Microsoft Returns to the Bond Market for the First Time Since 2017 With at Least $25 Billion for AI

Microsoft launched a US investment-grade bond sale on Thursday seeking to raise at least $25 billion, its first trip to the high-grade debt market in more than nine years, according to Bloomberg. The deal is marketed in as many as 10 tranches with maturities from two to 40 years, and no final decision has been made on the size, which may flex with demand. The proceeds are earmarked for general corporate purposes, including capital expenditures — the clearest sign yet that even the strongest balance sheet in tech is borrowing to fund the AI buildout.

The structure: two floating-rate notes and eight fixed-rate tranches, with initial price guidance running from 50 to 55 basis points over Treasuries on the two-year fixed notes to 130 to 135 basis points on the longest tranche, a 40-year bond maturing in 2066. Wells Fargo, JPMorgan Chase and UBS are managing the sale. The senior unsecured notes carry expected ratings of Aaa/AAA — Microsoft remains one of only two publicly traded US companies, alongside Johnson & Johnson, to hold the top rating from both Moody's and S&P Global. Settlement is scheduled for November 4.

The timing is deliberate. The offering comes one day after Microsoft's fiscal first-quarter report: revenue of $92.3 billion, up 19 percent, with Azure disclosed in dollars for the first time at $33.2 billion and up 48 percent. Cash capital expenditures reached $39.4 billion, more than doubling year over year, and free cash flow fell 27 percent to $18.6 billion as the buildout consumed cash. Last quarter Microsoft actually net repaid $4.85 billion of debt and issued nothing; CFO Amy Hood told analysts the company would raise additional funds "when we believe it is attractive to do so." Nine days later, it has.

The deal is also a market test. It is the first blue-chip hyperscaler bond since Alphabet priced $25 billion of debt on August 6, and it lands amid growing investor skepticism about AI spending timelines. Hyperscalers and data center developers have raised more than $313 billion through investment-grade bond sales globally this year, nearly three times the full-year 2025 total, helping push global bond issuance to a record $6.61 trillion, according to Bloomberg-compiled data. Some investors have begun demanding more compensation: five-year credit default swaps on Meta's AA-rated debt trade around 116 basis points, while Oracle — widely treated as the proxy for AI debt risk — trades around 275 basis points.

Microsoft sits at the safe end of that spectrum, insuring at roughly 54 basis points. "The timing of this deal feels opportunistic as we don't see a true need for issuance here, but the demand should be strong given the uniqueness of very rare long AAA paper" likely yielding more than 6 percent, Brett Kozlowski, a portfolio manager at GW&K Investment Management, told Bloomberg. Its 40-year guidance of 130 to 135 basis points is roughly in line with where Alphabet's and Amazon's 40-year bonds trade — despite those carrying lower ratings.

The structural shift is the story. Microsoft funded a decade of cloud infrastructure almost entirely from operating cash flow; its AI commitments now run so large that the company with the best credit in the industry is re-entering the debt market alongside Alphabet, Meta, Oracle and the neoclouds. If the pricing lands tight, expect the remaining cash-rich hyperscalers to follow quickly — and expect AI financing to keep migrating from balance sheets to bond portfolios, with all the discipline questions that entails when the revenue timeline remains unproven.