Microsoft Unveils $25 Billion Debt Spree To Fuel AI Dominance as Cash Dries up for Tech Rivals

Microsoft has launched a $25 billion (£19.25 billion) bond sale, one of the largest in its history, to help fund a vast build-out of infrastructure as demand for artificial intelligence services accelerates. The debt offering, announced in Redmond, Washington, on Thursday, 29 October, is expected to close on 4 November, according to the company.

Microsoft has been expanding computing capacity to meet demand from Anthropic, OpenAI and other customers. Its latest borrowing follows finance chief Amy Hood's statement that the company would consider additional funding when conditions were attractive.

Microsoft is targeting $170 billion (€156.4 billion and £130.9 billion) in capital expenditure during 2026, according to the supplied report. That spending programme provides the backdrop to the offering, although Microsoft has not earmarked all the proceeds for artificial intelligence.

Its announcement permits spending on working capital, capital expenditure, share repurchases, acquisitions and repayment of existing debt. The distinction matters because this is corporate borrowing supporting several possible uses, not a dedicated AI financing package.

Microsoft Debt Deal Extends Beyond AI

Microsoft described the securities as senior unsecured notes, with fixed-rate and floating-rate portions across several maturities. The earliest notes mature in November 2028 and the longest-dated series matures in November 2066.

The fixed interest rates range from 4.85% on notes due in 2028 to 6.35% on those maturing in 2066. The company holds an AAA rating from S&P, according to the supplied report.

Chief financial officer Amy Hood identified leasing as another funding route during Wednesday's earnings call, alongside bond issuance and the use of existing cash. Microsoft reported positive free cash flow on Wednesday, according to the supplied account.

The company's announcement states that proceeds may be used for working capital, capital expenditure, share repurchases, acquisitions and repayment of existing debt, and does not restrict all funds to data centre or computing investments.

Cash Flow Divides Microsoft Debt Story

Several large technology companies that are expanding infrastructure have reported negative free cash flow, according to the supplied report. Alphabet recorded negative free cash flow for a second consecutive quarter.

Meta also reported negative free cash flow last week, while Amazon disclosed the same measure on Thursday. These figures describe cash-flow performance over specific reporting periods and do not show that these companies have exhausted their available cash.

The supplied account states that there is pressure on free cash flow, but does not present evidence that Microsoft's largest competitors are unable to meet their obligations.

Amazon and Alphabet have accessed bond markets this year to support infrastructure projects, according to the report. CoreWeave has used borrowing to expand its data centre footprint.

Microsoft's bond sale is part of this broader pattern of financing infrastructure investment. The supplied reporting notes that Microsoft is doing so while reporting positive free cash flow and holding a top-tier credit rating.

Oracle announced plans for additional borrowing on Wednesday. It said it expected positive free cash flow to return during the second half of its 2028 financial year. The report states that major technology companies are borrowing to fund investment programmes while reporting differing near-term free cash flow outcomes.

Investors Get Terms, Not a Project List

Microsoft said the immediate next step is to complete the bond sale, which is scheduled to close on 4 November, subject to customary conditions. The company's announcement sets out the financing terms and permitted uses of the proceeds but does not list specific AI projects that will receive funding.

The documentation provides investors with a timetable for the various bond maturities and the range of potential uses, including working capital, capital expenditure, share repurchases, acquisitions and debt repayment. It does not break down the planned allocation on a project-by-project basis.