Satya Nadella-led Microsoft, already in the news for offering voluntary buyouts to about 60,000 of its employees, is preparing to raise approximately USD 25 billion through its first US investment-grade bond sale in more than nine years, marking another significant development in the financing of the artificial intelligence (AI) infrastructure boom.
The proposed debt offering comes just a day after the company reported stronger-than-expected quarterly results, with robust growth in its Azure cloud business and a substantial improvement in free cash flow.
Through the bond sale, Microsoft would become the latest major technology company to tap debt markets to finance its AI ambitions.
According to two sources cited by Reuters, the offering had attracted more than USD 100 billion in orders, representing over four times the proposed fundraising amount.
Bloomberg reported that Microsoft was considering issuing debt across as many as 10 tranches, with maturities ranging from two to 40 years.
The final size of the offering had not been determined and could change depending on investor demand.
Wells Fargo, JPMorgan Chase and UBS Group are managing the bond offering, according to the report.
The development comes as the world’s largest technology companies prepare to spend hundreds of billions of dollars on data centres, computing equipment and energy infrastructure required to develop and operate AI technologies.
Microsoft delivers strong Azure growth and cash flow
Microsoft’s decision to explore additional funding sources comes against the backdrop of a strong fiscal first-quarter performance.
The company reported revenue of USD 92.28 billion for the quarter ended September, representing an increase of approximately 20% from the previous year.
Adjusted earnings reached USD 4.89 per share, exceeding the average analyst estimate of USD 4.73.
Its Azure cloud computing business delivered particularly strong results, with revenue increasing 48% during the quarter.
Azure generated USD 33.17 billion in revenue, surpassing Visible Alpha’s estimate of USD 32.84 billion.
The performance reinforced Microsoft’s position in the increasingly competitive cloud computing market, where businesses are spending more on infrastructure to support AI applications and workloads.
The company also generated USD 18.6 billion in free cash flow, approximately USD 10 billion above analyst expectations.
This financial performance distinguished Microsoft from some of its largest technology competitors, whose AI-related capital expenditure has begun putting pressure on cash generation.
The company’s financial performance has also provided some reassurance to investors concerned about the possibility that AI could disrupt Microsoft’s established software business or leave its growth excessively dependent on OpenAI.
Microsoft’s commercial relationship with the frontier AI lab generated approximately USD 10 billion in revenue during the September quarter, underlining the commercial contribution of its AI partnerships.
Azure outlook strengthens Microsoft’s growth prospects
Microsoft also provided an upbeat outlook for its cloud business, suggesting that corporate demand for AI-related infrastructure remains strong.
The company expects Azure revenue growth of between 49% and 50% in its fiscal second quarter.
This is above the analyst consensus estimate of 47.6%, according to Visible Alpha data.
Microsoft forecast total revenue of between USD 96 billion and USD 97.1 billion for the quarter, exceeding the LSEG analyst estimate of USD 95.6 billion.
The stronger outlook suggests that businesses continue to invest in cloud computing capacity despite concerns about the rising costs of implementing AI technologies.
Nadella has already sought to capture this demand by offering customers a broader range of AI products and pricing options.
During a conference call with analysts, he said Microsoft was providing businesses with different AI choices, including lower-cost alternatives to cutting-edge models developed by companies such as Anthropic.
He also discussed efforts to make Microsoft’s Copilot products more useful with each successive model release, describing the approach as “consolidating the frontier gains for broad deployment.”
The strategy reflects an effort to make AI adoption more commercially accessible as companies evaluate the costs associated with deploying advanced models across their operations.
Microsoft’s decision to disclose Azure revenue in dollar terms rather than reporting only growth rates is another important development.
The change, announced in September, provides investors with greater visibility into the scale of its cloud business and makes comparisons with Amazon Web Services (AWS) and Google Cloud easier.
AI infrastructure spending puts pressure on Big Tech finances
Microsoft’s strong cash generation comes at a time when the financial implications of the AI investment boom are attracting greater scrutiny.
The world’s largest technology companies are expected to spend more than USD 700 billion in 2026 on data centres and the computing hardware and energy infrastructure needed to develop and operate AI systems.
While accelerating revenue growth indicates that these investments are beginning to generate commercial returns, the scale of capital expenditure has raised questions about financing requirements and future profitability.
The financial divide between major AI investors has become increasingly visible.
Alphabet reported a negative free cash flow of USD 9.07 billion in the third quarter as capital expenditure increased and growth in its core advertising business slowed.
Despite reporting a doubling of cloud sales, the company faced a negative market reaction, with its shares falling 8% in extended trading.
Meta Platforms also reported its first cash burn in more than a decade last week and indicated that it planned to issue new stock to finance its growing capital requirements.
Concerns have also spread beyond the largest hyperscalers.
Financial stress at the Neocloud company CoreWeave and rising costs of insuring Meta’s debt against default have added to uncertainty surrounding the financing of the AI buildout.
Microsoft’s ability to generate substantial free cash flow has therefore become an important point of differentiation.
Its five-year credit default swaps, which measure the market’s perception of default risk, remained the tightest among the largest technology companies, according to Truist, even as credit spreads widened across much of the AI sector.
Microsoft capital expenditure continues to climb
Despite its strong cash generation, Microsoft is not immune to the rising infrastructure costs associated with AI development.
Capital expenditure reached USD 45.2 billion in the September quarter, compared with USD 34.9 billion during the corresponding period a year earlier.
Although the figure represented a substantial increase, it was below the company’s own projection of USD 50 billion.
Microsoft’s capital expenditure totalled USD 118.1 billion during the first nine months of calendar 2026.
To reach the USD 175 billion spending forecast it provided in July, the company would need to invest another USD 56.9 billion during the final three months of the year.
Jonathan Neilson, Microsoft’s vice president of investor relations, attributed the lower-than-expected quarterly expenditure to delays in receiving capacity from third-party suppliers rather than a change in the company’s underlying investment plans.
“We did see some third-party capacity deliveries that we expected in the first quarter were actually delayed,” Neilson said.
The company expects to continue generating positive free cash flow during its current financial year, which runs through June 2027.
This contrasts with the cash flow pressures facing some of its competitors as they accelerate investments in AI infrastructure.