In a surprising move within the booming AI investment landscape, Microsoft has revised its capital expenditure forecast downwards. During an earnings call, CFO Amy Hood disclosed that the company now anticipates spending $170 billion on capital expenditures by 2026, a reduction of $5 billion from the previously projected $175 billion.
GPU Contract Revisions Impact Outlook
The adjustment stems from the deferral of certain GPU computing capacity service contracts. These contracts, which were expected to enhance Microsoft’s AI infrastructure, have been postponed and are now slated for delivery in the latter half of the 2027 fiscal year, corresponding to the first half of 2027. Reports suggest these agreements may involve third-party suppliers utilizing Nvidia GPUs for AI cloud services.
Despite the delay, Microsoft expects capital expenditures to accelerate in the latter half of the current fiscal year as the deferred capacity eventually comes online. This strategic shift contrasts with the aggressive expansion plans of other major cloud providers who are heavily investing in AI infrastructure, a trend that has raised concerns among Wall Street analysts.
Financial Performance and Workforce Adjustments
Microsoft’s first-quarter earnings for fiscal year 2027, ending September 30, showed robust growth, with revenue climbing 19% year-over-year to $92.3 billion. Notably, its Azure cloud business experienced a significant surge, with revenue jumping 48% to over $33 billion, surpassing analyst expectations.
Following the earnings announcement, Microsoft’s stock saw a post-market increase of approximately 3%. However, the company also reported a 2% decrease in its workforce during the same quarter. Earlier this week, Microsoft offered voluntary separation packages to over a quarter of its employees. A company spokesperson indicated that they anticipate fewer than 5% of eligible employees will accept the offer, emphasizing the ample growth opportunities within Microsoft.
The revised capital expenditure outlook suggests a more measured approach to infrastructure build-out by Microsoft, even as its cloud services continue to perform strongly. Investors and analysts will be closely monitoring how these GPU contract delays and the subsequent delivery schedule impact Microsoft’s long-term AI strategy and its competitive position in the cloud computing market.
