Because the launch of the ChatGPT chatbot in 2022, Microsoft has plowed an increasing number of 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 placed on the brakes, in line 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 continues to be on observe to spend greater than $80 billion on capital bills within the present fiscal yr, 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. just isn’t limitless.
General, Microsoft’s outcomes confirmed sudden power in its enterprise. Gross sales surpassed $70 billion, up 13 % from the identical interval a yr earlier. Revenue rose to $25.8 billion, up 18 %. The outcomes far surpassed Wall Road’s expectations.
“Cloud and A.I. are the important inputs for each enterprise to broaden output, cut back prices, and speed up progress,” Satya Nadella, Microsoft’s chief govt, stated in a press release.
Microsoft’s inventory worth elevated greater than 5 % in after-hours buying and selling after the outcomes have been introduced.
The corporate had been frantically constructing, and in latest quarters, Microsoft had stated it will have seen even larger gross sales if it had extra knowledge facilities up and working to totally provide the cloud computing and synthetic intelligence companies its clients wished.
Gross sales of Microsoft’s flagship cloud computing service, Azure, grew 33 % within the quarter, effectively over Wall Road’s expectations. Virtually half of that progress got here from synthetic intelligence companies.
Traders 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 stated a lot of that appeared tied to tasks Microsoft had supposed to construct for its companion, OpenAI, to develop superior A.I. techniques. OpenAI is now anticipated to work with the software program maker Oracle via their Stargate project.
Microsoft has acknowledged slowing down tasks in Ohio and Wisconsin, and stated it had paused some early-stage tasks as a part of a “refinement” course of.
(The New York Occasions has sued OpenAI and Microsoft, claiming copyright infringement of stories content material associated to A.I. techniques. The 2 corporations have denied the go well with’s claims.)
Analysts on the funding agency Raymond James wrote final week that they’d not but detected main reductions in spending by Microsoft’s enterprise cloud clients. However they’re involved that tariffs and the unsure economic system may lead clients “to cut back spending on progress initiatives, shifting their focus to ‘maintaining the lights on.’”
Microsoft’s private computing enterprise grew 6 % to $13.4 billion. Business gross sales for its on-line productiveness instruments for companies, together with Excel, Groups and Phrase, grew 15 %.
Microsoft’s outcomes would have been even stronger have been it not for the weakened U.S. greenback, which diminished income by greater than $1 billion and revenue by virtually $400 million.
