Microsoft AI capacity constraints could impact customers as early as June, following an unexpected surge in demand for its AI services during the fiscal third quarter of 2025.

During the company’s latest earnings call on Wednesday, Executive Vice President and Chief Financial Officer Amy Hood acknowledged that demand for AI infrastructure outpaced expectations, creating temporary shortfalls in available computing power.

Surging Demand Strains Data Center Readiness

“We had hoped to be in balance by the end of Q4, but we did see some increased demand, as you saw through the quarter,” Hood stated. “So we are going to be a little short, a little tight as we exit the year.”

The revelation arrives at a time when Microsoft is making aggressive infrastructure investments. However, recent Bloomberg reports suggest the company has also been canceling several large-scale data center leases in 2024.

Conflicting Signals on Infrastructure Strategy

A February memo from investment firm TD Cowen noted Microsoft backed out of data center leases totaling several hundred megawatts, roughly equivalent to two major facilities. Reports of additional cancellations followed in the ensuing months.

Despite these developments, Microsoft maintains that its infrastructure strategy remains on track. The company reiterated its commitment to investing $80 billion in global data center expansion this year, with half allocated to U.S. operations.

Planning Challenges in a Rapidly Evolving Market

Hood emphasized the complexity of managing infrastructure against shifting demand trends. “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,” she said. “So we’re constantly in a balancing position as we watch demand curves.”

In the same earnings call, Microsoft CEO Satya Nadella highlighted the company’s continued global expansion, noting the launch of data centers in 10 new countries and on four continents in the past quarter alone.

As AI workloads continue to soar, Microsoft’s balancing act between infrastructure buildout and AI service demand will remain a central narrative in the months ahead.

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