By Elena Vasquez

Microsoft is selling $25 billion in bonds for general corporate purposes, giving the company a new funding option for working capital, capital spending, share buybacks, acquisitions and repayment of existing debt.

Microsoft set a $170 billion capital-spending goal for the current fiscal year as it tries to keep pace with the appetite of AI labs Anthropic and OpenAI and other customers.

What did Amy Hood say?

Chief Financial Officer Amy Hood said on Wednesday’s earnings call that Microsoft would draw on other financing alongside internally generated cash when market conditions favor it. “There's a form of financing called leasing, and we've been using that one as a vehicle,” Hood said, according to CNBC.

“We're fortunate to have access in the debt markets, given where our ratings are, and we haven't yet tapped that,” Hood said. Her comments identify leasing as an existing financing vehicle and the debt market as available capacity, putting the $25 billion bond sale in direct use of that funding flexibility.

What is Microsoft selling?

The offering contains two floating-rate tranches, each $1 billion: one due Nov. 3, 2028, and the other due Nov. 3, 2029. Fixed-rate notes range from $2 billion of 4.85% notes due in 2028 to $2 billion of 6.35% notes due in 2066.

The two largest fixed-rate tranches are each $4 billion, or $8 billion combined: 5.55% notes due in 2036 and 6.25% notes due in 2056. Those two tranches represent 32% of the full $25 billion sale. The mix pairs two floating-rate maturities with fixed coupons extending across nearly four decades.

How will Microsoft use the proceeds?

Microsoft said it intends to direct the net amount raised toward general corporate purposes. The company lists five possible uses:

• Working capital.
• Capital expenditure.
• Share buybacks.
• Acquisitions.
• Repayment of debt already owed.

By keeping the $25 billion proceeds flexible, Microsoft can direct money toward its largest needs rather than commit the full amount to one project. The bond sale equals about 15% of the company’s $170 billion capital-spending goal, although the disclosure does not earmark the proceeds for capital spending.

Why is Microsoft borrowing?

Microsoft disclosed on Wednesday that its free cash flow was in the black. CNBC reported that Alphabet’s (GOOGL) free cash flow fell below zero for a second consecutive quarter. It also reported negative free cash flow at Meta (META) last week and at Amazon (AMZN) on Thursday.

Amazon and Alphabet have tapped bond investors this year to help fund infrastructure projects, according to CNBC. CNBC also said CoreWeave has turned to borrowing to expand its network of data centers. The moves show technology companies using debt markets and borrowing to support computing infrastructure, placing Microsoft’s $25 billion sale within a broader capital-raising cycle.

Who is arranging the sale?

J.P. Morgan Securities, UBS Securities and Wells Fargo Securities (WFC) are among the joint book-running managers. Barclays, BNP Paribas, BofA Securities, Citigroup (C), Goldman Sachs (GS), HSBC, Morgan Stanley (MS) and RBC Capital Markets also serve as joint book-runners. Twelve co-managers complete the underwriting group.

CNBC reported that Microsoft holds an AAA rating from S&P. The rating, the $25 billion deal size and the two $4 billion largest tranches provide the market context for Hood’s view that Microsoft retains broad access to debt investors.

What does the financing strategy achieve?

The transaction broadens Microsoft’s funding options without relying on free cash flow alone: the company remains free-cash-flow positive while carrying a $170 billion capital-spending target and meeting demand from Anthropic, OpenAI and other customers. General-purpose proceeds preserve the ability to fund buybacks, acquisitions and debt repayment alongside new investment.

For investors, the test is whether $25 billion of added borrowing supports Microsoft’s $170 billion spending plan without constraining its remaining financial choices.