Microsoft raises $25 billion as AI investments accelerate after buyout offer to 60,000 staff

Microsoft has returned to the US bond market for the first time since 2017, raising $25 billion as technology companies step up investments in artificial intelligence infrastructure. The transaction comes days after the company announced a voluntary buyout offer for around 60,000 eligible employees across India, the US, Canada and the UK. While the timing of these developments may invite comparisons, Microsoft has not linked its workforce offer to its borrowing plans. Instead, the bond sale raises a broader question - Why is a company generating billions of dollars in cash turning to debt markets as it expands its AI infrastructure?

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Why Microsoft is borrowing despite strong cash flows

Microsoft’s $25 billion bond sale attracted investor orders worth as much as $115 billion at their peak, around 4.6 times the size of the offering, according to Bloomberg. The 10-part offering included bonds with maturities ranging from two to 40 years. It was Microsoft’s first US investment-grade bond sale since 2017, when it raised $17 billion.

The borrowing does not indicate that Microsoft is running short of cash. For the quarter ended September 30, the company reported $58 billion in cash flow from operations and $18.6 billion in free cash flow. Its revenue rose 19% year-on-year to $92.3 billion. Microsoft also had $64.5 billion in cash, cash equivalents and short-term investments at the end of the quarter.

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However, its infrastructure plans require substantial capital. During the October 28 earnings call, chief financial officer Amy Hood said Microsoft expected to remain free cash flow positive in FY27. She added that the company would access additional funding when it found the terms attractive, to complement cash generated by the business and preserve financial flexibility.

AI infrastructure is driving Microsoft’s spending plans

Microsoft spent $45.2 billion on capital expenditure in the September quarter. Around three-quarters of this went towards short-lived assets, primarily CPUs and GPUs, including higher memory and storage costs. These components are essential to expanding computing capacity for AI applications and cloud services.

The company expects capital expenditure to exceed $50 billion in the December quarter. For calendar year 2026, Hood expects the figure to reach approximately $170 billion. Microsoft expects spending to accelerate in the second half of its fiscal year, primarily because of higher investment in CPUs, GPUs and third-party capacity deliveries that were delayed from earlier in the year.

The investment is also linked to demand for Microsoft’s cloud services. Azure revenue grew 48% in the September quarter, while the company said customer demand continued to exceed available supply.

What the bond sale tells us about Microsoft’s strategy

The bond sale gives Microsoft another source of funding as it expands its data centres and computing capacity. Its AAA credit ratings from Moody’s and S&P Global Ratings also support its access to debt markets. The strong investor demand for the offering highlights the appetite for Microsoft’s debt, even as questions grow around the scale and returns of the technology industry’s AI investments.

For employees, the voluntary buyout offer remains a separate workforce decision. Microsoft expects 3,000 or fewer of the roughly 60,000 eligible employees to accept it. The two developments reflect different parts of the company’s strategy: adjusting its workforce while committing substantial capital to the infrastructure it expects to support future growth.