Microsoft just signed over $130 billion worth of new data center leases in a single quarter, a scale of commitment that says a lot about how seriously the company is taking the AI infrastructure race right now.
CEO Satya Nadella told analysts Microsoft is on pace to roughly double its data center capacity over the next two years. The company brought 31 new data centers online during the quarter alone, and 88 over the full fiscal year ending in June. The new leases reported this week pushed Microsoft’s total commitments up by more than two-thirds compared to the previous quarter, a jump that reflects just how much computing power AI startups like OpenAI and Anthropic are demanding, alongside everyone else building on Azure.
Investors responded well. Microsoft’s stock jumped 9% in after-hours trading, a notable reversal after shares had fallen 17% earlier this year. Melissa Otto, head of research at Visible Alpha, said the market’s reaction reflects growing confidence that Microsoft’s massive capital spending is actually translating into real growth, particularly after the company forecast 45% revenue growth for the coming quarter.
That growth hasn’t come cheap. Microsoft’s capital expenditures hit $41 billion for the quarter, up 70% year over year, with roughly two-thirds going toward shorter-lived assets like semiconductors and the rest funding data center buildings and other long-term infrastructure. Free cash flow dropped 23% as a result, landing at $19.6 billion, though that still beat analyst expectations.
The spending is clearly paying off on the revenue side. Total sales rose 18% to $90 billion for the quarter, and Microsoft’s cloud segment, which includes Azure, climbed 32% to $39.3 billion. Net income jumped 31% to $35.8 billion, boosted partly by a $3.2 billion gain tied to Microsoft’s stake in Anthropic. The company’s future revenue backlog also grew to $678 billion, though that figure doesn’t yet include any new commitments from OpenAI or Anthropic specifically.
Microsoft’s relationship with OpenAI remains genuinely complicated. OpenAI contributed $24.1 billion in revenue over the past year, about 7% of Microsoft’s total sales, even as the startup increasingly competes with Microsoft’s own AI ambitions. Nadella addressed that tension directly, telling investors that Microsoft is building its infrastructure so that its core technical systems stay separate from any one specific AI model, giving the company flexibility to switch between its own models and those built by OpenAI, Anthropic, or others depending on cost and performance.
