Microsoft Capital Spending Reaches $45.2 Billion as Capacity Deliveries Lag

Key Facts

Microsoft’s capital spending reached about $45.2 billion in the first quarter of its 2027 fiscal year, up from $34.9 billion in the same period a year earlier. But it came in below the company’s $50 billion forecast for the quarter. Microsoft attributed the gap to delays in capacity deliveries from third parties, according to Reuters via Euronext. That puts the shortfall in ready-to-use resources at the center of the explanation for quarterly spending, as the company continues to expand its cloud infrastructure. The year-over-year comparison shows spending rose even though some expected deliveries did not arrive on time.

More broadly, the company’s cumulative capital spending reached $118.1 billion through October 2026. Reaching its July forecast of $175 billion for the calendar year would have required spending $56.9 billion in the final three months of the year, according to Reuters via Euronext. Microsoft said in July that its investment forecast for 2026 was unchanged, but the transfer of some data-center leases from finance to operating leases raised the reported figure to about $175 billion. This context highlights the difference between underlying investment spending and the accounting effect of lease reclassification. It also shows the level of spending that would have been required at year-end to meet the previous forecast.

On the revenue side, Azure revenue rose 48% in the first quarter of fiscal 2027, while Microsoft Cloud revenue reached about $63.9 billion. Cloud revenue increased 30% in reported currency and 31% in constant currency, according to the company’s earnings release. These figures provide context for infrastructure spending, as the company is betting on converting demand for its cloud services into revenue. Chief Executive Satya Nadella said a broad range of Microsoft customers are now planning spending "over a decade or more." That shift in planning horizon comes as the company manages delays in some capacity deliveries.

The company expects Azure revenue to grow between 49% and 50% in the second quarter of fiscal 2027, and total revenue to range between $96 billion and $97.1 billion. The revenue range exceeds analysts’ average estimate of $95.6 billion, according to Reuters via Euronext. Microsoft also reported free cash flow of $18.6 billion in the first quarter, beating analysts’ expectations by about $10 billion, according to the same source. The company returned $10.2 billion to shareholders during the quarter through dividends and share buybacks. Microsoft did not specify when it would announce its next quarterly results, saying the release date would be announced soon.