margin to be down YoY in Q3.