Microsoft (MSFT.US) returns to the US investment-grade bond market after 9 years and plans to raise $25 billion to increase AI investment

The Zhitong Finance App learned that Microsoft (MSFT.US) is seeking to raise at least 25 billion US dollars through the first US investment-grade bond issuance after a lapse of more than nine years to join competitors' financing boom to raise funds to support the artificial intelligence (AI) investment boom.

According to people familiar with the matter, Microsoft has yet to finalize the scale of this bond issue, and the exact amount may be adjusted according to market demand. People familiar with the matter pointed out that Microsoft will issue up to 10 types of bonds with different terms, ranging from 2 to 40 years. One of the people familiar with the matter added that the initial price guidance for the longest term bond, which will expire in 2066, is up to 1.35 percentage points higher than the yield on US Treasury bonds.

Wells Fargo Bank (WFC.US), J.P. Morgan Chase (JPM.US), and UBS Group (UBS.US) are responsible for managing this bond issue. The source said that the proceeds from the issuance will be used for general corporate purposes, including capital expenses.

The deal will put an end to Microsoft's long-standing empty bond issuance window. According to compiled data, Microsoft is one of only two listed companies in the US to receive the highest AAA rating from Moody's and S&P Global Ratings at the same time. The other company is Johnson & Johnson (JNJ.US). The last time Microsoft issued high-rated bonds dates back to 2017, when it raised $17 billion.

This offering is also the first bond issue by a major US blue-chip hyperscaler (hyperscaler) since Alphabet (GOOGL.US) issued a $25 billion bond price on August 6. In a context where the market is increasingly concerned about whether the AI industry's large-scale spending boom will continue, this launch will be a key test to measure investors' demand for AI investment and financing.

Microsoft's financial report for the first quarter of fiscal year 2027 released after the US stock market on Wednesday showed that the company's revenue for the quarter reached US$92.279 billion, up 19% year on year, and the growth rate was 17% higher than market expectations; non-GAAP adjusted net profit reached US$36.422 billion, up 18% year on year; and adjusted earnings per share were 4.89 US dollars, up from 4.13 US dollars in the same period last year, up 18% year on year.

The cloud computing business continues to be an important driver of Microsoft's performance growth. In the first fiscal quarter, Microsoft Azure's revenue reached US$33.165 billion, up 48% from US$22.384 billion in the same period last year. The growth rate was also higher than market expectations of 44%, reflecting the continued expansion of corporate demand for cloud computing and artificial intelligence infrastructure.

In terms of cash flow, Microsoft's cash flow from operating activities reached US$58 billion in the first fiscal quarter, an increase of about 29% over US$45.57 billion in the same period last year. At the same time, the company continues to increase investment in infrastructure. The quarter's capital expenditure for the purchase of property and equipment reached US$39.367 billion, up about 103% from US$19.394 billion in the same period last year, but it was also 14.3% lower than analysts' expectations and lower than the capital expenditure level of US$41 billion in the previous quarter.

For AI trading, this is a combination of “high growth+lower than expected capital expenditure” that excites the market. As one of the core indicators for measuring corporate AI demand, Azure's revenue growth rate not only beat sellers' expectations, but also surpassed the more optimistic expectations of some buyers, which may be close to 47%; the revenue and profit side exceeded expectations, with an operating margin of close to 50% indicating that AI investment has not significantly damaged Microsoft's profitability; at the same time, cash capital expenses fell short of expectations, which was interpreted as a better return on AI investment than expected, mitigating market concerns about AI “only burning money, not monetizing” in the short term.

Meanwhile, during the results conference call, Microsoft executives revealed that Azure revenue will grow 49%-50% in the second fiscal quarter, and the growth rate will further accelerate. The capital expenditure guide for the full year 2026 in the Gregorian calendar is about 170 billion US dollars, which is slightly lower than the previous forecast.