By Trefis Team
Publication Date: 2026-10-16 15:43:00
Microsoft Is Spending Heavily To Meet AI Demand
The cost is the AI capacity Microsoft is building, and the company’s executives raised it on that same call. Customer demand still exceeds the capacity Microsoft has available, management said. In July, the company expected to spend over $50 billion on capital in fiscal Q1 2027, covering the July to September quarter. This figure includes the effect of a change in how it counts some leases. Microsoft also expects capital spending for fiscal 2027 as a whole to grow from the year before.
That heavy spending already shows in Microsoft’s financial results. Gross margin was 67.2% in fiscal Q4 2026, against 68.6% a year earlier. Management attributed this decline to a shift in sales toward Azure and to continued investment in AI infrastructure. Free cash flow, the cash left after that spending, fell to $19.6 billion from $25.6 billion a year earlier, even as cash from operations rose.
Microsoft’s…
