Microsoft’s record-breaking investment in artificial intelligence has sparked unease on Wall Street. Despite strong quarterly results, Microsoft’s stock dropped after the company revealed it spent nearly $35 billion building data centers to power its AI ambitions.
The company spent $34.9 billion last quarter, a 74% increase from the previous year, The New York Times reported. The spending went toward expanding computing infrastructure to support its growing AI portfolio.
Microsoft’s strategy reflects the growing arms race in AI infrastructure.
As AI models expand, so does the demand for computing power. Each billion spent is now a bid for long-term dominance against Google, Amazon and Nvidia.
With $77.7 billion in revenue and $27.7 billion in profit, Microsoft’s shares still fell 3% in after-hours trading, according to The New York Times. Investors fear the spending could weigh on margins before new AI products fully monetize.
Reuters reported that Microsoft’s growth is driven primarily by Azure, its cloud-computing division, which saw revenue rise 40% in the first quarter of its 2026 fiscal year. Azure now powers both Microsoft’s internal AI tools and its high-profile partnership with OpenAI.
“We will increase our total AI capacity by over 80% this year and roughly double our total data center footprint over the next two years,” CEO Satya Nadella told investors. His remarks reflected Microsoft’s race to secure infrastructure dominance in the global AI boom.
The partnership with OpenAI deepened this week after the startup converted into a for-profit entity.
Under the new structure, Microsoft gained a $135 billion stake and extended its technology-sharing deal through 2032.
OpenAI also committed to buying $250 billion in computing power from Microsoft, a figure more than triple Azure’s sales last fiscal year. The agreement strengthens Microsoft’s position but adds heavy short-term costs.
Losses from the partnership cut net income by $3.1 billion last quarter. Analysts say the deal signals long-term strategic commitment, but raises near-term financial risks.
Microsoft’s capital expenditures are projected to reach $140 billion this year, up 58% from 2024 and triple from 2023 levels, CNBC reported.
Competitors like Amazon and Google are investing more cautiously. Amazon Web Services grew 20%, while Google Cloud rose 34% in the same quarter. Microsoft’s greater spending underscores both its ambition and its exposure.
But this isn’t just about quarterly profits. Microsoft wants to be the backbone of the AI economy and make a platform that powers every enterprise, developer and device. Still, its AI tools continue to gain traction. More than 150 million people now use Copilot, Microsoft’s AI assistant for Word, Excel and Teams, up 50 million from the prior quarter. Nadella said adoption remains “early but accelerating.”
According to Reuters, Microsoft’s market value sits near $4 trillion, second only to Nvidia’s record-breaking $5 trillion.
For Microsoft, investors continue to watch closely to see if the AI spending will pay off.
