Because the launch of the ChatGPT chatbot in 2022, Microsoft has plowed increasingly more cash into constructing knowledge facilities in what one business analyst called “the most important infrastructure build-out that humanity has ever seen.”
However after 10 consecutive quarters of elevated spending for synthetic intelligence, the corporate has tapped on the brakes, in keeping with monetary outcomes launched Wednesday.
Within the first three months of 2025, Microsoft spent $21.4 billion on capital bills, down greater than $1 billion from the earlier quarter.
The corporate indicated it was on tempo to spend greater than than $85 billion on capital bills within the present fiscal yr, which ends in June. However the pullback, although slight, is a sign that the tech business’s urge for food for spending on A.I. just isn’t limitless.
General, Microsoft’s outcomes confirmed surprising energy in its enterprise. Gross sales surpassed $70 billion, up 13 p.c from the identical interval a yr earlier. Revenue rose to $25.8 billion, up 18 p.c. The outcomes far exceeded Wall Road’s expectations.
Regardless of the financial uncertainty, the corporate predicted extra energy forward, saying income would surpass $73 billion within the present quarter.
Satya Nadella, Microsoft’s chief govt, stated on a name with traders that demand for cloud and synthetic intelligence remained sturdy. He stated the corporate was tweaking its investments primarily based on effectivity enhancements in computing techniques, which international locations are driving demand, and how much providers prospects need.
“We simply need to be certain we’re accounting for the most recent and best info,” he stated.
Microsoft’s inventory worth elevated greater than 8 p.c in after-hours buying and selling after the outcomes have been introduced.
The corporate had been frantically constructing, and in latest quarters, Microsoft had stated it will have seen even increased gross sales if it had extra knowledge facilities up and operating to ship cloud computing and A.I. providers. Amy Hood, Microsoft’s finance chief, stated the constraints stay and can possible bleed into the beginning of the subsequent fiscal yr.
The corporate reiterated that infrastructure spending would develop within the subsequent fiscal yr, although not as sharply as it’s within the present one.
Gross sales of Microsoft’s flagship cloud computing service, Azure, grew 33 p.c within the quarter, properly over Wall Road’s expectations. Nearly half of that progress got here from synthetic intelligence providers.
Buyers have been bracing for a change in infrastructure spending since analysts on the funding financial institution TD Securities reported in late February that Microsoft had been pulling out of some contracts for knowledge facilities. The analysts stated a lot of that appeared tied to initiatives Microsoft had meant to construct for its companion, OpenAI, to develop superior A.I. techniques. OpenAI is now anticipated to work with the software program maker Oracle via their Stargate project.
Microsoft has acknowledged slowing down initiatives in Ohio and Wisconsin, and stated it had paused some early-stage initiatives as a part of a “refinement” course of.
(The New York Occasions has sued OpenAI and Microsoft, claiming copyright infringement of reports content material associated to A.I. techniques. The 2 corporations have denied the swimsuit’s claims.)
Analysts on the funding agency Raymond James wrote final week that that they had not but detected main reductions in spending by Microsoft’s enterprise cloud prospects. However they’re involved that tariffs and the unsure economic system would possibly lead prospects “to scale back spending on progress initiatives, shifting their focus to ‘holding the lights on.’”
“We proceed to see sturdy demand for our cloud and A.I. choices,” Ms. Hood stated.
Microsoft’s private computing enterprise grew 6 p.c to $13.4 billion. That benefited partially from laptop producers making extra laptops with the Home windows working system, so that they have stock accessible amid the tariff uncertainty.
Business gross sales for its on-line productiveness instruments for companies, together with Excel, Groups and Phrase, grew 15 p.c.
Microsoft’s outcomes would have been even stronger have been it not for the weakened U.S. greenback, which decreased income by greater than $1 billion and revenue by nearly $400 million.
