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Microsoft (MSFT) — moat facet
Microsoft's two customer disclosures used to contradict each other; this quarter the reassuring one was narrowed and the awkward one grew.
Microsoft's two customer disclosures tell opposite stories, and the gap between them is the most interesting thing on this page. The annual report is unambiguous about revenue: "No sales to an individual customer or country other than the United States accounted for more than 10% of revenue" in fiscal 2026, 2025 or 20241. Hundreds of millions of seats sold to hundreds of thousands of organisations, none of which matters individually. That sentence has since been narrowed. In the quarterly report filed on the twenty-eighth of October the same disclosure reads: no sales to an individual country other than the United States4. The words “customer or” were taken out.
A second disclosure, which did not exist two years ago, says something else. Because OpenAI is an equity-method investee and therefore a related party, Microsoft must now report what it sells to it: $24.1 billion of revenue in fiscal 2026, with $6.0 billion still owed at the year end2. That is 7.3% of the company — comfortably the largest customer Microsoft has, three points below the threshold at which the reassuring sentence above would have to be rewritten, and disclosed only by accident of the accounting. One quarter later the same counterparty paid $10.0 billion in three months, 10.8% of revenue5, and the threshold had stopped being mentioned.
The backlog leans the same way. Commercial remaining performance obligation reached $678 billion, up 84% in a year3, of which the largest single component is OpenAI's committed Azure purchases; three months later it stood at $677 billion6, which is to say it stopped growing. A company with no revenue concentration has meaningful concentration in its contracted future revenue, and the concentration is in a counterparty whose own revenues remain a fraction of what it has promised to spend.
Both facts are true and they describe different time periods. Today's revenue comes from the most diversified enterprise base in technology — governments, banks, manufacturers, schools, and the OEMs who pre-install Windows on the machines they sell. Tomorrow's contracted revenue leans heavily on one AI laboratory that Microsoft part-owns, sells to, buys from and competes with. The pages that follow take the diversified base, the concentrated backlog, the governments, and the OEM channel in turn.
The revenue base remains the most diversified in enterprise technology and the 10-K language has been unchanged for three years. Set against that, the contracted backlog has become concentrated in a way the revenue never was. Stable overall: today's customers are as safe as they have ever been, and tomorrow's are more concentrated than they have ever been.
Microsoft's filings used to say no customer reaches ten per cent, and they also disclose, because OpenAI is an equity-method investee, what that counterparty pays. In the September 2026 quarter it paid $10.0 billion, 10.8% of revenue, and the ten-per-cent sentence was narrowed to cover countries only. Watch the related-party figure, which is now the only one disclosed.
Source: Microsoft Form 10-K, FY2026 — related-party disclosure ↗- Reported"No sales to an individual customer or country other than the United States accounted for more than 10% of revenue for fiscal years 2026, 2025, or 2024."Microsoft Form 10-K, FY2026 — financial statements and notes: net income $133,749M, diluted EPS $17.95; segment revenue and operating income (Productivity and Business Processes $139,996M / $83,879M; Intelligent Cloud $137,791M / $56,972M; More Personal Computing $54,052M / $14,386M); revenue by product and service offering; additions to property and equipment $115,948M; net cash from operations $182,935M; unearned revenue $75,712M with $194,184M deferred and $185,737M recognised; revenue allocated to remaining performance obligations $684B, commercial $678B at a weighted average duration of about 2.3 years with approximately 30% expected within twelve months; contractual obligations $743,821M — FY2026 (ended June 30, 2026) · publ. July 29, 2026 · source ↗
- Moat Explorer calcRevenue from commercial arrangements with OpenAI was $24.1 billion in fiscal 2026, with accounts receivable of $6.0 billion at 30 June 2026 — 7.3% of revenue of $331,839M.Moat Explorer calculation from Microsoft Forms 10-K, FY2023-FY2026 — segment operating margin = segment operating income / segment revenue (Productivity and Business Processes $83,879M / $139,996M = 59.9% in FY2026 and $50,074M / $94,151M = 53.2% in FY2023; Intelligent Cloud $56,972M / $137,791M = 41.3%); free cash flow = net cash from operations less additions to property and equipment ($182,935M - $115,948M = $66,987M in FY2026; $118,548M - $44,477M = $74,071M in FY2024); capital spending as a share of operating cash flow (63% in FY2026, 38% in FY2024); Windows and Devices as a share of revenue ($17,084M / $331,839M = 5.1%); the near-term backlog = the disclosed percentage applied to the disclosed total ($205B of $684B in FY2026; $103B of $229B in FY2023); OpenAI's share of revenue = $24.1B / $331,839M = 7.3% — FY2023-FY2026 · publ. 2026 · source ↗
- ReportedCommercial remaining performance obligation reached $678 billion, up 84% year on year.Microsoft, Q4 FY2026 earnings release (Form 8-K, Exhibit 99.1) — quarter ended June 30, 2026: revenue $90,007M (+18%); operating income $40,603M (+18%); net income $35,766M GAAP and $35,286M non-GAAP; diluted EPS $4.81 and $4.74; Microsoft Cloud revenue $59.3B (+27%); commercial remaining performance obligation +84% to $678B; Azure and other cloud services +43%; Productivity and Business Processes $37,847M (+14%); Intelligent Cloud $39,306M (+32%); More Personal Computing $12,854M (-4%); Windows OEM and Devices -7%; XBOX content and services -10%; a $3.2B gain on the investment in Anthropic and lower-than-expected Voluntary Retirement Program expenses contributing $0.27 of EPS against guidance; Azure revenue surpassed $100 billion for the first time and Microsoft 365 Copilot reached over 30 million paid seats; $10.2B returned to shareholders — Q4 FY2026 (quarter ended June 30, 2026) · publ. July 29, 2026 · source ↗
- ReportedIn the quarterly report filed on the twenty-eighth of October the same disclosure reads: no sales to an individual country other than the United States.Microsoft Form 10-Q for the quarter ended September 30, 2026 - segment note, narrowed: “No sales to an individual country other than the United States accounted for more than 10% of revenue for the three months ended September 30, 2026 or 2025.” — Q1 FY2027 · publ. 2026-10-29 · source ↗
- Moat Explorer calcOne quarter later the same counterparty paid $10.0 billion in three months, 10.8% of revenue, and the threshold had stopped being mentioned.Moat Explorer calculation from Microsoft's Form 10-Q for the quarter ended September 30, 2026: revenue of $92,279 million, Azure revenue of $33,165 million, and revenue from commercial arrangements with OpenAI of $10.0 billion. — Q1 FY2027 · publ. 2026-10-29 · source ↗
- ReportedCommercial remaining performance obligation reached $678 billion, up 84% in a year, of which the largest single component is OpenAI's committed Azure purchases; three months later it stood at $677 billion, which is to say it stopped growing.Microsoft Form 10-Q for the quarter ended September 30, 2026 - revenue allocated to remaining performance obligations: $683 billion total and $677 billion commercial at September 30, 2026, with approximately 30% expected within twelve months. — Q1 FY2027 · publ. 2026-10-29 · source ↗
- Microsoft Form 10-K, FY2026 (SEC EDGAR)
- Microsoft Q4 FY2026 earnings release (Form 8-K, Exhibit 99.1)