Microsoft Boosts A.I. Investments as Data Center Spending Soars 74%

Record-High Spending to Power the A.I. Boom

Microsoft has intensified its artificial intelligence drive, spending a record $34.9 billion in capital expenditures during the quarter ending Sept. 30 — a 74% increase year over year.
The company said the money is fueling an aggressive global data center expansion to meet surging demand for A.I. computing power.

“We will increase our total A.I. capacity by over 80% this year and nearly double our data center footprint within two years,”
said Satya Nadella, Microsoft’s chief executive.

Strong Growth Across Azure and Cloud Business

Revenue for the quarter climbed 18% to $77.7 billion, while profit rose 12% to $27.7 billion.
Microsoft credited much of this growth to its Azure cloud division and continued success with OpenAI-powered products, including its Copilot A.I. assistant and enterprise cloud integrations.

Azure sales alone jumped 40%, despite capacity constraints that the company says it’s working rapidly to address.

“Demand continues to exceed supply,” said Amy Hood, Microsoft’s chief financial officer. “That means we’ll be spending more for the rest of the fiscal year — but with confidence.”

The OpenAI Partnership Deepens

Microsoft’s close collaboration with OpenAI continues to reshape its financial profile.
This week, OpenAI finalized its conversion to a for-profit entity, giving Microsoft a $135 billion equity stake and extending exclusive access to all OpenAI technologies until 2032.

The agreement also commits OpenAI to purchasing $250 billion worth of computing capacity from Microsoft — more than triple Azure’s total annual sales last year.

However, Microsoft reported a $3.1 billion loss from its OpenAI investments this quarter due to accounting adjustments tied to the restructuring.

Productivity Tools and Copilot Drive User Growth

Sales of Microsoft 365 and productivity tools rose 17%, reaching $33 billion for the quarter.
Its flagship A.I. feature, Copilot, now has over 150 million monthly active users across consumer and business versions — up from 100 million just three months earlier.

The company also saw a 4% increase in personal computing revenue, totaling $13.8 billion, boosted by pre-tariff demand for PC laptops.

Guidance and Market Reaction

For the next quarter, Microsoft expects revenue between $79 billion and $80.6 billion, representing growth of 14% to 16%, in line with Wall Street forecasts.

Despite beating estimates, the company’s shares fell more than 3% in after-hours trading, as investors digested the heavy spending pace.
Analysts warn that rising tariffs and a cooling global economy could dampen enterprise technology budgets in 2025.

A.I. as Microsoft’s Core Future Strategy

Microsoft’s financial results underscore its strategic pivot toward A.I.-driven infrastructure and services, positioning itself as the foundational supplier for the global A.I. economy.
The company has already pledged to outspend competitors such as Amazon Web Services and Google Cloud, while maintaining close alignment with OpenAI’s technology roadmap.

“We’re not just building for demand today — we’re building for the next decade of A.I.,”
Nadella said during the earnings call.