Microsoft plans to issue $25 billion in bonds to support AI infrastructure expansion
Microsoft announced on Thursday that it plans to issue $25 billion in bonds, using its S&P AAA rating to finance infrastructure expansion. Management has set a 2026 capital expenditure target of $170 billion to meet demand from customers such as Anthropic and OpenAI. The company said the net proceeds will be used for general corporate purposes, which may include working capital, capital expenditures, share repurchases, acquisitions, and repayment of existing debt. The offering is expected to close on November 4. Microsoft's earnings report on Wednesday showed positive free cash flow, while Alphabet's free cash flow was negative for the second consecutive quarter, and Meta and Amazon also reported negative free cash flow this week; Oracle announced a new $10 billion bond issuance plan the same day.
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Microsoft is still issuing $25 billion in bonds despite positive cash flow, which can be compared with the negative cash flow of Alphabet, Meta, and Amazon in the same period to see the financing divergence in AI infrastructure.
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Microsoft on Thursday announced plans to raise $25 billion in bonds, taking advantage of its healthy credit rating to support its infrastructure expansion.
The software maker holds a top-tier AAA rating with S&P, a credit agency. Management is targeting $170 billion in 2026 capital expenditures, as the company looks to meet heavy demand from artificial intelligence labs Anthropic and OpenAI, as well as other clients.
"Microsoft intends to use the net proceeds from the offering for general corporate purposes, which may include, among other things, funding for working capital, capital expenditures, repurchases of capital stock, acquisitions, and repayment of existing debt," according to a statement. The offerings should close on Nov. 4, the company said.
Amazon and Alphabet have engaged the bond market to support infrastructure projects this year, and AI-focused cloud CoreWeave has also relied on the debt market to broaden its data center footprint. Investors have turned more skittish on companies with tall debt piles as central bankers raise interest rates to fight inflation.
Microsoft will access additional funding sources to complement its own cash flow generation when conditions are attractive, Amy Hood, its finance chief, said on the company's earnings call on Wednesday.
"There's a form of financing called leasing, and we've been using that one as a vehicle," she said. "We're fortunate to have access in the debt markets, given where our ratings are, and we haven't yet tapped that."
Microsoft reported positive free cash flow on Wednesday, differentiating itself from Alphabet, whose cash flow was negative for the second quarter in a row. Last week Meta said it had negative free cash flow, and on Thursday Amazon reported negative free cash flow.
Also on Wednesday, Oracle unveiled plans to raise $10 billion in new debt and said it anticipates a return to positive free cash flow in the second half of its 2028 fiscal year.
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