On Wednesday, Microsoft Corp. (NASDAQ:MSFT) said it is confident it can navigate hardware and supply chain constraints as it sharply raises its capital spending outlook to nearly $190 billion for 2026.
AI Demand Drives Massive Infrastructure Push
During the company's third-quarter earnings call, Microsoft CFO Amy Hood said, "We are doing our best to get things in as quickly as we can," as demand for cloud and AI compute continues to outpace available capacity.
She pointed to strong usage trends across Azure and Microsoft's Copilot suite, which now spans coding, productivity and security applications.
Hood said the company remains "quite good" at managing physical limitations in the supply chain, including access to CPUs, GPUs and storage systems required for expanding data centers.
She added that many constraints are short-term and tied to scaling infrastructure quickly rather than structural shortages.
CapEx Outlook Jumps Amid AI Buildout
Microsoft expects capital expenditures to exceed $40 billion in the fourth quarter alone, with total spending projected to approach $190 billion in calendar year 2026.
The figure includes an estimated $25 billion impact from higher component prices, particularly for advanced AI chips.
Hood noted that the spending reflects both rising demand and the company's effort to expand capacity across its cloud infrastructure.
Copilot Usage Surges Across Microsoft Ecosystem
Microsoft also highlighted accelerating adoption of its Copilot AI tools, which are being integrated across enterprise software and cloud services.
Hood said usage trends in the third quarter were "on a different trajectory" compared to earlier periods, signaling faster-than-expected AI adoption.
The company said it is working to bring new data center capacity online as quickly as possible to support continued growth in AI-driven workloads.
Microsoft Tops Q3 Estimates On Strong AI And Cloud Growth
Microsoft posted third-quarter revenue of $82.9 billion, marking an 18% increase compared to the same period last year and topping Wall Street expectations of $81.39 billion, according to Benzinga Pro data.
The company also reported earnings of $4.27 per share, surpassing analysts' forecast of $4.06 per share.
Looking ahead, Microsoft said it expects operating margins for fiscal year 2026 to expand by about one percentage point year over year, even as it continues heavy investment spending and absorbs roughly $900 million in one-time retirement-related costs in the fourth quarter.
Price Action: Microsoft fell 1.12% to $424.46 during regular trading on Wednesday, but edged higher in after-hours trading, rising 0.34% to $425.89, according to Benzinga Pro.
Benzinga Edge data shows MSFT in the 93rd percentile for Quality, reflecting strong short and medium-term performance, though its longer-term momentum appears comparatively weaker.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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