Microsoft is looking to raise at least $25 billion in a Microsoft bond sale, its first US investment-grade deal in more than nine years, as spending on AI infrastructure climbs. Bloomberg reported that the size is not final and may change with investor demand. Bloomberg described the offering as a crucial test of investor appetite for financing AI investments as concerns grow about the sustainability of the industry’s spending spree.
Key Takeaways
- Microsoft seeks at least $25 billion in its first US high-grade sale since 2017.
- The AAA-rated deal may include up to 10 tranches maturing in two to 40 years.
- Data-center spending hit $45.2 billion in the quarter to September; free cash flow fell 27%.
- Azure revenue rose 48% to $33.2 billion, with demand still exceeding supply.
How the Microsoft Bond Sale Is Structured
People familiar with the matter, who asked not to be identified, told Bloomberg the company is selling the debt in as many as 10 tranches. Maturities range from two years to 40 years. Wells Fargo, JPMorgan Chase and UBS are managing the offering, The Next Web reported, citing Bloomberg.
- Longest maturity: a note due in 2066, with initial price talk of as much as 1.35 percentage points above Treasuries.
- Use of proceeds: general corporate purposes, including capital expenditures.
- Microsoft and the banks either declined or did not immediately respond to requests for comment, Bloomberg said.
First US High-Grade Deal Since 2017
Bloomberg described the offering as the end of a long issuance dry spell. Microsoft last sold high-grade US debt in January 2017, raising $17 billion, partly to help finance the LinkedIn acquisition, The Next Web reported. Data compiled by Bloomberg also put that 2017 raise at $17 billion.
Microsoft holds a top-tier AAA rating from both Moody’s Ratings and S&P Global Ratings. It is one of only two publicly traded US firms at that level, alongside Johnson & Johnson. The Next Web noted that the rating sits above the US government’s and helps Microsoft secure favorable terms.
Readers should treat the AAA mark as context, not as proof the $25 billion target will clear. Neither outlet reported that the books are covered.
Data Center Spending and Azure Demand
A day before the reported bond sale, Microsoft disclosed that spending on data centers and equipment, including leases, reached $45.2 billion in the three months to September, The Next Web reported. Free cash flow fell 27% to $18.6 billion in that period. The company has rarely needed to borrow heavily in recent years, which makes the drop in free cash flow the clearest explanation on offer for a return to the market.
Demand is not waiting. Azure revenue rose 48% to $33.2 billion in the quarter, and Microsoft expects growth of 49% to 50% in the current quarter. Chief financial officer Amy Hood told analysts, according to The Next Web:
“We still have demand that exceeds supply.”
That line, not the bond headline, is what capacity-constrained customers should weigh. More borrowing does not by itself add servers next week. It does show management raising cash while free cash flow is down 27%.
How This Compares With Other AI Borrowers
Microsoft is joining a borrowing spree, not starting one. Bloomberg described the offering as the first from a blue-chip hyperscaler since Alphabet priced $25 billion of debt on Aug. 6. The Next Web said Alphabet’s August deal was a 10-part sale across a similar maturity range, and that Alphabet planned to borrow in the US twice a year.
| Issuer | Figure | Context from sources |
|---|---|---|
| Microsoft | At least $25 billion | First US high-grade sale since 2017, when it raised $17 billion; up to 10 tranches |
| Alphabet | $25 billion | Priced Aug. 6; 10-part sale; planned two US borrowings a year |
| Amazon | $25 billion | Earlier this year; lukewarm reception, The Next Web said |
| Five firms | Around $350 billion | Alphabet, Amazon, Meta, Microsoft and Oracle roughly doubled combined debt over five years |
The five-company debt total comes from Bloomberg data that The Next Web cited in July, so it predates this sale. Reception has not been uniform. Amazon’s $25 billion sale earlier this year met a lukewarm reception, The Next Web reported, and S&P downgraded Oracle to one notch above junk as its debt grew.
Microsoft’s rating gives it more room than peers already nearer the edge of high-grade territory, an analytical contrast with Oracle’s downgrade, not a new rating action. Even so, the sale lands while the largest technology companies face a rising cost of financing AI, The Next Web wrote. For consumers, the link is indirect: bond-funded data centers are how Azure capacity gets built when Hood says demand still exceeds supply. Whether investors accept the 2066 note at the talked spread is still open.
