Microsoft adds $25 billion to AI spending as chip costs surge and cloud demand accelerates

Microsoft lifts 2026 CapEx by $25B to cover price rises

Will write checks for $190 billion and even those megabucks may not satisfy demand If you've felt the sting of surging hardware prices, Microsoft can sympathize because the company on Wednesday said it expects its 2026 capital expenditure will hit $190 billion, with $25 billion of that due to rising component costs. Memory and storage prices have skyrocketed since last northern autumn, in some cases more than tripling in price, with demand for AI infrastructure squarely to blame. Despite higher costs, Redmond appears undeterred in its quest to win the AI arms race. Last quarter, Microsoft spent roughly $32 billion to bring additional compute capacity online, which means the company is on track to spend another $158 billion between now and Christmas. According to CFO Amy Hood, next quarter alone the company plans to spend about $40 billion on hardware and datacenters to house it. Hood said that despite spending megabucks "we expect to remain constrained at least through 2026." The company's infrastructure build-out has been met with growing concern from Wall Street, and understandably so given that in the last four quarters, Microsoft has spent roughly $97 billion on infrastructure and equipment to win $37 billion of annual recurring revenue (ARR) for its AI services. That's up 123 percent from this time last year, but still short of achieving obvious ROI. In her prepared statements ahead of Microsoft's Q3 earnings call, Hood attempted to reassure investors that the company's investments will eventually pay off. "We remain confident in the return on these investments given higher demand signals and increasing product usage, as well as the efficiencies we're already driving across the platform," she said. These concerns may have motivated Microsoft's decision earlier this week to pivot GitHub Copilot from an all-you-can-eat scheme to a pay-per-token model. It probably doesn't hurt that Microsoft has been freed from having to share revenues with its long-time partner OpenAI, after they opened their relationship to other models and clouds earlier this week. While Microsoft's AI business can't quite pay the bills yet, its cloud biz is making bank. In Q3, Microsoft's profits jumped 23 percent year over year to $31.8 billion on revenues of $82.9 billion. Cloud accounted for more than half of all revenue, at $54.5 billion, an increase of 29 percent compared to this time last year. Azure may be a cash cow, but Microsoft's personal computing biz, which spans PCs, gaming, and Bing, saw revenue retreat one percent to $13.2 billion thanks to a two percent year-over-year drop in Windows sales and a five percent dip for Xbox content and services revenues. Improved revenue from Bing search staunched the bleeding. Looking ahead to the next quarter, Hood forecast Windows OEM revenue to fall in the mid-teens. Microsoft's broader outlook is a bit rosier. In Q4 the company expects to see revenues rise 13-15 percent year-over-year to $86.7-$87.8 billion. ®

Microsoft cloud revenue accelerates as spending growth cools

April 29 (Reuters) - Microsoft's (MSFT.O), opens new tab cloud revenue growth increased in the March quarter while its spending rose less-than-expected as the software giant looks to convince investors that its big bet on artificial intelligence would pay off. Capital expenditure rose 49% to $31.9 billion in the company's fiscal third quarter, the company said on Wednesday, compared with Wall Street expectations of $34.90 billion, according to Visible Alpha. Spending had totaled $37.5 billion in the second quarter. Revenue at the Azure cloud-computing unit jumped 40% in the period, faster than the 39% growth in the previous three months. That was in line with a consensus estimate of 40%. The ⁠results could ease fears that sluggish adoption of its Copilot 365 assistant for businesses and a heavy reliance on OpenAI may have chipped away Microsoft's early lead in the AI race. It may also help justify data-center spending that has strained cash flows, with major cloud players on track to spend more than $600 billion on AI infrastructure this year. To sharpen its competitive edge, Microsoft has aggressively added Anthropic's technology to its cloud service and products like Copilot amid rising demand for the Claude creator's models. The expanded AI model options helped the company land on Monday ⁠its biggest-ever roll-out of Copilot, covering roughly 743,000 Accenture employees - a majority of the IT firm's workforce. Earlier this week, Microsoft also overhauled its OpenAI deal to lock in its 20% cut of the startup's revenue through 2030 regardless of whether it achieves technological breakthroughs. But the new arrangement also strips Microsoft of ⁠exclusive rights to resell OpenAI's products on its cloud, just as competition heats up from Alphabet (GOOGL.O), opens new tab and Amazon. The e-commerce giant (AMZN.O), opens new tab has already started offering OpenAI's latest models and Codex coding tool on its cloud. The move ⁠could free up cloud capacity for Microsoft, which has blamed shortages for holding back revenue growth and used that to argue for its massive spending. Funding those outlays has, however, forced ⁠companies to look for ways to cut costs. Microsoft earlier this month rolled out its first employee buyout program in more than five decades. Amazon and Meta have also announced job cuts affecting thousands of employees. Reporting by Aditya Soni in Bengaluru; Editing by Sriraj Kalluvila Our Standards: The Thomson Reuters Trust Principles., opens new tab

Microsoft forced to up AI spending by $25 billion to cover hardware price rises -- says it 'remains confident in the return on these investments'

* Azure revenue is up 29%, but next quarter's growth could rise 40% * Two-thirds of last quarter's capex was dedicated to CPUs, GPUs * Microsoft 365 Copilot now has over 20 million paying customers In its latest quarterly results, Microsoft has confirmed an 18% rise in revenue to $82.9 billion for the most recent three months, with Microsoft Cloud revenue up around 29% year-over-year to $54.5 billion and Azure growth standing at around 40%. However despite heavy spend by customers in its products and services, the company hasn't been immune from rising prices and global chip shortages, CFO Amy Hood explained. With its AI business now standing at around $37 billion in annual revenue run rate (up 123% year-over-year), Microsoft is being forced to spend big on AI and data center technology. Microsoft revenues climb, capex climbs further Proof of continued growth comes in the form of a $627 billion commercial backlog, up around 99%, indicating huge forward demand for AI and cloud. Consequentially, 2026 capex is expected to be around the $190 billion mark, but alarmingly, Microsoft is attributing around $25 billion of that to rising component costs. The company is also set to spend $40 billion on hardware and data centers in the next quarter, Hood revealed. That's a marked increase over last quarter's $31.9 billion capex, two-thirds of which was destined for "short-lived assets" like CPUs and GPUs. Speaking about the fiscal year capex projections, Hood said: "We remain confident in the return on these investments given higher demand signals and increasing product usage as well as the efficiencies we're already driving across the platform." As for AI use, Microsoft declared "over 20 million Microsoft 365 Copilot paid seats" and noted considerable growth in major customers. It has has 4x as many customers with over 50,000 seats, compared with last year - Accenture represents the biggest customer, with over 740,000 seats. Looking ahead, the company is targeting total revenue growth of 13-15% for the next period, but more importantly, around 39-40% in Azure revenue growth. Follow TechRadar on Google News and add us as a preferred source to get our expert news, reviews, and opinion in your feeds.

Microsoft Boosts AI Spending by $25 Billion Amid Rising Chip Costs and Record Cloud Backlog

A key growth driver remains Microsoft Cloud, which generated $54.5B in revenue, rising about 29% YoY. Within this segment, Azure continues to stand out with growth of around 40%, reinforcing its position as a core pillar of Microsoft's long-term strategy. Microsoft is accelerating its artificial intelligence investment cycle with a major increase in capital spending, even as rising hardware costs and global supply constraints continue to pressure margins. The company is adding roughly $25B in additional investment requirements, reflecting both strong AI demand and the rising expense of building large-scale cloud infrastructure. The move comes as Microsoft continues to report strong momentum across its cloud and AI portfolio. In its latest quarterly update, the company posted revenue of $82.9B, up 18% year over year. A key growth driver remains Microsoft Cloud, which generated $54.5B in revenue, rising about 29% YoY. Within this segment, Azure continues to stand out with growth of around 40%, reinforcing its position as a core pillar of Microsoft's long-term strategy. A large portion of recent capital spending is concentrated in short-cycle infrastructure assets such as CPUs and GPUs. Nearly two-thirds of the previous quarter's capex went into these components, reflecting the intensity of AI workloads and the need for continuous capacity expansion. Microsoft is guiding overall revenue growth of 13% to 15% in the next period. Azure is expected to remain the standout performer with projected growth of around 39% to 40%, underscoring continued enterprise migration to cloud and AI platforms. The company is effectively positioning itself for a structural shift in enterprise computing, where AI becomes a core utility layer rather than an optional tool. While chip shortages and rising prices are increasing short-term spending pressure, Microsoft's strategy is clear: scale aggressively now to secure long-term leadership in the AI-driven cloud era.

Microsoft reports cloud growth in line with expectations

April 29 (Reuters) - Microsoft reported quarterly cloud revenue growth in line with analyst expectations, a sign that its hefty spending on artificial intelligence was paying off despite intensifying competition from Big Tech rivals. The company said revenue at its Azure cloud-computing unit jumped 40% in the January-March quarter, surpassing a consensus estimate of 40%, according to research firm Visible Alpha. The strong showing could ease fears that sluggish adoption of its Copilot 365 assistant for businesses and a heavy reliance on OpenAI may have chipped away Microsoft's early lead in the AI race. It may also help justify data-center spending that has strained cash flows, with major cloud players on track to spend more than $600 billion on AI infrastructure this year. To sharpen its competitive edge, Microsoft has aggressively added Anthropic's technology to its cloud service and products like Copilot amid rising demand for the Claude creator's models. The expanded AI model options helped the company land on Monday its biggest-ever roll-out of Copilot, covering roughly 743,000 Accenture employees - a majority of the IT firm's workforce. Earlier this week, Microsoft also overhauled its OpenAI deal to lock in its 20% cut of the startup's revenue through 2030 regardless of whether it achieves technological breakthroughs. But the new arrangement also strips Microsoft of exclusive rights to resell OpenAI's products on its cloud, just as competition heats up from Alphabet and Amazon. The e-commerce giant has already started offering OpenAI's latest models and Codex coding tool on its cloud. The move could free up cloud capacity for Microsoft, which has blamed shortages for holding back revenue growth and used that to argue for its massive spending. Funding those outlays has, however, forced companies to look for ways to cut costs. Microsoft earlier this month rolled out its first employee buyout program in more than five decades. Amazon and Meta have also announced job cuts affecting thousands of employees. (Reporting by Aditya Soni in Bengaluru; Editing by Sriraj Kalluvila)