Concerns Over AI Capacity Constraints

Amy Hood, Microsoft’s Executive Vice President and Chief Financial Officer, expressed concerns regarding anticipated constraints in AI capacity, warning that these issues could arise as soon as June. Hood stated, “We had hoped to be in balance by the end of Q4 but we did see some increased demand, as you saw through the quarter. So we are going to be a little short, a little tight as we exit the year.”

Data Center Leasing and Investments

The timing of Hood’s comments is noteworthy given recent reports of lease cancellations for multiple data centers. Notably, in February, investment bank TD Cowen disclosed that Microsoft had terminated several leases, totaling a capacity of “a couple hundred megawatts” — approximately equivalent to two data centers. Although Microsoft has confirmed these lease cancellations, the company insists that they are not directly related to the current demand issues.

Despite these challenges, Microsoft remains committed to investing approximately $80 billion in data center infrastructure throughout the year, with half of this funding directed towards facilities in the United States.

Long-Term Planning for Data Centers

Hood emphasized the complexities involved in data center planning, stating, “Just a reminder, these are very long lead time decisions, from land to build out, it can be, you know, lead times of five to seven years, two to three years. So we’re constantly in a balancing position as we watch demand curves.”

Global Expansion Efforts

Microsoft CEO Satya Nadella noted during the earnings call that the company has successfully established data centers in ten new countries across four continents in the past quarter, reinforcing its commitment to global expansion.