In a recent internal communication addressed to Microsoft employees, Chief Financial Officer Amy Hood emphasized the company’s extraordinary commitment to expanding its technological infrastructure, a move that reflects both confidence in the surging demand for artificial intelligence and a readiness to support it. Hood disclosed that the technology giant had invested a record-breaking $34.9 billion in infrastructure during the first quarter of its fiscal year, highlighting the company’s continued determination to align its resources with market momentum. She also drew attention to Microsoft’s newly formalized partnership agreement with OpenAI—a collaboration that has already proven to be an industry-defining force and continues to shape the future of intelligent computing.
This announcement followed the company’s release of quarterly earnings on Wednesday, revealing revenue of $77.7 billion for the three-month period ending in September. That figure not only surpassed analysts’ expectations on Wall Street but also underscored Microsoft’s sustained revenue growth and operational efficiency. Nevertheless, despite the positive financial indicators, Microsoft’s stock experienced a decline of more than three percent in after-hours trading—a reaction linked, at least in part, to concerns that surging demand for AI and cloud computing resources may be outpacing the company’s ability to scale its infrastructure rapidly enough. Compounding these concerns was a recent Azure service disruption, which occurred shortly before the earnings announcement, offering investors a tangible reminder of the challenges that accompany the current pace of technological expansion.
Many investors view this unprecedented infrastructure spending through a cautiously analytical lens, questioning whether the immense capital outlays made by technology leaders such as Microsoft will yield commensurate returns over time. Yet, within the organization, quarterly memos like Hood’s serve a dual purpose: they not only reiterate the company’s public-facing financial results but also provide employees with insights into the strategic priorities top leadership considers most critical. Hood’s internal correspondences, distributed after each earnings report, are designed to foster transparency, contextualize financial achievements, and align teams around the key developments shaping Microsoft’s trajectory.
In the latest memo, Hood praised the company’s record $34.9 billion infrastructure expenditure on technological components such as graphics processing units (GPUs), central processing units (CPUs), and extensive data-center frameworks. She explained that this unprecedented level of investment is intended to significantly expand computing capacity and accommodate what she described as “strong demand signals.” Such investments, she noted, are integral to maintaining Microsoft’s competitive edge in the evolving cloud and AI marketplace. This spending figure exceeded the company’s own initial forecast of $30 billion in capital expenditures for the quarter, signaling both the acceleration of client demand and Microsoft’s readiness to scale its global infrastructure footprint accordingly.
Hood elaborated that the accelerating pace of adoption in artificial intelligence presents not merely a challenge but a monumental opportunity—one that the company is determined to capture through continuous innovation and capacity amplification. “Demand continues to accelerate, and we’re investing to capture the opportunity ahead,” she stated, emphasizing Microsoft’s strategic focus on ensuring operational readiness in an era defined by AI integration. She praised internal teams across the company for their agility in bringing new products to market at record speed, underscoring how these efforts are directly impacting customers by enabling transformative use cases and unlocking measurable value.
This quarter’s earnings disclosure also coincided with the announcement of a new agreement between Microsoft and OpenAI, cementing their already close partnership. As part of the revised arrangement, Microsoft acquired a 27% equity stake in OpenAI’s for-profit arm—an entity currently valued at approximately $135 billion. In exchange, Microsoft relinquished its right of first refusal to provide new computing resources to OpenAI under future deals, signaling both trust in the partnership’s evolution and a maturation of their business relationship. Hood described the new contract as “another big step forward in a partnership that’s been game-changing for our industry,” while clarifying that the timing of the deal—finalized after the quarter’s end—means its financial effects were not reflected in the reported results.
The CFO’s memo provided further detailed insight into the company’s financial strongholds. Microsoft Cloud revenue, reaching an impressive $49.1 billion, grew 26% year over year, or 25% when adjusted for constant currency fluctuations. This growth was fueled by customers’ increasing reliance on Microsoft’s platforms to drive their innovation, accelerate digital transformation, and enable sustainable business expansion. Hood noted multiple highlights reflective of the company’s broad performance. Among these were the 50% surge in commercial remaining performance obligation (RPO) to $392 billion—nearly doubling within two years—as well as 39% constant-currency growth in Azure and other cloud service revenues, surpassing market expectations. She credited this strength to customers employing Microsoft’s complete technology stack, which includes cloud infrastructure, AI capabilities, data solutions, and enterprise applications, embedding artificial intelligence into nearly every layer of their operations.
The memo also showcased Microsoft’s diverse revenue growth across its product ecosystem. Microsoft 365 Commercial Cloud revenue increased 17% (15% in constant currency), driven by rising average revenue per user from high-tier enterprise subscriptions such as E5 and the integration of productivity enhancements via Microsoft 365 Copilot, alongside 6% growth in user seats. Consumer cloud performance mirrored this momentum, with M365 achieving 26% year-over-year revenue growth and surpassing 90 million total subscriptions. Additionally, the company’s search and news advertising revenue—excluding traffic acquisition costs—rose by 16%, buoyed by increasing search engagement and strengthened collaboration with external partners. Platform tools such as Bing and the Edge browser continued to increase their market share during this period.
Other product segments demonstrated similar resilience. Windows OEM and Devices revenue grew by 6%, attributed largely to heightened demand in anticipation of the upcoming end-of-support milestone for Windows 10. Meanwhile, Xbox content and services revenue climbed modestly by 1% but still achieved record engagement levels, including all-time highs for PC-based players and for Minecraft’s monthly active users. LinkedIn, another pillar of Microsoft’s business, expanded by 10% (9% in constant currency), reaching nearly 1.3 billion members globally, reinforcing its position as a preeminent platform for professional networking and workforce development.
In the concluding portion of her message, Hood encouraged employees to tune into Microsoft’s quarterly earnings call to gain further insights into the company’s performance and strategic vision for the second quarter. She also reminded staff of the upcoming Ignite conference, scheduled for November 18–21, which will serve as a global showcase of Microsoft’s latest technological innovations. The event’s opening keynote, featuring Judson, Scott, and Ryan, will offer in-depth demonstrations of how the company is enabling organizations to harness the combined power of AI and the Microsoft Cloud to achieve meaningful, real-world impact.
Hood closed the memo with a tone of gratitude and optimism, commending the collective effort of teams across the company and characterizing Microsoft’s current momentum as both defining and transformative. She observed that the fiscal year had begun with remarkable strength, attributing this success to the company’s focus, collaboration, and customer-centered execution. As demand continues to surge, she reaffirmed Microsoft’s commitment to investing strategically in both innovation and capacity, positioning the company to lead decisively in what she described as a pivotal era not only for Microsoft’s future but for the entire global technology industry.
Sourse: https://www.businessinsider.com/microsofts-cfo-highlights-record-capex-openai-deal-in-internal-memo-2025-10
