Published by Global Banking & Finance Review®
Posted on October 29, 2025
3 min readLast updated: January 21, 2026
Add as preferred source on GoogleMicrosoft's $35 billion AI investment raises investor concerns despite Azure's 40% growth. Shares dipped 2% due to spending worries.
By Aditya Soni and Deborah Mary Sophia
(Reuters) -Microsoft's spending on artificial intelligence infrastructure soared to a record of nearly $35 billion in the September quarter, deepening investor concerns about the mounting costs of sustaining the AI boom.
The tech company said on Wednesday its capital outlay jumped 74% in its fiscal first quarter year over year, with about half directed toward short-term assets such as Nvidia's high-priced chips to relieve capacity bottlenecks in its cloud business. Spending exceeded a Visible Alpha estimate of $30.34 billion.
The rising capacity and strong demand for AI services from businesses rushing to adopt the technology helped Microsoft's Azure cloud business grow 40% in the July-September period, outpacing Visible Alpha's estimate of 38.4%.
"We continue to see demand which exceeds the capacity we have available," Jonathan Neilson, Microsoft's vice president of investor relations, told Reuters. "Our capital expenditure strategy remains unchanged in that we build against the demand signal we're seeing."
SHARES DIP IN EXTENDED TRADING
Shares of the company were down around 2% in extended trading, having fallen as much as 4% due to the capex worries.
The mounting spending comes as Big Tech is under growing pressure to show returns on massive AI investments.
Also reporting results on Wednesday, Meta said its spending next year would be "notably larger" than in 2025, while Alphabet boosted its projected capital expenditures for this year.
Adding to investor worries are circular deals, soaring valuations and limited evidence of AI productivity gains that have raised doubts about how long the boom will last.
"The capex number was a little bit worrisome. But still, their operating income is up 24%. It's just that the stock is up a huge amount the past six weeks," Bob Lang, chief options analyst at Explosive Options, said of the decline in Microsoft shares.
REVENUE JUMPS 18%
The company reported total revenue rose 18% to $77.7 billion, beating expectations of $75.33 billion, according to data compiled by LSEG. Its profit of $3.72 per share also beat expectations of $3.67.
The results follow Microsoft's revised deal with OpenAI this week that gave it a 27% stake worth about $135 billion, as well as a cut of sales and access to intellectual property, clearing up uncertainty about the collaboration with the company synonymous with the AI boom.
The partnership, which gives Microsoft exclusive access to the models behind ChatGPT, has been key to Azure's rapid growth in recent quarters and strengthened its challenge to top cloud provider Amazon.com. It is also crucial to Microsoft's other AI services, such as 365 Copilot for businesses.
That AI push has turned Microsoft into the world's second-most valuable firm with a $4 trillion market value, trailing only the $5 trillion chip company Nvidia. The stock, up nearly 30% this year, is among the best performers in the "Magnificent 7." The after-hours share drop threatens the $4 trillion valuation, though.
Some analysts have praised Microsoft's decision in recent months to let some OpenAI contracts go to Oracle, saying it shows discipline in steering limited AI capacity toward more profitable enterprise customers. The move is part of a broader strategy to lessen its dependence on OpenAI by building its own models and partnering with other AI firms, including Anthropic.
(Reporting by Aditya Soni and Deborah Sophia in Bengaluru; Editing by Maju Samuel and Rod Nickel)
Artificial intelligence (AI) refers to the simulation of human intelligence in machines programmed to think and learn. AI can perform tasks such as problem-solving, understanding language, and recognizing patterns.
Capital expenditure (capex) is the funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, or equipment. It is a critical investment for long-term growth.
Cloud computing is the delivery of computing services over the internet, allowing users to access and store data on remote servers instead of local machines. It offers flexibility and scalability for businesses.
A partnership is a business structure where two or more individuals share ownership and the responsibilities of managing the business. Partnerships can benefit from combined resources and expertise.
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