- Microsoft is looking to raise at least $25 billion from its first US investment-grade bond offering since 2017, marketing the debt in as many as 10 tranches with maturities from two to 40 years, according to people familiar with the matter. The final size may change with demand.
- The deal would be roughly 47% larger than Microsoft’s last high-grade sale, a $17 billion offering in 2017. Initial price talk on the longest bond, due in 2066, is as much as 1.35 percentage points over Treasuries, roughly in line with where Alphabet’s and Amazon’s 40-year bonds trade even though those companies carry lower ratings.
- The sale lands in a market flooded with AI debt. Hyperscalers and data center developers have raised more than $313 billion through investment-grade bond sales globally this year, almost three times the full-year 2025 total, so a $25 billion deal alone would equal about 8% of that year-to-date haul.
- Credit markets are already separating the strongest borrowers from the rest. Five-year credit default swaps on Microsoft trade around 54 basis points, versus about 116 for AA-rated Meta and about 275 for Oracle, which is widely seen as a proxy for AI debt risk.
What Happened?
Microsoft began marketing the bonds Thursday, a day after reporting fiscal first-quarter results that showed a 48% gain in cloud revenue while capital spending stayed in check. Wells Fargo, JPMorgan and UBS are managing the offering, and proceeds will go toward general corporate purposes including capital expenditures, the people said. It is the first deal from a blue-chip hyperscaler since Alphabet priced $25 billion of debt on Aug. 6. Microsoft is one of only two publicly traded US companies, alongside Johnson & Johnson, with top-tier AAA ratings from both Moody’s and S&P.
Why It Matters?
The offering is a crucial test of investor appetite for funding the AI build-out at a time when concerns about excessive spending and the timeline for profits are growing, and buyers have at times pulled back and demanded more compensation. Rising benchmark rates have also pushed borrowing costs higher. Microsoft’s scarcity value works in its favor: GW&K’s Brett Kozlowski called the timing “opportunistic” but said demand should be strong for “very rare long AAA paper” likely yielding more than 6%. Global bond sales have already reached a record $6.61 trillion this year, with two months still to go.
What’s Next?
Watch the final size and where the 40-year tranche prices against the initial talk, which will show how much of a premium investors demand for long-dated AI-linked debt even from a AAA issuer. CFO Amy Hood said the company would raise more funds “when we believe it is attractive to do so,” leaving room for further issuance. A strong order book could encourage other hyperscalers to return to the market, while weak demand would deepen worries about the sector’s reliance on debt.
Affected Tickers and Coins: MSFT, GOOGL, AMZN, META, ORCL, LQD
Source: Bloomberg
