Microsoft expects some AI capacity constraints this quarter

An executive cautioned during Microsoft’s earnings call on Wednesday that customers might face AI service disruptions as demand outstrips the company’s ability to bring data centers online.

Microsoft’s EVP and CFO Amy Hood said during the company’s fiscal 2025 third-quarter earnings call that the company may face AI capacity constraints as early as June.

“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 said. “So we are going to be a little short, a little tight as we exit the year.”

The timing of Hood’s statement is interesting because Microsoft has reportedly canceled multiple data center leases this year.

In February, investment bank TD Cowen published a memo that Microsoft canceled multiple data center leases that equated to a “couple hundred megawatts” or the equivalent of two data centers. In the two months since, there have been multiple reports of additional data center lease cancellations.

Microsoft says these two instances are not necessarily related. The company reiterated today that it is still committed to investing $80 billion into data centers this year — as it originally earmarked at the beginning of this year. Half of that figure is for U.S.-based data centers.

Hood also added that demand today and demand tomorrow are not the same thing.

“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,” Hood said. “So we’re constantly in a balancing position as we watch demand curves.”

Microsoft CEO Satya Nadella said at the top of the earnings call that the company opened data centers across 10 new countries and four new continents during this past quarter.