Microsoft to Continue Building Data Centers as Cloud and AI Lead Growth

Microsoft will continue investing in capital expenditures throughout its fiscal year 2026 after seeing its cloud and artificial intelligence (AI) offerings lead its revenue gains in the third quarter of fiscal year 2025.

“These investments, along with focused execution that delivers near-term value to our customers, will ensure we continue to lead through the cloud and AI opportunity ahead,” Microsoft Chief Financial Officer Amy Hood said Thursday (April 30) during the company’s quarterly earnings call.

Microsoft’s Intelligent Cloud business led the company’s revenue growth during the quarter ended March 31, according to a presentation released Wednesday in conjunction with the call.

The Intelligent Cloud business was up 21% year over year, while Productivity and Business Processes was up 10% and More Personal Computing was up 6%. Overall, Microsoft’s revenue was up 13% year over year, per the presentation.

“Cloud and AI are the essential inputs for every business to expand output, reduce costs and accelerate growth,” Microsoft Chairman and CEO Satya Nadella said during the call.

During the most recent quarter, the company opened data centers in 10 countries on four continents, Nadella said. He added that model capabilities are doubling in performance every six months and that the company’s cost per token has more than halved.

Microsoft is introducing AI agents “for every role and business process,” Nadella said during the call. He highlighted a Sales Agent that turns contacts into qualified leads, Sales Chat that can get reps up to speed on new accounts and a Customer Service Agent that manages customer inquiries and helps service reps resolve issues faster.

“This quarter alone, customers created over 1 million custom agents across SharePoint and Copilot Studio, up 130% quarter over quarter,” Nadella added during the call.

Looking ahead, Microsoft expects its Intelligent Cloud business to see revenue growth of 20% to 22% in constant currency during the current quarter. (In the quarter ended March 31, it grew 22% in constant currency.) This growth will be driven by its cloud platform Azure.

“In our non-AI services, we expect focused execution to continue driving healthy growth,” Hood said during the call. “In our AI services, while we continue to bring data center capacity online as planned, demand is growing a bit faster. Therefore, we now expect to have some AI capacity constraints beyond June.”