Microsoft Extends Data Center Lifespans as AI Costs Surge

Generative AI demand has driven Microsoft to expand the data centers, power capacity and advanced chips underpinning Azure, even as the buildout weighs on cash flow and cloud margins. Extending the accounting life of those facilities spreads depreciation over more years and reduces annual expenses, helping soften the reported impact of infrastructure investment. It does not, however, lower the cash Microsoft must spend, keeping returns on AI capital under close investor scrutiny.

Microsoft said on July 29 that revenue rose 18% to $90 billion in the quarter ended June 30, 2026, while capital expenditures jumped 70% to $41 billion. Azure revenue grew 43% in the quarter and exceeded $100 billion for the full fiscal year for the first time. The company extended the useful life of office and data center buildings to 25 years from 15 and forecast $175 billion of reported capital expenditures for calendar 2026.