Microsoft (MSFT.US) is finally using the bond market: issuing 25 billion US dollars in bonds, increasing capital expenditure on AI infrastructure

The Zhitong Finance App learned that Microsoft (MSFT.US) announced on Thursday that it plans to issue 25 billion US dollars in bonds to raise funds for infrastructure expansion, relying on its own high-quality credit ratings.

The software giant has the highest AAA rating in S&P credit ratings. The company's management plans to reach 170 billion US dollars in capital expenditure in 2026 to meet the strong computing power needs of AI laboratories such as Anthropic and OpenAI and other customers.

According to a statement, Microsoft will issue senior unsecured notes with a total principal amount of 25 billion US dollars, divided into two categories: floating interest rates and fixed interest rates. “Microsoft intends to use the net proceeds from this offering for general corporate purposes, which may include funding working capital, capital expenses, share repurchases, acquisitions, and repayment of existing debts.” The company said the release is expected to be completed on November 4.

According to reports, Amazon (AMZN.US) and Alphabet (GOOGL.US) have entered the bond market to finance infrastructure projects this year, and CoreWeave (CRWV.US), which focuses on the AI cloud business, is also using the debt market to expand its data center layout. The last time Microsoft issued high-rated bonds dates back to 2017, when it raised $17 billion. However, as major central banks raised interest rates to fight inflation, investors' risk appetite for highly indebted companies continued to decline.

Microsoft's chief financial officer Amy Hood said during the company's earnings call on Wednesday that when conditions are attractive, Microsoft will obtain additional sources of financing to supplement its ability to generate cash flow.

“Leasing is also a financing tool we are using,” she said. “Relying on our rating advantage, we have financing space in the bond market, and we have not used this amount yet.”

Microsoft announced positive free cash flow on Wednesday, which is in stark contrast to Alphabet — the latter's cash flow has been negative for the second consecutive quarter. Meta (META.US) disclosed negative free cash flow last week, and Amazon also announced negative free cash flow on Thursday.

Also on Wednesday, Oracle (ORCL.US) announced plans to issue $10 billion in new bonds and said it expects to restore positive free cash flow in the second half of the 2028 fiscal year.