Microsoft Corporation (MSFT.US) Finally Taps the Bond Market: Issues US$25 Billion in Bonds as AI Infrastructure Capex Ramps Up Further

Microsoft Corporation (MSFT.US) announced on Thursday that it plans to issue US$25 billion in bonds, leveraging its high-quality credit rating to raise funds for infrastructure expansion. The software giant holds the highest AAA rating in the T. Rowe Price Group rating scale. Management plans capital expenditures of US$170 billion for 2026 to meet robust computing power demand from AI labs such as Anthropic and OpenAI, as well as other customers. According to a statement, Microsoft Corporation will issue senior unsecured notes with an aggregate principal amount of US$25 billion, divided into floating-rate and fixed-rate tranches. "Microsoft Corporation intends to use the net proceeds from this offering for general corporate purposes, which may include funding working capital, capital expenditures, share repurchases, acquisitions and repayment of existing debt," the company said. The offering is expected to close on November 4. It is understood that Amazon.com, Inc. (AMZN.US) and Alphabet (GOOGL.US) have already entered the bond market this year to finance infrastructure projects, and AI cloud-focused CoreWeave (CRWV.US) has also used the debt market to expand its data center footprint. Microsoft Corporation's last high-grade bond issuance dates back to 2017, when it raised US$17 billion. However, as major central banks raised interest rates to combat inflation, investors' risk appetite for highly indebted companies has continued to decline. Microsoft Corporation Chief Financial Officer Amy Hood said on the company's earnings call on Wednesday that Microsoft Corporation will access additional funding sources when conditions are attractive to supplement its own cash flow generation capability. "Leasing is also a financing tool we are using," she said. "Given our rating advantage, we have financing capacity in the bond market that we have not yet utilized." Microsoft Corporation reported positive free cash flow on Wednesday, in sharp contrast to Alphabet, whose cash flow has been negative for a second consecutive quarter. Last week Meta (META.US) disclosed a turn to negative free cash flow, and Amazon.com, Inc. also reported negative free cash flow on Thursday. Also on Wednesday, Oracle Corporation (ORCL.US) announced plans to issue US$10 billion in new bonds and said it expects to return to positive free cash flow in the second half of fiscal 2028.