Microsoft signed more than $130 billion (€113 billion) of new data centre leases in the second quarter in a huge expansion of its commitments, as it races to bring online enough computing infrastructure to capitalise on an AI-driven boom in cloud sales.
Chief executive Satya Nadella told analysts that Microsoft was on track to roughly double its data centre capacity over two years and that it had brought online 31 new data centres in the quarter and 88 over its fiscal year to end June.
The new leases reported on Wednesday increased Microsoft’s commitments by more than two-thirds between March and June.
Like the other Big Tech “hyperscalers”, Microsoft is racing to add data centres to satisfy rising computing power demands from AI start-ups such as OpenAI and Anthropic, as well as other companies.
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Microsoft’s strong earnings helped it defy a gloomy mood for stocks linked to AI, rising 9 per cent in after-hours trading. The stock had fallen 17 per cent this year to Wednesday’s close.
Melissa Otto, head of research at Visible Alpha, said investors had bid up shares after Microsoft forecast higher-than-expected revenue growth of 45 per cent in the coming quarter.
“All the capex investments are having a meaningful return. The business is accelerating,” she said.
However, the $2.9 trillion tech group’s AI spending has driven up its capital expenditures, which ballooned to $41 billion in the second quarter, up 70 per cent year on year.
Roughly two-thirds of the capex was for short-lived assets such as semiconductors, with the rest going toward data centre buildings and other long-lived infrastructure, the company said.
The rise in capital spending ate into free cash flow, which fell 23 per cent year on year to $19.6 billion, though it came in advance of analysts’ estimates of $13.4 billion. The group held its capex forecast steady for the year, though an accounting change reduced the figure to $175 billion.
Microsoft investors have taken comfort that data centre spending is powering Microsoft’s sales higher, with total sales up 18 per cent year on year to $90 billion in the quarter. Its intelligent cloud segment, which houses its Azure platform, rose 32 per cent to $39.3 billion.
Net income rose 31 per cent year on year to $35.8 billion during the three-month period, inflated by a $3.2 billion gain on its ownership stake in AI lab Anthropic.
Microsoft’s contracted future revenue backlog rose to $678 billion at the end of the quarter, up $51 billion from the prior period. The increase did not include any commitments from the frontier labs such as OpenAI and Anthropic, Microsoft said.
It reported that OpenAI, in which it owns a one-quarter stake, had contributed $24.1 billion of revenue over the past year, or about 7 per cent of Microsoft’s $332 billion in sales.
The tech giant has a complex relationship with the start-up, as its largest investor and provider of computing power, but also a competitor. Investors have fretted over the durability of Microsoft’s software franchise in the AI era.
“Every model is substitutable,” Nadella told investors, explaining how Microsoft was building “a new model system” so that the core technical scaffolding sits separately from any particular model. This would allow Microsoft to swap between its own models or those created by OpenAI, Anthropic and others as economics and quality dictate. – Copyright The Financial Times Limited 2026
