Microsoft Faces AI Capacity Constraints Due to High Demand
Microsoft expects potential disruptions to its AI services this quarter. CFO Amy Hood warned during the company's fiscal 2025 Q3 earnings call that demand for AI resources is exceeding their current data center capacity.
Hood stated,
"We had hoped to be in balance by the end of Q4 but we did see some increased demand...So we are going to be a little short, a little tight as we exit the year."
This announcement comes after reports of Microsoft cancelling several data center leases earlier this year. However, Microsoft maintains its commitment to invest $80 billion in data centers this year, with half allocated to U.S. facilities.
While acknowledging the current capacity limitations, Hood emphasized the long lead times involved in data center development. She explained,
"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."
Despite the challenges, Microsoft CEO Satya Nadella highlighted the company's expansion efforts, noting the opening of data centers in 10 new countries and across four continents during the last quarter.
The company recognizes that current and future demand may differ, and they are actively working to address the capacity constraints to meet the growing needs of their AI customers.
Read more about Microsoft's data center investments: Microsoft to Spend $80 Billion in FY25 on Data Centers for AI
Learn about previous reports on data center lease cancellations: Microsoft Cancels Some of its AI Data Center Leases
