Since launching the ChatGPT chatbot in 2022, Microsoft has heavily invested in expanding its data centers—a move that an industry expert has described as possibly “the largest infrastructure build-out in history.”
However, after 10 straight quarters of rising spending on artificial intelligence, the company has slowed down its expenditures, as revealed in their financial report released on Wednesday.
In the first quarter of 2025, Microsoft’s capital spending reached $21.4 billion, which is over $1 billion less than the previous quarter.
The company is still on track to exceed $80 billion in capital expenditures for this fiscal year, ending in June. Nevertheless, this slight reduction signifies that the tech sector’s appetite for A.I. investments may not be endless.
Despite the pullback, Microsoft’s overall financial performance was unexpectedly robust. Sales rose to over $70 billion, marking a 13 percent increase compared to the same time last year. Profits jumped to $25.8 billion, an 18 percent rise, significantly exceeding Wall Street’s estimates.
“Cloud and A.I. are crucial for businesses aiming to boost output, lower costs, and accelerate growth,” said Satya Nadella, Microsoft’s CEO, in a statement.
Following the announcements, Microsoft’s stock price surged over 5 percent in after-hours trading.
Microsoft has been rapidly expanding, and during recent quarters, they indicated that sales could have been higher if they had more operational data centers to meet customer demand for cloud computing and A.I. services.
Sales of Microsoft’s primary cloud service, Azure, surged 33 percent during the quarter, exceeding Wall Street’s predictions, with nearly half of that growth attributed to A.I. services.
Investors have anticipated a shift in infrastructure spending since TD Securities analysts reported in late February that Microsoft had begun exiting certain data center contracts. Many of these contracts were linked to projects Microsoft aimed to develop with its partner, OpenAI, for advanced A.I. systems. OpenAI is now expected to collaborate with Oracle on their Stargate project.
Microsoft has confirmed a slowdown in projects in Ohio and Wisconsin, and mentioned that they have paused some early-stage initiatives as part of a “refinement” process.
(Recently, The New York Times filed a lawsuit against OpenAI and Microsoft for alleged copyright infringement concerning news content related to A.I. systems, which both companies have denied.)
Analysts from Raymond James noted last week that they have not yet seen significant spending cuts from Microsoft’s enterprise cloud clients. However, they expressed concerns that tariffs and an uncertain economy might prompt customers to pull back on growth investments, choosing instead to focus on basic operational needs.
Microsoft’s personal computing sector grew by 6 percent to $13.4 billion, while sales of its online productivity tools for businesses—including Excel, Teams, and Word—rose by 15 percent.
Microsoft’s financial results would have been even better if not for the decline of the U.S. dollar, which led to a revenue decrease of over $1 billion and a profit drop of nearly $400 million.
