Microsoft's capital expenditure jumped to $10.7 billion this past quarter as the company said it was spending heavily on data centers, compute, and networking.
Already up from the previous quarter's $7.8bn capex, the company said that spending would continue to rise each quarter throughout fiscal 2024.
Generative AI & the future of data centers: Part I - The Models
A seven-part article on what large language models and what the next wave of workloads mean for compute, networking, and data center design
"The acceleration is really quite broad," CFO Amy Hood said in an earnings call. "It's both the data centers on a physical basis plus CPUs and GPUs and networking equipment... So it's overall increases of acceleration of overall capacity."
Hood added that the company was spending to increase capacity for "normal Azure workloads plus some of the AI workloads."
CEO Satya Nadella concurred: "There's this complete new world of AI driving a set of new workloads... I mean if you think about Azure, we have grown Azure over the years coming from behind. And here we are as a strong number two [for traditional workloads, and] in the lead when it comes to these new workloads."
After investing billions in OpenAI, Microsoft is the company's sole cloud provider. But like other hyperscalers, Microsoft has struggled to get enough Nvidia GPUs - earlier this quarter signing a deal with rival CoreWeave to use its facilities - as it tries to meet demand.
“You don't build ChatGPT's infrastructure from scratch,” Nidhi Chappell, Microsoft GM for Azure AI, told DCD earlier this year. “We have a history of building supercomputers that allowed us to build the next generation. And there were so many learnings on the infrastructure that we used for ChatGPT, on how you go from a hyperscaler to a supercomputing hyperscaler.”
The company views the current wave of generative AI applications as a critical moment, with Hood noting that "the real focus here is being able to be aggressive in meeting the demand curve."
The spend is supported by strong revenue growth, with Microsoft reporting revenues of $56.2bn, up eight percent. Sales of Azure were up 27 percent, excluding fluctuation in foreign currency. The company said that about one percentage point of that was due to AI, while the next quarter will see two percentage points of AI growth.
While Microsoft doesn't provide specific financial figures for Azure, the Intelligent Cloud unit that includes it posted revenues of $24bn.
Rival Google also said that it was investing heavily in data centers and AI compute, amid a record year for data centers.
