Microsoft eyes to raise at least $25 billion in first US bond since 2017

Microsoft is seeking to raise at least $25 billion through its first US bond sale since 2017, testing investor appetite for AI-linked debt amid rising borrowing costs and spending concerns.

Microsoft Corp. is looking to raise at least $25 billion from its first US investment-grade bond offering in nearly a decade, armed with rare top credit ratings that may help it attract investors who've been swamped by relentless borrowing to fund the AI boom.

 

The world's largest software company is marketing the debt in as many as 10 tranches, with maturities ranging from two to 40 years, according to people familiar with the matter. No final decision has been made on the offering's size, which may change according to demand, the people said, asking not to be identified because they're not allowed to speak publicly.

 

 

The offering, the first from a blue-chip hyperscaler since Alphabet Inc. priced $25 billion of debt on Aug. 6, will be a crucial test of appetite for financing AI investments as concerns grow about excessive spending and the timeline for profit payoffs from the technology. Investors, who initially rushed to snap up the debt, have at times pulled back and demanded greater compensation. A rise in benchmark interest rates has also served to drive up borrowing costs.

 

Despite the more discerning backdrop, there are reasons to expect Microsoft will find ready buyers. The company stands out among its Big Tech peers in having not tapped the market in years — it last sold high-grade debt in 2017, raising $17 billion. It's also the only publicly traded US firm besides Johnson & Johnson with top-tier AAA ratings from Moody's Ratings and S&P Global Ratings.

 

"The timing of this deal feels opportunistic as we don't see a true need for issuance here but the demand should be strong given the uniqueness of very rare long AAA paper" likely yielding more than 6%, said Brett Kozlowski, portfolio manager at GW&K Investment Management. "This combination likely highlights the market's demand for some diversification in names even as massive supply creates challenges."

 

Initial price talk on the longest maturity, a note due in 2066, is a premium of as much as 1.35 percentage points above Treasuries, people familiar with the plans said. That's roughly in line with where Alphabet and Amazon.com Inc.'s 40-year bonds are trading, according to Trace pricing data, though they have lower ratings.

 

Wells Fargo & Co., JPMorgan Chase & Co. and UBS Group AG are managing the bond offering. Proceeds from the sale will be used for general corporate purposes including capital expenditures, the people familiar said. Microsoft and the banks either declined or didn't immediately respond to requests for comment.

 

Microsoft reported robust results for its fiscal first quarter on Wednesday, posting a 48% gain in cloud revenue while keeping its capital expenditures in check, soothing investors concerned about lavish spending on artificial intelligence. On a conference call after the results, Chief Financial Officer Amy Hood said the company would raise additional funds "when we believe it is attractive to do so."

 

Hyperscalers and data center developers have raised more than $313 billion through investment-grade bond sales globally this year, almost three times more than in the full year of 2025, according to data compiled by Bloomberg. The sector has catapulted global bond sales to a record $6.61 trillion this year, with two months still to go.

 

The deluge of AI-linked debt has raised caution flags among some investors as they brace for even more borrowing to fund the sector's massive capex plans. Those concerns are playing out in the market for credit default swaps, a type of insurance against a missed payment.

 

Swaps tied to the hyperscalers with relatively weaker credit metrics have widened the most. For example, five-year CDS on Meta Platforms Inc.'s debt — rated AA — is at around 116 basis points on Thursday, according to ICE Data Services. That's 62 basis points wider than the cost of insuring Microsoft debt at about 54 basis points.

 

Swaps tied to Oracle Corp., which has the weakest credit rating among the largest hyperscalers and is widely seen as a proxy for AI debt risk, are trading at around 275 basis points, about 221 points wider than Microsoft.