Microsoft Increases Spending on A.I. as Profit Jumps 31%

Microsoft’s spending on artificial intelligence is still going up, but unlike other big technology companies, it appears to have an answer for worries that the returns do not justify the cost.

On Wednesday, Microsoft said it spent $41 billion on capital expenditures, including data centers, in the three months that ended in June, up 69 percent from a year earlier. Microsoft also said its spending hit $145.3 billion in its 2026 fiscal year, which also ended in June.

At the same time, Microsoft’s profit for the quarter was $35.8 billion, up 31 percent. Revenue was $90 billion, up 18 percent.

Revenue at Azure, the company’s cloud computing service, which lets businesses rent computer power, storage and A.I. tools, drove much of the growth, surging 43 percent. Analysts had expected growth of about 40 percent, the same as the previous quarter. Investors watch the figure as the clearest sign of whether Microsoft’s A.I. spending is translating into revenue.

Azure’s revenue for the fiscal year surpassed $100 billion for the first time, “reflecting the confidence customers are placing in us to power their A.I. transformation,” Satya Nadella, Microsoft’s chief executive, said in a statement.

The company’s results exceeded Wall Street’s projections of $87.6 billion in revenue and $31.5 billion in profit, sending Microsoft’s shares up more than 7 percent in after-hours trading on Wednesday.

Those strong results may offer comfort to investors worried about Microsoft’s plans to barrel ahead with more A.I. spending.

The company expects to spend roughly $175 billion on A.I. infrastructure in the 2026 calendar year and more than $50 billion in the current quarter, Amy Hood, Microsoft’s finance chief, said on the earnings call on Wednesday. The company expects revenue to be between $89.85 billion and $90.95 billion for the quarter.

The company has said demand for its cloud computing services outpaces its available data centers, requiring more spending to expand. Microsoft added 31 data centers in the quarter, bringing the total to 88 new data centers this year, Mr. Nadella said.

The real test, some investors said, is whether demand continues to match Microsoft’s spending. The company’s commercial backlog — contracted future sales — rose to $678 billion, up 8 percent from the previous quarter.

All of the $51 billion increase came from customers other than frontier A.I. labs like OpenAI, Ms. Hood said.

Microsoft’s shares have fallen since January, as investors have grown anxious about whether the hundreds of billions of dollars that it and its peers are pouring into A.I. development will convert into profit.

That anxiety was on display just last week. Alphabet, Google’s parent, reported that it had quadrupled its quarterly profit to $112 billion, strengthened largely by major investments in other A.I. companies, and raised its expected 2026 spending to a range of $195 billion to $205 billion. Its stock fell roughly 7 percent the day after the earnings call.

“The market really extended Big Tech that license to spend on A.I., and that was based on faith that these companies would get a sizable return on their investment,” said Bryan Hayes, an analyst at Zacks Investment Research. “That patience is now conditional.”

Much of the demand filling those data centers traces back to OpenAI. Microsoft’s relationship with the San Francisco company behind ChatGPT was overhauled late last year, when the start-up converted into a for-profit entity and Microsoft took a stake valued at roughly $135 billion. Under the revised agreement, Microsoft retained access to OpenAI’s technology through 2032.

Sales rose 14 percent to $37.8 billion for commercial subscriptions to Microsoft’s productivity tools for businesses, which include Excel, Teams and Word, as well as its A.I. assistant, Copilot. The company said more than 30 million people were paying for Copilot, up from more than 20 million a quarter earlier. Microsoft’s personal computing business had $12.9 billion in sales, a 4 percent decline that the company attributed to weaker PC demand and higher component costs.

Microsoft has been trimming its other businesses to help pay for its A.I. push. In July, the company eliminated 20 percent of its Xbox work force as part of roughly 4,800 job cuts, and dropped several game studios. Xbox accounted for about 6 percent of Microsoft’s revenue in the 2026 fiscal year, down from roughly 8 percent a year earlier. Xbox revenue also decreased 10 percent in the quarter.

(The New York Times has sued OpenAI and Microsoft, claiming copyright infringement of news content related to A.I. systems. The companies have denied the claims.)