Microsoft’s AI-Heavy Spending Powers Record Quarterly Gains Amid Workforce Cutbacks

Microsoft reported that capital expenditures rose to $45.2 billion in the three months ending in September, a roughly 30 percent increase from the $34.9 billion recorded a year earlier. The company said the spending includes data-center expansion to meet rising demand for artificial-intelligence services. Revenue climbed to $92.3 billion, up 19 percent year-over-year, while profit reached $36.6 billion, a 32 percent rise. Azure, Microsoft’s cloud platform, was the primary growth engine, with sales jumping 48 percent to $33.2 billion. Analysts had expected about a 45 percent increase. Microsoft projected Azure growth of 49-50 percent for the current quarter, positioning the segment as the clearest barometer of the company’s AI investment payoff.

New York Times

The latest quarter follows a July pledge to spend more than $50 billion on AI infrastructure. To support the expanded infrastructure, Microsoft added 24 new data centers across five continents, after adding 31 in the prior quarter. Concurrently, the firm extended buyout offers to roughly 60,000 employees in the United States, Canada, Britain, and India—about one-quarter of its roughly 223,000-strong workforce. The offers represent the second round of voluntary exits this year; earlier in July, Microsoft eliminated 20 percent of its Xbox staff (about 4,800 jobs) and closed several game studios.

New York Times

Chief Executive Satya Nadella told investors that the surge in data-center construction reflects “increasing demand” for AI-driven cloud services. He emphasized that the new facilities are essential to sustain Azure’s rapid growth trajectory. Regarding the buyout program, Microsoft indicated that only a “sliver” of eligible employees are expected to accept the offers, framing the move as a voluntary restructuring rather than mandatory layoffs.

New York Times

Microsoft’s results contrast sharply with weaker earnings reported by Meta and Alphabet, both of which are also heavily investing in AI. The strong Azure performance suggests that large-scale AI infrastructure spending can translate into near-term revenue gains, potentially prompting rivals to accelerate similar capital outlays. At the same time, the workforce reductions highlight the tension between expanding AI capabilities and managing labor costs, a balance that other technology firms may need to navigate as AI adoption accelerates.

New York Times