Microsoft’s $45.2 Billion Capital Spending Falls Short of Forecast Amid Delayed Computing Capacity Deliveries
Key Facts
Microsoft’s capital expenditures and finance leases totaled $45.2 billion in fiscal first-quarter 2027, versus the company’s forecast of $50 billion, according to data cited by Reuters. Although the figure fell short of expectations, it rose from $34.9 billion in the same period a year earlier, putting the gap in the context of delayed spending execution rather than a reduction from last year. Jonathan Nelson, the company’s vice president of investor relations, attributed the lower-than-expected level to delays in deliveries of capacity from third parties. He said the shortfall did not reflect a change in underlying spending plans. The explanation matters to specialized cloud infrastructure suppliers, as part of their demand is tied to major technology companies’ expansions in computing capacity.
The spending figures came alongside strong growth in Microsoft’s cloud computing business in the quarter ended September 30, 2026. Azure revenue rose 48%, while Microsoft Cloud revenue reached $63.9 billion, up 30% year over year. The company’s total revenue was $92.3 billion, up 19% year over year. The results offer a picture of continued expansion in cloud operations at a time when spending below forecast raised questions about the timing of new capacity coming online. Chief Executive Satya Nadella said a broader base of customers had begun planning long-term spending on artificial intelligence, adding that “the fascination with shiny objects is fading in the AI market.”
The company’s cash flow offered another indicator for investors assessing its spending. Microsoft generated $18.6 billion in free cash flow in its fiscal first quarter, exceeding Wall Street expectations by about $10 billion, while investing $45.2 billion in expanding its computing infrastructure. After the results were announced, the company’s shares rose more than 3% in after-hours trading on Wednesday. Reuters noted a divergence in market reaction between companies generating revenue from artificial intelligence and those struggling to control its costs. Microsoft’s shares therefore moved higher despite the debate over spending, while concerns focused on the timing of capacity deliveries and the cost of building data centers.
Shares of specialized cloud companies were under pressure in premarket trading on Thursday, according to an Invezz report, after recovering in the previous two sessions. The sector had earlier fallen on October 26, when CoreWeave shares dropped 4.5%, Nebius fell 3.4% and Iren declined 3.3% before the market opened, after Elon Musk warned of potential mergers and failures. Concerns about growth were accompanied by questions about the ability of capital-intensive companies to keep expanding and secure financing; CoreWeave, Nebius, Applied Digital and TeraWulf posted quarterly losses during the previous year, while Iren was not profitable in the preceding three quarters. Reuters cited Gartner’s estimate that 80% of specialized cloud companies could cease operating independently by 2032. But closing data for October 28 showed all three stocks higher than the previous day’s close: CoreWeave at $63.93, up from $59.57; Iren at $28.84, up from $27.44; and Nebius at $182.34, up from $170.47.