Microsoft Adjusts AI Spending Amid Strong Q1 Results
Redmond, WA – Microsoft has announced a notable shift in its capital expenditures following an unprecedented two-and-a-half years of investment in artificial intelligence infrastructure. In its latest financial report, the company revealed a decrease in spending, with capital expenses reaching $21.4 billion in the first quarter of 2025—down over $1 billion from the previous quarter.
Despite this moderation, Microsoft remains poised to exceed $80 billion in capital expenses for the fiscal year ending in June. This pullback indicates that the tech industry’s insatiable demand for AI spending may be stabilizing. Nevertheless, Microsoft’s financial results showcased resilience, with sales exceeding $70 billion—marking a 13 percent increase year-over-year—and profits climbing 18 percent to $25.8 billion, outpacing Wall Street predictions.
CEO Satya Nadella emphasized the critical role of cloud and AI technologies in driving business growth, stating, “Cloud and A.I. are the essential inputs for every business to expand output, reduce costs, and accelerate growth.” Following the results, Microsoft’s stock surged 5 percent in after-hours trading.
The company had previously indicated that revenue would have been even higher had it fully operational data centers to meet customer demand. Particularly, sales from its cloud service, Azure, soared 33 percent, fueled largely by AI services.
Investor concerns surfaced as analysts reported Microsoft retracting from some data center contracts, particularly projects intended for OpenAI. This has led to speculation about future collaboration with Oracle under the Stargate initiative.
Despite market uncertainties and tariffs, analysts at Raymond James noted that major spending cuts from Microsoft’s enterprise customers have yet to materialize. Meanwhile, the personal computing division also saw a growth uptick of 6 percent, contributing to overall revenue gains.
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