Microsoft trims 2026 capex outlook to $170 billion on delayed capacity

Microsoft lowered its calendar 2026 capital expenditure forecast to $170 billion from $175 billion, a $5 billion reduction, Chief Financial Officer Amy Hood said on the company’s fiscal first-quarter earnings call on Wednesday, October 28.¹

The stated reason is timing. Hood said Microsoft had expected new capacity from third parties, but some “GPU-as-a-Service contracts” slipped into the second half of the fiscal year.¹ CNBC’s account puts the delay further out, with some capacity pushed to the first half of 2027.² Hood did not name the providers. Microsoft is known to rely on CoreWeave, IREN and Nebius, among others.²

The quarter’s own spending came in under plan. Capex rose to $45.2 billion, short of earlier expectations of roughly $50 billion, and Hood tied the gap to delays in bringing data centers online.³ Next quarter, she said, AI-related investment should pass $50 billion.³

The cut is also partly an accounting matter. Microsoft had been on track for about $190 billion this calendar year, but reclassified some data center leases as operating costs, which brought reported capex down to $170 billion.³ An RBC Capital Markets analyst said the move lets Microsoft raise or lower spending quickly as demand shifts.³

The reduction is not a pullback. Hood said capex will accelerate as the delayed capacity arrives, with spending picking up in the second half of the fiscal year.¹ CNBC reports she sees acceleration in the first half of 2027, helped by higher component costs and the late deliveries.² About 75% of the quarter’s capex went to short-lived assets, meaning chips.³

The wider picture is mixed. Alphabet held its capex guidance at $195 billion to $205 billion, and shares of CoreWeave, Nebius, IREN and Oracle fell after the reports.² Microsoft itself had a strong quarter: revenue of $92.3 billion, up 19%, with Azure revenue up 48% to more than $33 billion.¹³ Free cash flow fell 27% to $18.63 billion, though Hood said she expects it to stay positive through the fiscal year ending in June.³ Shares rose in after-hours trading.¹

Our read: A $5 billion cut sounds like restraint, but the sources describe a delay, not a change of plan. Part of the drop comes from relabeling leases, and the rest is spending that moves to later quarters, when Hood says it will speed up. The next check is the following earnings call, where the second-half acceleration she described should show up in the numbers.

The forecast went down. The bill is still coming.

Footnotes

1. businessinsider.com, “Microsoft Cuts 2026 Capex Forecast to $170 Billion on Capacity Delays”. Retrieved October 30, 2026. ↩ ↩² ↩³ ↩⁴ ↩⁵

2. CNBC, “AI buildout hits snag as Google and Microsoft put off raising capex forecasts”. Retrieved October 30, 2026. ↩ ↩² ↩³ ↩⁴

3. The Seattle Times, “Microsoft beats earnings estimates, even as AI spending spree continues”. Retrieved October 30, 2026. ↩ ↩² ↩³ ↩⁴ ↩⁵ ↩⁶ ↩⁷