Key points
- Microsoft's cash and investments fell $12 billion
- Microsoft's spending will top $50 billion this quarter
- How Microsoft's borrowing compares with Alphabet's
Microsoft (MSFT) is preparing its first US bond sale in more than nine years and could raise at least $25 billion, according to Bloomberg. The offering comes as Microsoft and other tech giants spend heavily on AI infrastructure.
Microsoft's operating cash flow still exceeds its spending on property and equipment. The company also had $64.5 billion in cash and short-term investments on September 30, down from $76.8 billion three months earlier.
The bond filing doesn't tie the proceeds to a single use. But spending is set to rise: finance chief Amy Hood said Wednesday that capital spending, including finance leases, would exceed $50 billion in the October-to-December quarter and accelerate in the first half of 2027.
Microsoft is one of two US companies with a AAA credit rating, along with Johnson & Johnson (JNJ). Its shares were down 0.4% at $528.88 at 9:55 a.m. Eastern on Thursday, October 29, after closing Wednesday at $531.01.
Microsoft's filing lists 10 sets of notes
Microsoft filed a preliminary prospectus supplement with the SEC at 7:33 a.m. Eastern on Thursday. It lists 10 series of notes, two with floating interest rates and eight with fixed rates. The amounts, interest rates, and maturity dates are left blank until the bonds are priced.
The bonds will mature in two to 40 years, and the final size may change with investor demand. JPMorgan (JPM), UBS (UBS), and Wells Fargo (WFC) are running the sale.
Microsoft can use the money for general corporate purposes, the filing says. Those may include working capital, capital expenditures, share buybacks, acquisitions, and repaying existing debt.
Microsoft's last US bond sale raised $17 billion in January 2017, partly to help pay for its purchase of LinkedIn.
Microsoft had $35.5 billion of total debt on September 30, according to the capitalization table in Thursday's filing. A $25 billion sale would equal about 70% of that amount by our calculation, before any debt repayment.
Microsoft's operating cash still exceeds its property spending
Microsoft's business brought in $58.0 billion of cash in the July-to-September quarter, and it spent $39.4 billion on property and equipment, leaving $18.6 billion, as we reported Wednesday. Counting finance leases, which are long-term data center leases it treats much like purchases, Microsoft spent $45.2 billion.
Hood also said on Wednesday's earnings call that Microsoft expects "to continue to remain free cash flow positive" in its fiscal year that ends in June 2027.
Alphabet, Amazon, and Meta have borrowed more
Microsoft's biggest rivals have sold bonds again and again. Over the past 12 months, Alphabet (GOOGL) has sold about $106 billion of bonds and Amazon (AMZN) about $113 billion, including sales in euros and other currencies, according to our AI debt tracker. Meta (META) has sold $55 billion.
Alphabet's latest US sale, in August, was also $25 billion across 10 tranches. The largest cloud companies will probably sell around $300 billion of new investment-grade bonds in 2026, Loren Moran, a portfolio manager at Wellington Management, said this month.
The final size and interest rates of Microsoft's bonds will be set when the deal prices.
