Microsoft lowered its 2026 capital spending forecast to $170 billion from $175 billion, citing delays in capacity from third-party GPU cloud providers. At the same time, Azure revenue climbed 48% year over year to more than $33 billion, beating Wall Street expectations as demand for AI computing continued to drive cloud growth.
Chief Financial Officer Amy Hood said on the company’s Wednesday earnings call for the first quarter of fiscal 2027 that some contracted capacity will not be delivered until the second half of the fiscal year.
Third-party GPU capacity delayed
Microsoft had expected external providers to supply some of its additional computing capacity. Hood said capacity under certain “GPU as a service” contracts is now expected to come online in the second half of the fiscal year. These services are typically offered by cloud providers with Nvidia GPUs, and Microsoft works with some of them to meet rising demand for AI services.
The company expects capital spending to accelerate in the second half of the fiscal year as the delayed capacity becomes available. The revised forecast applies to calendar 2026 spending; Microsoft did not say it was cancelling the related AI infrastructure plans. The change reflects the timing of third-party capacity deliveries.
Data center expansion also faces challenges including power shortages and local opposition. Microsoft did not say on the earnings call whether either issue directly contributed to the contract delays, so the specific projects affected and the scale of any postponements remain unclear.
Azure growth beats expectations
For the first fiscal quarter, ended September 30, Microsoft reported revenue of $92.3 billion, up 19% from a year earlier. Azure revenue exceeded $33 billion, an increase of 48% that surpassed Wall Street expectations. The results point to strong cloud growth, while the timing of new computing capacity continues to shape the company’s investment schedule.
Microsoft shares rose about 3% in after-hours trading following the earnings call. Investors are weighing the revenue growth fueled by AI demand against the scale of spending required to build data centers and whether computing capacity will be delivered on schedule.
Buyout offer and employee headcount
Earlier this week, Microsoft offered buyouts to more than a quarter of its employees. In an internal memo, Hood said the company expected up to 5% of eligible employees to accept, linking that expectation to growth opportunities within Microsoft.
The company said its employee count fell 2% from the previous quarter in the first fiscal quarter. It did not specify how that change related to the buyout offer. Headcount and capital spending are separate measures: the former concerns workforce size, while the latter reflects investment in AI computing and cloud infrastructure.