Microsoft (MSFT.US) finally taps the bond market: issues $25 billion in bonds to further boost AI infrastructure capital expenditure

According to news from Zhitong Finance APP, Microsoft (MSFT.US) announced on Thursday that it plans to issue $25 billion in bonds, leveraging its strong credit rating to raise funds for infrastructure expansion.

The software giant holds the highest AAA rating by S&P. Company management plans to reach $170 billion in capital expenditures by 2026 to meet the surging computing power demands of AI labs such as Anthropic, OpenAI, and other clients.

According to a statement, Microsoft will issue a total principal of $25 billion in senior unsecured notes, divided into floating rate and fixed rate categories. "Microsoft intends to use the net proceeds from this issuance for general corporate purposes, which may include funding for working capital, capital expenditures, share repurchases, acquisitions, and the repayment of existing debt." The company stated, the offering is expected to be completed on November 4.

It is reported that Amazon (AMZN.US) and Alphabet (GOOGL.US) have entered the bond market this year to finance infrastructure projects. CoreWeave (CRWV.US), which focuses on AI cloud services, has also used the debt market to expand its data center footprint. The last time Microsoft issued high-grade bonds was in 2017, when it raised $17 billion. However, as central banks raise rates to combat inflation, investors' risk appetite for highly leveraged companies continues to decline.

Microsoft Chief Financial Officer Amy Hood said during the company's earnings call on Wednesday that Microsoft will seek additional funding sources when conditions are attractive to supplement its cash flow generation capacity.

"Leasing is also a financing tool we are using," she said. "Relying on our rating advantage, we have financing opportunities in the bond market, but we have not yet tapped into this capacity."

On Wednesday, Microsoft also reported positive free cash flow, which contrasts sharply with Alphabet—whose cash flow has been negative for two consecutive quarters. Last week, Meta (META.US) reported negative free cash flow, and Amazon also disclosed negative free cash flow on Thursday.

Also on Wednesday, Oracle (ORCL.US) announced plans to issue $10 billion in new bonds and said it expects to return to positive free cash flow in the second half of fiscal year 2028.