Dive Brief:

• Microsoft expects its capital expenditures to grow at a slower pace later this year, CFO Amy Hood said Wednesday, on the heels of the company confirming a pullback in artificial intelligence data center projects.
• The software giant’s capex, including finance leases, totaled $21.4 billion in its fiscal 2025 third quarter ended March 31, which was “slightly lower than expected due to normal variability from the timing of delivery of data center leases,” Hood said during a Wednesday earnings call.
• Capex “will grow at a lower rate than FY 2025 and will include a greater mix of short-lived assets, which are more directly correlated to revenue than long-lived assets,” she said.

Dive Insight:

The pullback comes as Microsoft and other big tech companies face growing investor scrutiny over their heavy AI spending. It also comes as President Donald Trump’s on-again, off-again tariff measures are creating added pressure and uncertainty for tech executives. 

Noelle Walsh, Microsoft president of cloud operations and innovation, said in an April LinkedIn post that the company was “slowing or pausing” some of its AI data center projects.

Meanwhile, Amazon Web Services has paused some of its leasing discussions around new data centers, Wells Fargo analysts said last month.

“It's not clear the magnitude of the pause, but the positioning is similar to what we've heard recently from MSFT,” the analysts said in a client’s note.

In January, Microsoft President Brad Smith said the company was planning to spend roughly $80 billion during the current fiscal year on AI-enabled data centers to train large language models and deploy AI and cloud-based applications. The software provider remains on track to achieve this spending goal despite Walsh’s comments, a spokesperson previously told CFO Dive. 

According to Walsh’s LinkedIn post, Microsoft plans to continue making “investments that stay aligned with business priorities and customer demand.”

“The demand signals for Google, Amazon, and Microsoft are real, and each company is investing to have adequate capacity to serve their customers,” Morningstar senior equity analyst Dan Romanoff said in an email. He said the companies’ executives “view AI and the public cloud more broadly as a key strategic imperative, so if they fail to have enough data center capacity, they will lose clients to their competitors and eventually may not be seen as a leader. There is too much at stake in public cloud services to not invest frankly.”