Microsoft Returns to the Bond Market With a 25 Billion Dollar Sale, Its First Since 2017

Microsoft is seeking to raise at least 25 billion dollars in its first United States investment grade bond sale in more than nine years, according to reports on Thursday, joining rivals that are borrowing heavily to fund the artificial intelligence investment boom. Microsoft shares shed their premarket gains after the report and were last down about 1 percent.

Ten parts, with maturities out to 40 years

Bloomberg reported that Microsoft is selling at least 25 billion dollars of bonds and that the final size may change with investor demand. The company's preliminary prospectus lists 10 series of notes, two with floating interest rates and eight with fixed rates, with maturities running from two years to 40 years. JPMorgan, UBS and Wells Fargo are running the sale. Bloomberg flashed at 7:46 in the morning Eastern time on Thursday that Microsoft was kicking off a 10 part dollar high grade bond offering, its first since 2017, and reported six minutes later that the company was looking to raise at least 25 billion dollars.

First trip to the market since the LinkedIn deal

Microsoft last sold United States bonds in January 2017, when it raised 17 billion dollars partly to help pay for its purchase of LinkedIn. The company is one of only two in the United States holding a AAA credit rating, the highest available, alongside Johnson and Johnson. That rating puts Microsoft among the cheapest borrowers in the corporate bond market whenever it chooses to sell debt.

Borrowing from a position of strength

The sale does not come from a shortage of cash. Microsoft generated 18.6 billion dollars in free cash flow in its fiscal first quarter, nearly 10 billion dollars more than Wall Street expected, even as it poured 45.2 billion dollars into expanding its computing infrastructure. Revenue at Azure, its cloud computing business, surged 48 percent in the quarter. Analysts contrasted that position with Alphabet, which poured 121.4 percent of its operating cash flow into capital spending in the September quarter, compared with 68 percent at Microsoft excluding finance leases. "Alphabet and Microsoft were night and day," said Melissa Otto, head of research at S and P Global Visible Alpha.

Smaller than what its rivals have raised

Reuters said the Microsoft raise is much smaller than the borrowing its peers have done so far this year. Google has raised more than 140 billion dollars through debt and equity offerings, Meta has brought in 62.5 billion dollars, and Amazon has collected 98 billion dollars through bond deals. The figures show how the race to build AI data centers has turned the world's richest technology companies into some of the biggest borrowers in the corporate bond market, even when, as in Microsoft's case, the cash is already flowing in.