Jefferies recently hosted Microsoft in Australia to address concerns sparked by a tweet and a Cowen report that unsettled the market. During the discussion, Microsoft executives firmly denied any changes to the company’s data center (DC) strategy.
“Microsoft is strongly refuting any shift in its DC plans,” they emphasized, highlighting that investments are based on a decade-long outlook to accommodate growing demand for cloud and AI. The company maintains the flexibility to adjust forecasts regionally as needed, ensuring strategic and scalable expansion.
Microsoft also pointed out its substantial data center investments in recent years. In a recent earnings call, the company projected that capital expenditure growth, which had surged by 50–60%, would return to its historically high base—still a significant level indicative of continued expansion.
Additionally, Microsoft expects AI-related supply and demand to reach better equilibrium by the end of the current fiscal year. This balance should ease concerns about prolonged AI capacity shortages as supply growth catches up with increasing demand.
One key point of confusion in the broker report stemmed from the classification of leasing. Microsoft clarified that contracts exceeding 15 years are sometimes categorized as leases, even when the company operates the data center itself. This accounting distinction may have contributed to misunderstandings about its DC partnerships. In reality, Microsoft’s reliance on third-party real estate investment trusts (REITs) remains minimal.
Jefferies hosted Microsoft $MSFT on the road in Australia today, addressing concerns raised by a recent tweet and a Cowen report that caused market jitters. Microsoft strongly refuted any changes to their data center (DC) strategy, emphasizing that investments are made based on a… pic.twitter.com/LWwmPys9OR
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Notably, Microsoft sees no fundamental difference between AI and cloud regarding long-term return on capital employed (ROCE), return on investment (ROI), and margins. Both are considered core pillars of the company’s future growth, backed by the same strategic investment framework.
