Microsoft has stood up 1GW of data center capacity in Q2 of FY2026 alone, in another quarter of heavy spending.

This is a rapid increase in deployment timelines, with the company previously bringing 2GW online in FY2025 as a whole.

In addition to capacity brought online, the company has also committed to data center investments in seven countries globally in the last quarter.

Unsurprisingly, this acceleration has come with a continued growth in capex, with a new quarterly high of $37.5 billion, of which two-thirds went to "short-lived assets" like GPUs and CPUs, and data center leases accounted for $6.7bn.

Quarterly capex has been consistently increasing – Q4 2025 saw Microsoft spending $24.2bn, Q1 2026 reached $34.9bn – but this is not a trend that the company is expecting to remain.

Speaking on the expenditure, CFO Amy Hood said that they expect capex to "decrease on a sequential basis due to a normal variability from cloud infrastructure build-outs and the timing of delivery of finance leases," but that the proportion of spend on chips will likely remain consistent.

This quarter also saw Microsoft committing to "pay our way to ensure our data centers don’t increase your electricity prices [and] minimize our water use and replenish more of your water than we use," and to no longer accept tax breaks from local municipalities. How this will impact expenditure was not addressed.

CEO Satya Nadella discussed the company's use of chips, noting that Microsoft was prioritizing optimizing the "tokens per watt per dollar" in an attempt to be more financially efficient in the pursuit of AI capacity.

This is being achieved through "increasing utilization and decreasing TCO using silicon systems and software," which Nadella said had enabled Microsoft to increase throughput by 50 percent for its OpenAI inferencing workloads for Co-Pilot.

Total revenue for the company was $81.3bn, a year-over-year (YoY) increase of 17 percent, and cloud revenue specifically was $51.5bn, up 26 percent, the first time the cloud business has surpassed $50bn in a quarter.

Azure revenues grew 39 percent, compared with 40 percent growth in the fiscal first quarter.

Despite this, analyst questions during the call were bullish on the rapidly growing capex and concern that revenue was not growing sufficiently to ease investor concern.

An analyst from Morgan Stanley pointed to the fact that in after-hours trading, the "stock is still down" despite strong results. "I think one of the core issues that is weighing on investors is capex is growing faster than we expected, and maybe Azure is growing a little bit slower than we expected," the analyst surmized.

In response to this, Hood explained that many investors are looking for a "very direct correlation" between Azure earnings specifically and capex, but that Microsoft is making "long-term decisions."

She elaborated: "I think the most important thing to realize is that this is about investing in all the layers of the stack that benefit customers. And I think that's hopefully helpful in terms of thinking about capital growth. It shows in every piece. It shows in revenue growth across the business. And shows as opex growth as we invest in our people."

Another concern raised was regarding Microsoft's remaining performance obligation (RPO).

The company reported a massive RPO of $625bn, with an average duration of 2.5 years. Notably, 45 percent of that is for OpenAI alone following the AI start-ups restructuring and negotiated deal with Microsoft in October 2025.

Hood was keen to emphasise the other portion of the company's RPO, telling analysts that the remaining 55 percent – or $350bn – is "related to the breadth of our portfolio, a breadth of customers, across solutions, across Azure, across industries, across geographies. That is a significant RPO balance, larger than most peers. More diversified than most peers. And frankly, I think we have super high confidence in it."

A key milestone for the company this quarter was in the deployment of its Maia 200 AI chips. Revealed on January 26, the chips are built on TSMC's 3nm technology, and can deliver around ten petaflops of FP4 and five petaflops of FP8 compute performance within a 750W SoC (System-on-Chip) TDP (Thermal Design Power) envelope.

Nadella said during the earnings call that the superintelligence team is building all of its models to be optimized for Maia, and the chip will first be rolled out for inferencing and synthetic data gen for the superintelligence team, and for inferencing for Co-Pilot and Foundry.

He noted that the company remains a good partnership with Nvidia and AMD, but that "We want a fleet at any given point in time to have access to the best TCO. And it's not a one-generation game. I think a lot of folks just talk about who's ahead."

Other key metrics for the quarter include operating income, which has increased 21 percent YoY, and a gross margin percentage of 68 percent, slightly lower YoY due to growing capex.