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Since the release of the ChatGPT chatbot in 2022, Microsoft has ploughed more and more money into building data centres in what one industry analyst called the largest infrastructure build-out that humanity has ever seen. But after 10 consecutive quarters of increased spending for artificial intelligence, the company has tapped on the brakes, according to financial results released Wednesday. In the first three months of 2025, Microsoft spent $21.
4 billion on capital expenses, down more than $1 billion from the previous quarter. The company indicated it was on pace to spend more than than $85 billion on capital expenses in the current fiscal year, which ends in June. But the pullback, though slight, is an indication that the tech industry's appetite for spending on AI is not limitless.
Overall, Microsoft's results showed unexpected strength in its business. Sales surpassed $70 billion, up 13% from the same period a year earlier. Profit rose to $25.
8 billion, up 18%. The results far surpassed Wall Street's expectations. Despite the economic uncertainty, the company predicted more strength ahead, saying revenue would surpass $73 billion in the current quarter.
Satya Nadella, Microsoft's CEO, said on a call with investors that demand for cloud and artificial intelligence remained strong. He said the company was tweaking its investments based on efficiency improvements in computing systems, which countries are driving demand, and what kind of services customers want. We just want to make sure we are accounting for the latest and greatest information, he said.
Microsoft's stock price increased more than 8% in after-hours trading after the results were announced. The company had been frantically building, and in recent quarters, Microsoft had said would have seen even higher sales if it had more data centres up and running to deliver cloud computing and AI services. Amy Hood, Microsoft's finance chief, said the constraints remain and will likely bleed into the start of the next fiscal year.
The company reiterated that infrastructure spending would grow in the next fiscal year, though not as sharply as it is in the current one. Sales of Microsoft's flagship cloud computing service, Azure, grew 33% in the quarter, well over Wall Street's expectations. Almost half of that growth came from artificial intelligence services.
Investors have been bracing for a change in infrastructure spending since analysts at the investment bank TD Securities reported in late February that Microsoft had been pulling out of some contracts for data centres. The analysts said much of that appeared tied to projects Microsoft had intended to build for its partner, OpenAI, to develop advanced AI systems. OpenAI is now expected to work with software maker Oracle through their Stargate project.
Microsoft has acknowledged slowing down projects in Ohio and Wisconsin, and said it had paused some early-stage projects as part of a refinement process. Analysts at the investment firm Raymond James wrote last week that they had not yet detected major reductions in spending by Microsoft's enterprise cloud customers. But they are concerned that tariffs and the uncertain economy might lead customers to reduce spending on growth initiatives, shifting their focus to 'keeping the lights on.
' We continue to see strong demand for our cloud and AI offerings, Hood said. Microsoft's personal computing business grew 6% to $13.4 billion.
That benefited in part from computer manufacturers making more laptops with the Windows operating system, so they have inventory available amid the tariff uncertainty. Commercial sales for its online productivity tools for businesses, including Excel, Teams and Word, grew 15%. Microsoft's results would have been even stronger were it not for the weakened U.
S. dollar, which reduced revenue by more than $1 billion and profit by almost $400 million..
