Microsoft is spending more than ever on artificial intelligence, even as it offers buyouts to a quarter of its work force. On Wednesday, the company demonstrated how that spending was paying off.
Microsoft said it spent $45.2 billion on capital expenditures, which include data centers, in the three months that ended in September, up about 30 percent from $34.9 billion a year earlier. The company had told investors in July to expect more than $50 billion spent on A.I. infrastructure.
Revenue was $92.3 billion, up 19 percent from a year earlier. Profit was $36.6 billion, up 32 percent.
Azure, the company’s cloud computing service, which lets businesses rent computing power, storage and A.I. tools, drove much of the growth. Its sales increased 48 percent to $33.2 billion, a figure Microsoft now reports every quarter after disclosing it only occasionally. Investors had been hoping for about 45 percent, analysts said, up from 43 percent the previous quarter. The figure is the clearest sign of whether Microsoft’s A.I. spending is translating into sales.
The results beat Wall Street’s expectations, and Microsoft’s shares were up more than 4 percent in after-hours trading.
On Monday, the company offered buyouts to about 60,000 workers in the United States, Canada, Britain and India, roughly a quarter of its work force of about 223,000. (The company said only a sliver of those offered a buyout were expected to take it.) It was Microsoft’s second buyout offer this year. In July, Microsoft also eliminated 20 percent of its Xbox work force as part of roughly 4,800 job cuts, and closed several game studios.
Microsoft’s stock fell earlier this year as investors grew anxious about whether enough profit would be generated from the hundreds of billions of dollars that Microsoft and its peers are pouring into A.I.
That worry was on display again last week when Meta raised the low end of its spending forecast for this year to $135 billion and said its free cash flow — the cash left after paying for expenses and investments — had turned negative in the previous quarter. Meta’s shares fell about 7 percent the next day.
Microsoft has avoided that so far. Its free cash flow was $18.6 billion in the latest quarter, down 28 percent from a year earlier but still positive. Investors appear more worried about how the company is financing all the A.I. spending rather than about demand.
Amy Hood, Microsoft’s finance chief, said on a call with investors in July that the company expected to “remain free cash flow positive” in the 2027 fiscal year.
“I don’t think we’re out of patience,” said Brian Mulberry, chief market strategist at Zacks Investment Management. “But I do think people are paying attention to it now, in a way that they haven’t been before.”
Microsoft has repeatedly said demand for its cloud services outpaces its available data centers. Its commercial backlog, or contracted future sales, was $677 billion, down slightly from $678 billion the previous quarter.
Microsoft’s relationship with OpenAI, the San Francisco company behind ChatGPT, was overhauled late last year when the start-up converted into a for-profit entity and Microsoft took a stake valued at roughly $135 billion. Under the revised agreement, Microsoft retained access to OpenAI’s technology through 2032.
(The New York Times has sued OpenAI and Microsoft, claiming copyright infringement of news content related to A.I. systems. The companies have denied the claims.)
Microsoft reported results under new business groupings for the first time, a reshuffling that the company said put A.I. at the forefront. Sales in its Agents and Infra segment, which combines the Azure cloud business with business software like Excel, Teams and Copilot, rose 24 percent to $76.8 billion, from $61.7 billion a year earlier. Devices and Consumer, home to Windows and Xbox, had $15.5 billion in sales, down 3 percent from $16 billion.
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