Vole's problem isn’t demand but keeping up with it. The company’s data centres are bursting at the seams, and even with billions pouring into expansion, Nadella’s crew can’t build fast enough to stay ahead of the AI rush.
Demand for the company’s cloud and AI services is so intense that chief executive Satya Nadella told investors on it plans to boost AI capacity by more than 80 per cent this year and double its total data centre footprint within two years.
That expansion will cost plenty. Microsoft now expects to spend far more on AI infrastructure this fiscal year and still fall short of the capacity needed to meet surging demand.
Revenue for the first fiscal quarter hit $77.7 billion, comfortably beating the cocaine nose jobs of Wall Street’s forecasts.
Operating income rose 24 per cent to $38 billion, while net income reached $27.7 billion, or $3.72 per diluted share. The Azure cloud business was again the star, growing around 40 per cent year on year.
Despite the strong results, Vole's shares dipped nearly four per cent in after-hours trading as investors worried about ballooning capital expenditure and the company’s heavy reliance on OpenAI. The company booked a $3.1 billion charge related to its investment in the AI outfit.
Microsoft vice president of investor relations Jonathan Nielson said: “We’ve really been seeing a very healthy demand across our entire portfolio."
He added that OpenAI’s cloud commitments were helping drive Azure’s growth. The company’s backlog of signed but unrealised cloud contracts jumped 51 per cent to $392 billion. Some investors fear that limited capacity could push customers toward rival providers, but Microsoft insists it is focused on “longterm interests.”
Vole’s capital expenditure reached $34.9 billion for the quarter, well above expectations, as it continues an enormous buildout of AI and cloud infrastructure. Microsoft is constructing new data centres worldwide and renting extra capacity from partners.
In September, it said it was close to completing a $3.3 billion (about €3.05 billion) AI data centre in Wisconsin, which it claims is the most advanced in the world, packed with thousands of Nvidia GB200 GPUs. Microsoft also inked a $17.4 billion (about €16.1 billion) deal with Nebius Group for additional data centre capacity and expanded its partnership with Nscale to secure roughly 200,000 Nvidia GB300 GPUs.
Revenue across Microsoft’s three major segments exceeded projections. Its Productivity and Business Processes division, which includes Microsoft 365, generated $33 billion, while the personal computing segment brought in $13.8 billion.
The company also announced a fresh deal with OpenAI, taking a 27 per cent stake in the startup’s new public-benefit corporation and securing exclusive rights to its technology until 2032. OpenAI, in turn, will buy $250 billion (about €231 billion) worth of Microsoft’s cloud services.