For the reason that launch of the ChatGPT chatbot in 2022, Microsoft has plowed increasingly more cash into constructing knowledge facilities in what one trade 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 12 months, which ends in June. However the pullback, although slight, is a sign that the tech trade’s urge for food for spending on A.I. is just not limitless.
Total, Microsoft’s outcomes confirmed sudden power in its enterprise. Gross sales surpassed $70 billion, up 13 p.c from the identical interval a 12 months 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 power forward, saying income would surpass $73 billion within the present quarter.
Satya Nadella, Microsoft’s chief government, mentioned on a name with buyers that demand for cloud and synthetic intelligence remained robust. He mentioned the corporate was tweaking its investments primarily based on effectivity enhancements in computing programs, which nations are driving demand, and how much providers prospects need.
“We simply wish to ensure we’re accounting for the most recent and biggest info,” he mentioned.
Microsoft’s inventory worth elevated greater than 8 p.c in after-hours buying and selling after the outcomes had been introduced.
The corporate had been frantically constructing, and in current quarters, Microsoft had mentioned it will have seen even larger 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, mentioned the constraints stay and can probably bleed into the beginning of the following fiscal 12 months.
The corporate reiterated that infrastructure spending would develop within the subsequent fiscal 12 months, 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, nicely 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 mentioned a lot of that appeared tied to tasks Microsoft had supposed to construct for its accomplice, OpenAI, to develop superior A.I. programs. OpenAI is now anticipated to work with the software program maker Oracle by means of their Stargate project.
Microsoft has acknowledged slowing down tasks in Ohio and Wisconsin, and mentioned it had paused some early-stage tasks as a part of a “refinement” course of.
(The New York Instances has sued OpenAI and Microsoft, claiming copyright infringement of stories content material associated to A.I. programs. The 2 firms have denied the go well with’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 cut back spending on progress initiatives, shifting their focus to ‘retaining the lights on.’”
“We proceed to see robust demand for our cloud and A.I. choices,” Ms. Hood mentioned.
Microsoft’s private computing enterprise grew 6 p.c to $13.4 billion. That benefited partially from pc producers making extra laptops with the Home windows working system, in order that they have stock obtainable amid the tariff uncertainty.
Industrial 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 had been it not for the weakened U.S. greenback, which lowered income by greater than $1 billion and revenue by virtually $400 million.
