Microsoft expects to raise $25 billion in US bond sale, sources say

Updates headline

By Saeed Azhar and Aditya Soni

Oct 29 (Reuters) - Microsoft MSFT.O is planning to raise about $25 billion through its first US investment-grade bond sale in more than nine years, two sources familiar with the matter told Reuters on Thursday.

The bond sale would make Microsoft the latest tech giant to tap into debt markets to fuel its AI ambitions and had gathered more than $100 billion of orders, or over four times the size of the offering, one of the people said, requesting anonymity as the matter was confidential.

Bloomberg News first reported the development.

The world's largest tech firms have turned to selling bonds and raising equity over the past year to pay for their AI spending spree, a shift in approach for the Silicon Valley giants that have typically relied on their large coffers to fund investments.

Microsoft is selling the debt in as many as 10 tranches, with maturities ranging from 2 to 40 years, Bloomberg reported, adding that no final decision had been made on the offering's size and that it may change according to demand.

Wells Fargo WFC.N, JPMorgan Chase JPM.N and UBS Group AG UBSG.S are managing the bond offering, according to the report.

UBS, Wells Fargo and JPMorgan declined Reuters' requests for comment. Microsoft pointed Reuters to a regulatory filing that confirms the bond sale without disclosing the size of the sale.

The report comes just a day after Microsoft CFO Amy Hood told investors on an earnings call that the company would pursue additional sources of funding "when we believe it is attractive to do so", citing the need to preserve its cash flows and financial flexibility.

Microsoft shares fell 0.7% in afternoon trading. The company issued an upbeat current-quarter cloud sales outlook after hours on Wednesday.

The company expects to keep generating positive free cash flow in its current fiscal year that runs through June 2027 — making it a standout among Big Tech and hyperscaler peers, which have all started burning through cash to fund their data-center buildout.

Investors punished rival Alphabet GOOGL.O on Wednesday as it burned $9.07 billion in the third quarter, after selling off Meta META.O last week following the Facebook parent's first cash burn in more than a decade.

(Reporting by Deborah Sophia in Bengaluru; Editing by Mrigank Dhaniwala, Devika Syamnath, Joyjeet Das and Maju Samuel)

((DeborahMary.Sophia@thomsonreuters.com;))