Microsoft Is Borrowing $25 Billion For Ai, Its First Bond Sale Since 2017

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On October 29, 2026, Microsoft (NASDAQ:MSFT) priced $25 billion of senior unsecured bonds. It was the company’s first U.S. dollar bond sale since 2017, the year it raised $17 billion. Orders topped out at $115 billion, or 4.6 times the deal size.

The stock hardly moved. Shares closed that day at $530.14, down 0.16%, for a market value of $3.94 trillion. That came after a 4.1% after-hours jump to $552.55 on October 28, which faded.

Bond buyers accepted a premium for rare AAA debt from the strongest borrower in corporate America, while stock buyers were looking at a company whose spending is growing faster than its cash. Microsoft holds more cash than long-term debt, so the real question is why it chose to borrow.

What Microsoft Committed To and What It Only Intends

Once the bonds were priced, the debt was committed. The deal has 10 tranches, meaning separate bonds that mature at different dates, running from two years to 40 years. The bond due 2066 priced at 1.05 percentage points over Treasuries. That was as much as 0.3 points tighter than initial guidance, so investors accepted a smaller premium than first offered.

How the money gets spent is only stated intent. Microsoft listed general corporate purposes, including capital expenditures and share buybacks. So the bonds help pay for an AI-driven build, but none of the money is specifically set aside for AI. The size and coupon of each tranche had not been widely reported as of October 30, 2026.

On the October 28 earnings call, CFO Amy Hood spoke. She said Microsoft has “lots of options to be able to tap the financing markets when they make sense and they’re attractive.”

Why a Cash-Rich Company Borrowed

Before the deal, Microsoft had $64.5 billion of cash and short-term investments and $31.1 billion of long-term debt. The reason it borrowed anyway shows up in the fiscal first quarter. Capital spending, including finance leases, was $45.2 billion, and cash paid for property and equipment was $39.4 billion.

A finance lease gets recorded like a purchase. It is a long-term rental of data center capacity, which is why those two numbers differ. Microsoft now expects about $175 billion of capex for calendar 2026, compared with $190 billion in April. Most of that difference comes from an accounting change that shifts more leases to operating leases, and those sit outside capex.

Borrowing at AAA rates lets Microsoft keep its cash for buybacks and construction while spending runs ahead of what the business brings in. It also locks in 40-year money while lenders are eager to supply it.

AI Spenders Pay Very Different Prices for Credit

The 2066 bond priced tighter than Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) 40-year bond, which trades near 1.33 points over Treasuries. Alphabet sold $25 billion of bonds on August 6.

Five-year credit default swaps measure the yearly cost of insuring a company’s debt against default. Microsoft’s sit at about 54 basis points, compared with 116 for Meta Platforms (NASDAQ:META) and 275 for Oracle (NYSE:ORCL). Lenders therefore see paying for Oracle’s expansion as much riskier than paying for Microsoft’s.

Microsoft was a latecomer to the borrowing wave. Hyperscalers and data center developers have issued more than $313 billion of investment-grade bonds globally in 2026, and the proceeds flow well beyond the chipmakers to the power, cooling, and networking suppliers behind each facility (we profiled seven of those winners in a free report you can grab here). Brett Kozlowski of GW&K called the timing “opportunistic”. Still, the fact that Microsoft borrowed at all shows that even the strongest balance sheet now wants outside money for this cycle.

What Could Move MSFT Stock After Its First Bond Sale Since 2017

Revenue rose 19% to $92.3 billion. Azure grew 48% in constant currency, ahead of Microsoft’s own 44% to 45% forecast, and management said customer demand continued to exceed available supply.

The falling stock reflects a fair worry about spending, since Microsoft expects second-quarter capex of over $50 billion. That risk grows. It grows further if AI demand slows while borrowed money funds buybacks, or if repeated bond sales put pressure on the AAA rating.

The test is the fiscal second-quarter earnings report. Microsoft guided for Azure growth of 49 to 50% in constant currency. The case for the stock weakens. If Azure falls short of that range while capex tops $50 billion, a close below the October 29 low of $519.56 would signal market agreement.

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