Microsoft Joins Google In Shift To Data Centers, Away From Offices

Microsoft has steadily increased its spending on data centers as tech giants begin investing heavily in the infrastructure that supports growing areas of their businesses and pulling back from occupying office space. 

“Cloud and AI-related spending represents nearly all of our total capital expenditures," Microsoft Chief Financial Officer Amy Hood said on the company's latest earnings call.

"We expect capital expenditures to increase on a sequential basis, given our cloud and AI demand as well as existing AI capacity constraint," Hood said. 

On the same call, Microsoft told analysts it expects its annual operating lease liabilities, which include future rent payments, to drop by as much as 54% in the next few years. The decrease, which translates to about $2.2B, would be the result of Microsoft's earlier decision to move out of millions of square feet in offices near its headquarters in Washington as well as other locations. 

The company has already been on a path of steadily increasing its expenditures on this type of infrastructure. In the second quarter of this year, Microsoft invested $19B on data centers that would allow it to expand its cloud-based offerings and artificial intelligence programs, CoStar reported. That was almost double the $10B it had invested in similar projects in the same period the year before. 

Microsoft is not alone in its laser focus on expanding its data center portfolio. Amazon has said it plans to spend $100B over the next decade on data centers, and it already has more than 200 such projects scheduled to come online over the next couple of years, Bisnow has reported.

Google and Meta also indicated earlier this year that they plan to spend big on the infrastructure that will allow them to support their respective artificial intelligence-related businesses. 

These announcements have continued despite recent reports by Goldman Sachs and the Massachusetts Institute of Technology that cast doubt on these big investments and mull whether there is an AI bubble.