Microsoft Cloud expansion limited by data centre shortage

Key topics.Azure cloud growth slows due to data center constraints.AI services surge 157%, but monetization lags investor expectations.Microsoft plans $80B in AI data centers amid Wall Street concerns..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..The seventh BizNews Conference, BNC#7, is to be held in Hermanus from March 11 to 13, 2025. The 2025 BizNews Conference is designed to provide an excellent opportunity for members of the BizNews community to interact directly with the keynote speakers, old (and new) friends from previous BNC events – and to interact with members of the BizNews team. Register for BNC#7 here..If you prefer WhatsApp for updates, sign up for the BizNews channel here..By Matt Day and Dina Bass___STEADY_PAYWALL___.Microsoft Corp. said its cloud-computing business will continue to grow slowly in the current quarter as the company struggles to build enough data centers to handle demand for its artificial intelligence products..The Azure cloud division will grow at as much 32% in its fiscal third quarter, not much faster than it did during the last three months of 2024. The shares fell about 5% in extending trading..The Redmond, Washington-based software maker is considered a leader in commercializing artificial intelligence products, thanks to its close partnership with ChatGPT maker OpenAI. In the last year, Microsoft has unleashed a blizzard of Copilot-branded AI assistants, but efforts to monetize those products is taking longer than some investors would prefer. .Microsoft said Azure AI services grew 157%. But overall sales in the key cloud unit are being hurt by the fact that the company still doesn't have enough data center capacity to meet customer needs, Chief Financial Officer Amy Hood said in an interview. She later told investors that the capacity constraints should lift by the end of the fiscal year..Read more: 🔒 Microsoft shares dip on slower cloud growth amid AI demand.The company has almost $300 billion worth of commercial service contracts that Microsoft must provide in the future and has not yet recognized as revenue, she said..Demand remains strong, with commercial bookings — a measure of future revenue — rising 67%, "far ahead" of what Microsoft had expected, she said. Hood attributed that partly to Azure commitments from OpenAI..Along with cloud rivals Google and Amazon.com Inc., Microsoft is spending more than it ever has in its history, outlays that mostly go to the chips and data centers required to fuel power-hungry AI services. The company has said it expects to spend $80 billion this fiscal year on AI data centers. Wall Street has begun to question the massive outlays, especially after the Chinese upstart DeepSeek released a new open-source AI model that it claims rivals the abilities of US technology at a fraction of the cost..Capital expenditures during the quarter were $22.6 billion, the company said, exceeding analyst expectations of about $21 billion. The infrastructure buildout resulted in narrower margins in the cloud business..Total revenue in the three months ended Dec. 31 rose 12% to $69.6 billion. Profit during the quarter, the second of Microsoft's fiscal year, was $3.23 a share. Analysts estimated sales of $68.9 billion and profit of $3.12 per share, according to data compiled by Bloomberg. .The company said 13 percentage points of Azure's second-quarter growth was attributable to AI, compared with 12 points in the first quarter. Microsoft said its AI revenue during the quarter reached the point where it would be expected to bring in $13 billion over the course of a year..Read also: .🔒 Microsoft to add ChatGPT to Azure Cloud Services 'soon'Microsoft's Q2 revenue surges 18%, driven by AI and cloud successMicrosoft and Alphabet profit surge signals AI and cloud dominance.© 2025 Bloomberg L.P.

Microsoft Cloud expansion limited by data centre shortage

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