Microsoft has had a capex-heavy quarter, spending $34.9 billion in Q1 of FY2026.

Of this, $11.1bn alone was spent leasing data center space, with the rest mainly going towards GPUs, CPUs, and "long-lived assets."

CEO Satya Nadella said during the company's latest earnings call: "We're building a planet-scale cloud and an AI factory."

The capex is a significant jump from the previous quarter's $24.2bn, and is more than the $30bn capex that was then predicted.

According to Nadella, the company expects to increase its AI capacity by more than 80 percent throughout fiscal year 2026, and to "roughly double" its data center footprint over the next two years.

In 2025 alone, Microsoft said it had stood up around 2GW of data center capacity and had more than 400 data centers at the end of the fiscal year.

Among the major data center projects announced by Microsoft this quarter is the Fairwater campus in Wisconsin. Microsoft has said it will invest $7.3bn in the site, and that it will become the "world's most powerful data center."

On the technological infrastructure side of things, CFO Amy Hood noted that the company expects to increase its spend on GPUs and CPUs "sequentially," with FY2026's growth rate to be higher than FY2025. Hood added that some variability should be expected between each quarter.

Hood later emphasized the company's confidence in the ever-growing spend. Noting that the compute hardware itself has not really been the constraint - "we were short of space or power" - Hood said that Microsoft has been spending a long time building out capacity but is increasingly turning to leases.

"We're continuing to do that, also using leases. Those are very long-lived assets, as we've talked about, fifteen to twenty years. Over that period of time, do I have confidence that we'll need to use all of that? It is very high.... We are, and have been, short now for many quarters. I thought we were going to catch up. We are not. Demand is increasing."

Among major leasing agreements for the quarter are Microsoft's deals with Nscale, with whom the cloud giant has signed a $14bn deal. Microsoft is also said to have signed some $33bn in compute capacity deals with neoclouds, including a $19.4bn deal with Nebius, alongside others with CoreWeave and Lambda.

Nadella added that another important consideration for the company's scaling is "modernizing the fleet."

"It's not like we buy one version of, say, Nvidia and load up for all the gigawatts we have. Each year you buy, you ride the Moore's Law, you continuously modernize and depreciate. That means you also use software to grow efficiency," he explained.

On the revenue side, company-wide, Microsoft brought in $77.7bn, of which cloud revenue was $49.1bn, up 25 percent in constant currency Year-over-Year (YoY) and with a gross margin of 68 percent.

Within the cloud segment as a whole, Intelligent cloud - including Azure - brought in $30.9bn, up 27 percent. The previous quarter saw revenues of $29.9bn.

Operating income was up 22 percent in constant currency, with company-level operating margins at 49 percent. Operating margins were 43 percent, down slightly YoY.

Commercial bookings increased 112 percent, driven by an increase in $100 million-plus contracts and commitments from OpenAI. OpenAI's $250bn contract for Azure services was not reflected in the current results.

In total, Microsoft's remaining performance obligation reached $392 billion, up 51 percent year over year, with a weighted average duration of approximately two years.

The growing size of contracts was noted in the call, with analysts questioning the ability of customers who are committing to spending far more than their existing revenue scale to actually follow through.

Speaking on this, CFO Hood said: "When you think about concentration risk for delivering to any customer, you have to remember that because we're talking about this very large flex fleet that can be used for anyone and for any purpose, first party, third party, and including our commercial cloud, by the way, which I should be quite clear on, it's pretty flexible in every regard.

"You have to remember that the CPU and GPU and the storage gear doesn't come into play until the contracts start happening. You're right, some of these large contracts have delivery dates over time. You get a lot of lead time in being able to say, Oh, what's the status? I think we're pretty thoughtful around what's always gone in our RPO balance. We've been considerate of that."

Notably, Microsoft's Q1 results were not impacted by the company's resolution with OpenAI over the AI company's transition to a for-profit public benefit corporation. This was regularly reiterated by the Microsoft execs, with the agreed restructuring only completing this week.

Unmentioned during the call were the untimely issues with Azure experienced by several users, as were the reports that sections of the Israeli military were using Microsoft's cloud platform to enable mass surveillance of Palestinians, and Microsoft's subsequent ending of some services for the department.