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Microsoft was seeking to raise at least $25 billion in its first U.S. bond sale in more than nine years Thursday as the technology giant pursues a massive artificial intelligence expansion expected to push its capital spending to approximately $170 billion in 2026.
The planned borrowing marks Microsoft’s return to the American investment-grade bond market for the first time since 2017, underscoring the costs associated with building the infrastructure powering the AI boom. The offering follows the company’s disclosure Wednesday that it expects to spend more than $50 billion on capital expenditures during the current quarter alone, raising questions about how even the nation’s most profitable technology companies will finance their growing AI ambitions.
Microsoft is marketing the bonds across ten tranches with maturities ranging from two to 40 years, according to Bloomberg. The company last tapped the U.S. investment-grade bond market in 2017, when it raised $17 billion.
The proceeds are expected to support general corporate purposes, including capital expenditures, working capital, acquisitions, share repurchases and the repayment of existing debt. Microsoft has not indicated that the entire offering will be dedicated to AI investments.
The borrowing follows Microsoft’s fiscal first-quarter earnings call Wednesday, when Chief Financial Officer Amy Hood outlined the company’s infrastructure spending requirements and acknowledged that additional financing could supplement the cash generated by its operations.
“To complement cash generated by the business and preserve financial flexibility, we will access additional sources of funding when we believe it is attractive to do so,” Hood said during the call.
Microsoft reported $45.2 billion in capital expenditures during the three months ending Sept. 30, with approximately three-quarters of that spending directed toward shorter-lived assets, primarily central processing units and graphics processing units used in data centers.
The spending figures illustrate the financial demands of competing in the AI industry, where technology companies are committing billions to specialized computer chips, electricity-intensive data centers and the infrastructure required to train and operate increasingly sophisticated AI models.
Hood said the company expects capital expenditures to exceed $50 billion during the quarter ending in December, bringing its projected calendar-year spending to approximately $170 billion. She also indicated that spending would accelerate during the second half of Microsoft’s fiscal year as delayed infrastructure capacity becomes available and the company continues purchasing processors, memory and storage equipment.
The $170 billion projection represents a reduction from Microsoft’s previous $175 billion outlook, reflecting delays in third-party computing capacity rather than a broader retreat from its AI investment strategy.
Despite the massive expenditures, Microsoft remains highly profitable. The company reported Wednesday that quarterly revenue climbed 19% to $92.3 billion, while net income increased 32% to $36.6 billion.
Microsoft’s Azure cloud business, which provides much of the computing infrastructure used by businesses developing and deploying AI applications, recorded revenue growth of 48%. The company also generated $58 billion in operating cash flow during the quarter, although free cash flow totaled $18.6 billion after substantial infrastructure investments.
Meanwhile, shares of Google parent Alphabet plunged Thursday after the company reported negative quarterly free cash flow of $9.1 billion amid mounting AI infrastructure spending and weaker-than-expected advertising revenue.
Microsoft’s financing strategy also reflects its strong standing in credit markets. The company is one of only two publicly traded U.S. corporations holding the highest possible credit ratings from both Moody’s Ratings and S&P Global Ratings, alongside Johnson & Johnson, according to Bloomberg.
The planned offering includes eight fixed-rate tranches and two floating-rate tranches, with JPMorgan Chase, UBS Group and Wells Fargo managing the sale. The longest-dated bonds are expected to mature in 2066, extending Microsoft’s potential repayment obligations four decades into the future.
The debt offering follows Microsoft’s announcement Monday that approximately 60,000 employees would be eligible for voluntary buyouts as the company adjusts its workforce amid its expanding AI investments.
Microsoft confirmed the offers to the Daily Caller News Foundation, which previously reported on the initiative. The company expects no more than 5% of eligible employees to accept the offers, according to its earnings disclosures.
During Wednesday’s earnings call, Bank of America analyst Tal Liani pressed Hood on the company’s financing strategy, asking whether Microsoft intended to raise capital through debt, equity or other funding arrangements.
Hood pointed to the company’s existing use of leasing arrangements and its ability to access debt markets, stressing that Microsoft’s financial position provides multiple financing options.
“We feel good that the return on every dollar of CapEx we’re spending, we’re confident in that,” Hood said. “And therefore, we feel like we have lots of options to be able to tap the financing markets when they make sense and they’re attractive.”
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