Microsoft is turning to debt markets to raise $25 billion as its artificial intelligence (AI) ambitions push up infrastructure costs, just days after offering voluntary exit packages to around 60,000 employees across India, the US, Canada and the UK. The timing of the two moves has drawn attention as the technology giant prepares for a massive increase in spending on AI and cloud computing infrastructure. The company plans to use the money for general corporate purposes, including capital expenditure. Microsoft has projected capital expenditure of approximately $175 billion for 2026 as it races to expand its data centre capacity and meet growing demand for AI services. The bond sale is Microsoft's first US investment-grade debt offering since 2017. It also comes at a time when major technology companies are raising billions of dollars to finance their AI infrastructure expansion. However, the borrowing and employee buyout programmes are separate corporate decisions. Microsoft has described the exit offer as voluntary and expects only a small percentage of eligible employees to accept it. Why is Microsoft borrowing $25 billion? The growing cost of building and operating AI infrastructure is a major factor behind Microsoft's latest fundraising. The company needs substantial computing capacity to support its expanding portfolio of AI products and cloud services. This requires investments in data centres, servers and other infrastructure. Microsoft has forecast capital expenditure of around $175 billion for 2026. Raising money through bonds gives the company access to long-term funding while allowing it to finance its investment plans through debt markets. Microsoft Chief Financial Officer Amy Hood had indicated during the earnings call that the company had not yet tapped debt markets despite having access to them because of its strong credit ratings. The notes were subsequently priced in 10 tranches, with maturity dates ranging from 2028 to 2066. The offering is scheduled to close on November 4. Investors place $115 billion in orders for Microsoft's bond sale Microsoft's decision to raise $25 billion attracted substantial interest from investors. Orders for the bond offering reached approximately $115 billion, around 4.6 times the amount the company intended to raise, according to people familiar with the transaction. Live Events The fixed-rate bonds carry interest rates ranging from 4.85% for notes maturing in 2028 to 6.35% for those due in 2066. The company also included two floating-rate tranches worth $1 billion each. Microsoft's strong credit ratings have helped it attract investors. It is one of only two publicly traded US companies, alongside Johnson & Johnson, with AAA ratings from both Moody's and S&P. The company's previous US investment-grade bond offering was in 2017, when it raised $17 billion. The latest fundraising also highlights how expensive the AI infrastructure race is becoming. Hyperscalers and data centre developers have raised more than $313 billion through investment-grade bonds globally this year. This is nearly three times the amount raised during the whole of 2025. Alphabet raised $25 billion through a debt offering in August, while Meta chose to raise the same amount through an equity deal. Why is Microsoft offering buyouts to 60,000 employees? Microsoft announced its voluntary exit programme on October 26. The offer covers eligible employees at level 70 and below in participating teams across the US, India, Canada and the UK. With approximately 223,000 full-time employees, the programme potentially covers more than a quarter of Microsoft's global workforce. Eligible teams include AI experiences, Copilot, finance, human resources, Xbox, and Windows + Devices. Employees working in marketing, commercial business and security are excluded. Microsoft Chief People Officer Amy Coleman said the programme gives employees an opportunity to make career transitions with support from the company. The company has described the offer as voluntary and time-limited. It is not a mandatory separation programme. The timing of the announcement has attracted attention because Microsoft is simultaneously preparing to spend heavily on AI infrastructure. However, the company has not indicated that the buyout programme is directly linked to its $25 billion borrowing. Microsoft expects 3,000 employees to accept buyout offer Although nearly 60,000 employees are eligible for the exit programme, Microsoft expects participation to remain limited. A company spokesperson said the number of employees accepting the offer is expected to be 3,000 or fewer. This would represent approximately 5% of the eligible workforce. CFO Amy Hood also addressed the programme in an internal earnings memo. She said the offer was intended to give employees the option to leave the company on their own terms. Hood added that Microsoft expects very few employees to take the offer because of the growth opportunities available within the organisation. The company has previously used voluntary exit programmes to manage its workforce. Earlier this year, it offered voluntary retirement packages to approximately 9,000 US employees. Around one-third of eligible workers accepted the offer. The programme helped Microsoft reduce the number of employees affected by subsequent job cuts. In July, the company announced 4,800 job cuts, representing approximately 2.1% of its workforce, during a broader restructuring that included changes to its Xbox business. Azure demand exceeds supply as Microsoft increases AI investments Microsoft's spending plans come as its cloud and AI businesses continue to expand. The company reported a 19% increase in revenue in its latest quarter, while operating income rose 21%. Azure, its cloud computing platform, recorded revenue growth of 48%. Hood said demand for Azure services continues to exceed available supply. She also acknowledged the efforts of engineering teams working to increase infrastructure capacity and meet customer demand. This imbalance between demand and available computing capacity is one of the reasons Microsoft is investing heavily in data centres and AI infrastructure. The company is competing with other major technology players to expand its computing capabilities as businesses increasingly adopt AI-powered products and services. Microsoft's projected capital expenditure of approximately $175 billion for 2026 underlines the scale of this investment. The company is expected to discuss its cloud computing and AI strategy in greater detail at its annual Ignite conference, scheduled from November 17 to 20. For Microsoft, the challenge is to expand its AI infrastructure quickly enough to meet demand while managing the enormous costs involved. Its latest $25 billion bond sale is another indication of how much capital the technology industry is willing to deploy in the race to build AI capabilities. Add as a Reliable and Trusted News Source Add Now! (You can now subscribe to our Economic Times WhatsApp channel)
Why Microsoft seeks $25 bn after 60K staff buyout?
Microsoft is turning to debt markets to raise $25 billion as its artificial intelligence (AI) ambitions push up infrastructure costs, just days after offering voluntary exit packages to around 60,000 employees across India, the US, Canada and the UK. The timing of the two moves has drawn attention as the technology giant prepares for a massive increase in spending on AI and cloud computing infrastructure. The company plans to use the money for general corporate purposes, including capital expenditure. Microsoft has projected capital expenditure of approximately $175 billion for 2026 as it races to expand its data centre capacity and meet growing demand for AI services. The bond sale is Microsoft's first US investment-grade debt offering since 2017. It also comes at a time when major technology companies are raising billions of dollars to finance their AI infrastructure expansion. However, the borrowing and employee buyout programmes are separate corporate decisions. Microsoft has described the exit offer as voluntary and expects only a small percentage of eligible employees to accept it. Why is Microsoft borrowing $25 billion? The growing cost of building and operating AI infrastructure is a major factor behind Microsoft's latest fundraising. The company needs substantial computing capacity to support its expanding portfolio of AI products and cloud services. This requires investments in data centres, servers and other infrastructure. Microsoft has forecast capital expenditure of around $175 billion for 2026. Raising money through bonds gives the company access to long-term funding while allowing it to finance its investment plans through debt markets. Microsoft Chief Financial Officer Amy Hood had indicated during the earnings call that the company had not yet tapped debt markets despite having access to them because of its strong credit ratings. The notes were subsequently priced in 10 tranches, with maturity dates ranging from 2028 to 2066. The offering is scheduled to close on November 4. Investors place $115 billion in orders for Microsoft's bond sale Microsoft's decision to raise $25 billion attracted substantial interest from investors. Orders for the bond offering reached approximately $115 billion, around 4.6 times the amount the company intended to raise, according to people familiar with the transaction. Live Events The fixed-rate bonds carry interest rates ranging from 4.85% for notes maturing in 2028 to 6.35% for those due in 2066. The company also included two floating-rate tranches worth $1 billion each. Microsoft's strong credit ratings have helped it attract investors. It is one of only two publicly traded US companies, alongside Johnson & Johnson, with AAA ratings from both Moody's and S&P. The company's previous US investment-grade bond offering was in 2017, when it raised $17 billion. The latest fundraising also highlights how expensive the AI infrastructure race is becoming. Hyperscalers and data centre developers have raised more than $313 billion through investment-grade bonds globally this year. This is nearly three times the amount raised during the whole of 2025. Alphabet raised $25 billion through a debt offering in August, while Meta chose to raise the same amount through an equity deal. Why is Microsoft offering buyouts to 60,000 employees? Microsoft announced its voluntary exit programme on October 26. The offer covers eligible employees at level 70 and below in participating teams across the US, India, Canada and the UK. With approximately 223,000 full-time employees, the programme potentially covers more than a quarter of Microsoft's global workforce. Eligible teams include AI experiences, Copilot, finance, human resources, Xbox, and Windows + Devices. Employees working in marketing, commercial business and security are excluded. Microsoft Chief People Officer Amy Coleman said the programme gives employees an opportunity to make career transitions with support from the company. The company has described the offer as voluntary and time-limited. It is not a mandatory separation programme. The timing of the announcement has attracted attention because Microsoft is simultaneously preparing to spend heavily on AI infrastructure. However, the company has not indicated that the buyout programme is directly linked to its $25 billion borrowing. Microsoft expects 3,000 employees to accept buyout offer Although nearly 60,000 employees are eligible for the exit programme, Microsoft expects participation to remain limited. A company spokesperson said the number of employees accepting the offer is expected to be 3,000 or fewer. This would represent approximately 5% of the eligible workforce. CFO Amy Hood also addressed the programme in an internal earnings memo. She said the offer was intended to give employees the option to leave the company on their own terms. Hood added that Microsoft expects very few employees to take the offer because of the growth opportunities available within the organisation. The company has previously used voluntary exit programmes to manage its workforce. Earlier this year, it offered voluntary retirement packages to approximately 9,000 US employees. Around one-third of eligible workers accepted the offer. The programme helped Microsoft reduce the number of employees affected by subsequent job cuts. In July, the company announced 4,800 job cuts, representing approximately 2.1% of its workforce, during a broader restructuring that included changes to its Xbox business. Azure demand exceeds supply as Microsoft increases AI investments Microsoft's spending plans come as its cloud and AI businesses continue to expand. The company reported a 19% increase in revenue in its latest quarter, while operating income rose 21%. Azure, its cloud computing platform, recorded revenue growth of 48%. Hood said demand for Azure services continues to exceed available supply. She also acknowledged the efforts of engineering teams working to increase infrastructure capacity and meet customer demand. This imbalance between demand and available computing capacity is one of the reasons Microsoft is investing heavily in data centres and AI infrastructure. The company is competing with other major technology players to expand its computing capabilities as businesses increasingly adopt AI-powered products and services. Microsoft's projected capital expenditure of approximately $175 billion for 2026 underlines the scale of this investment. The company is expected to discuss its cloud computing and AI strategy in greater detail at its annual Ignite conference, scheduled from November 17 to 20. For Microsoft, the challenge is to expand its AI infrastructure quickly enough to meet demand while managing the enormous costs involved. Its latest $25 billion bond sale is another indication of how much capital the technology industry is willing to deploy in the race to build AI capabilities. Add as a Reliable and Trusted News Source Add Now! (You can now subscribe to our Economic Times WhatsApp channel)
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