Microsoft’s Chief Financial Officer, Amy Hood, announced a record spending of $34.9 billion on infrastructure aimed at meeting escalating demand for artificial intelligence (AI) in an internal memo to employees. This update followed the release of the company’s earnings for the first quarter of its fiscal year ending in September, where Microsoft reported revenues of $77.7 billion, surpassing Wall Street expectations.
Despite the positive revenue figures, Microsoft’s stock fell more than 3% in after-hours trading. The decline followed an Azure outage, raising concerns about whether the company can keep pace with the surging demand for AI and cloud computing resources. Investors are apprehensive about the long-term returns on the substantial investments in AI infrastructure made by major tech companies.
In her quarterly memo, Hood highlighted the $34.9 billion investment in computing resources, including GPUs, CPUs, and datacenter infrastructure. She emphasized that this spending was necessary to “expand capacity and support strong demand signals we see.” Microsoft had forecasted a capital expenditure of $30 billion for the first quarter.
“Demand continues to accelerate, and we’re investing to capture the opportunity ahead,” Hood stated. She noted that the company is actively bringing new products to market while increasing capacity at a rapid pace to deliver significant benefits to customers.
The earnings report coincided with Microsoft’s new agreement with OpenAI, which grants Microsoft a 27% stake in OpenAI’s for-profit division, valued at approximately $135 billion. This development, described by Hood as “another big step forward in a partnership that’s been transformative for our industry,” will not impact the current quarter’s results, as the deal was signed after the quarter concluded.
In the memo, Hood provided further insights into Microsoft’s financial health, stating that the company’s cloud revenue reached $49.1 billion, reflecting a growth of 26%. This surge is attributed to increasing trust from customers who rely on Microsoft to drive their innovation and transformation efforts.
Hood encouraged employees to tune into the earnings call for a comprehensive overview of the quarter and insights into the upcoming second quarter. The call is scheduled for 14:30 PM Pacific time, and a transcript will be available on the Investor Relations website.
Looking ahead, Hood urged employees to mark their calendars for the Ignite conference, taking place from November 18-21. She emphasized the importance of this event, noting that the opening day keynote will showcase how Microsoft is assisting customers in leveraging AI and the Microsoft Cloud to achieve tangible outcomes.
As Microsoft embarks on this promising start to its fiscal year, Hood expressed gratitude to her team, affirming the company’s commitment to customer satisfaction and innovative growth. The memo concluded with a motivational note, highlighting the defining moment for the business and the potential ahead as they continue to push boundaries in the tech landscape.
