Microsoft’s Capex Soars 45% to $64.6B with Q2 Free Cash Flow Falling to $5.9B
Microsoft increased capital expenditures from $44.5B in FY2024 to $64.6B in FY2025, with quarterly AI infrastructure outlays of $37.5B causing Q2 free cash flow to slump to $5.9B despite $136B operating cash flow. Institutional investors NatWest and Norden Group raised their stakes in Microsoft by 15.3% and 3.8%, respectively.
1. Capex Surge Driven by AI Infrastructure
Microsoft raised capital expenditures from $44.5B in FY2024 to $64.6B in FY2025, with Q2 spending hitting $37.5B as it expands its AI data centers and cloud infrastructure. This 45% increase underscores the company’s aggressive investment in AI capabilities.
2. Free Cash Flow Compression
Operating cash flow reached $136B, but free cash flow fell to $5.9B in Q2 due to elevated infrastructure outlays. Management views this as a temporary compression ahead of revenue growth tied to new AI services and Azure expansion.
3. Institutional Stake Increases
NatWest Group raised its Microsoft stake by 15.3%, owning 63,344 shares, while Norden Group increased its position by 3.8% to 71,917 shares. These purchases indicate continued confidence from institutional investors in Microsoft’s long-term AI strategy.