Microsoft returns to US bond market with $25 billion AI-driven sale

Key Points

1. Microsoft plans to raise about $25 billion in its first US investment-grade bond sale in over nine years.
2. Orders topped $100 billion, more than four times the offering size, one source told Reuters.
3. Big Tech is now borrowing, not just spending cash, to finance the AI data-center buildout.

The latest:

About $25 billion is the target for Microsoft’s first US investment-grade bond sale in more than nine years, two sources familiar with the matter told Reuters. Demand ran far ahead of supply, with orders above $100 billion, one of the sources said. Microsoft pointed Reuters to a regulatory filing confirming the sale without disclosing its size.

Details:

• The size: Two people familiar with the matter told Reuters the offering is expected to raise roughly $25 billion, marking Microsoft’s return to the US investment-grade market after more than nine years away. Bloomberg News, which first reported the plan, said no final decision had been made on the size and that it could shift with demand.
• The demand: One of the sources told Reuters the sale had gathered more than $100 billion of orders, over four times the size of the offering. The person requested anonymity because the matter was confidential. That level of oversubscription signals how aggressively credit investors are positioning for large AI-linked borrowers.
• The structure: Bloomberg reported the debt is being sold in as many as 10 tranches, with maturities ranging from 2 to 40 years. A 40-year maturity stretches repayment well past the current data-center investment cycle, spreading the cost of the buildout across decades of expected cloud revenue.
• The banks: Wells Fargo, JPMorgan Chase and UBS Group AG are managing the offering, according to Bloomberg. All three declined Reuters’ requests for comment, and Microsoft did not disclose the size of the sale in the regulatory filing it directed Reuters to.
• The CFO signal: The plan surfaced a day after Chief Financial Officer Amy Hood told investors on an earnings call that Microsoft would pursue additional sources of funding “when we believe it is attractive to do so”, citing the need to preserve cash flows and financial flexibility. She did not name a specific instrument or timetable.
• The cash position: Microsoft expects to keep generating positive free cash flow in its fiscal year running through June 2027, according to Reuters. That would make it a standout among Big Tech and hyperscaler peers, which have all begun burning through cash to fund data-center construction.
• The peer contrast: Investors punished Alphabet on Wednesday after it burned $9.07 billion in the third quarter, Reuters reported. Meta was sold off the previous week following the Facebook parent’s first cash burn in more than a decade. Microsoft’s borrowing comes from a stronger cash position than either.
• The market reaction: Microsoft shares fell 0.7% in afternoon trading on Thursday, a decline that followed the upbeat current-quarter cloud sales outlook the company issued after the close on Wednesday.

Background:

The world’s largest technology firms have turned to bond sales and equity raises over the past year to pay for AI spending. That marks a shift for Silicon Valley giants, which have typically funded investments from their own large cash reserves rather than debt markets.

Between the lines:

The $100 billion order book against a $25 billion offering is the clearest market verdict here: bond investors are willing to fund AI infrastructure at scale, at least for the borrower with the strongest cash profile. Hood’s conditional language on funding, delivered one day earlier, reads in hindsight as preparation rather than hypothesis. Maturities stretching to 40 years suggest Microsoft is financing an asset cycle it expects to outlast the current spending surge.

What’s next

Watch the final size and pricing of the tranches, which Bloomberg said could still change with demand, and whether other hyperscalers follow with investment-grade issuance of their own.