Microsoft's $25 billion bond sale, explained: ten series, spreads and the order book

Microsoft generated $58 billion in operating cash flow in the quarter that ended September 30. On Thursday, October 29, it still priced $25 billion of bonds, its first U.S. investment-grade sale since 2017, according to Bloomberg. The deal is a compact example of how a sale of this size is built, and of what Microsoft has said about borrowing.

What Microsoft has said about borrowing

In its fiscal first quarter, capital expenditures were $45.2 billion, including $7.4 billion of finance leases, and free cash flow was $18.6 billion, according to CFO Amy Hood on the earnings call. The company also returned $10.2 billion to shareholders. Hood said capital spending in the next quarter should exceed $50 billion and that spending “for the calendar year” should be about $170 billion. The quarter she was guiding ends in December, and CNBC described the figure as 2026 capital expenditures.

Hood said Microsoft expects to stay free cash flow positive in fiscal 2027, and that it “will access additional sources of funding when we believe it is attractive to do so” to complement the cash the business generates and preserve financial flexibility. She added that “we have a lot of flexibility in terms of our capacity to raise financing,” and that Microsoft had not yet tapped the debt market.

Microsoft’s pricing release says proceeds are for general corporate purposes, which may include working capital, capital expenditures, share repurchases, acquisitions and repayment of existing debt. People familiar with the deal told Bloomberg the money will go toward general corporate uses including capital spending. Neither Microsoft nor the reports tie the proceeds to one purpose.

Microsoft is unusual among large AI spenders because its free cash flow is positive. CNBC reported that Alphabet’s cash flow was negative for a second straight quarter, that Meta reported negative free cash flow, and that Amazon did as well. Amazon’s trailing free cash flow outflow was $42.4 billion. Reuters described the move as part of a shift for large technology companies that have typically relied on their own cash.

How an investment-grade sale works

A corporate bond is a loan from investors. The company promises interest, called the coupon, and repayment of the face value on a set maturity date, according to the SEC’s investor education site. Investment grade means a rating of BBB or Baa or higher (Investor.gov). Bloomberg said Microsoft is one of two publicly traded U.S. companies with AAA ratings from both Moody’s and S&P Global, alongside Johnson & Johnson.

A big sale is split into tranches, or series, with different maturities. Microsoft’s ten series add up to $25 billion:

Floating-rate notes: $1.0 billion due 2028 and $1.0 billion due 2029.
Fixed-rate notes at 4.85% due 2028 ($2.0 billion) and 5.00% due 2029 ($3.25 billion).
Fixed-rate notes at 5.20% due 2031 ($3.25 billion) and 5.35% due 2033 ($2.5 billion).
Fixed-rate notes at 5.55% due 2036 ($4.0 billion) and 6.15% due 2046 ($2.0 billion).
Fixed-rate notes at 6.25% due 2056 ($4.0 billion) and 6.35% due 2066 ($2.0 billion).

Investors price each series as a spread over the Treasury yield of the same maturity. The San Francisco Fed describes a credit spread as the part of a corporate bond’s yield above a comparable Treasury, which the bank says reflects default risk and also factors such as taxes and liquidity. Longer bonds generally pay more, because there is more time for rates to change, Investor.gov says.

The spread is negotiated in public. Bloomberg reported initial price talk ranged from 50 to 55 basis points over Treasuries for the two-year notes to 130 to 135 basis points for the 40-year bonds, as relayed by Investing.com. Demand let the banks tighten it. The 2066 note priced at 1.05 percentage points over Treasuries, down as much as 0.3 points from initial talk, and the 30-year priced at 0.95 points, Bloomberg said. It noted that lower-rated Procter & Gamble sold $1.25 billion of 30-year bonds the same week at a spread of 0.6 points. PitchBook reported the 5.20% notes due 2031 priced 45 basis points over Treasuries, the 5.55% notes due 2036 65 basis points over and the 6.25% notes due 2056 95 basis points over.

The order book is how the banks measure that demand. Wells Fargo, JPMorgan and UBS led the sale, and investors submit orders while it is marketed. Bloomberg, citing people familiar with the matter, said orders peaked at $115 billion, or 4.6 times the offering. Reuters, citing a source, earlier reported orders of more than $100 billion before pricing. Peak orders are a reported figure, not one Microsoft published. Microsoft expects the sale to close on November 4.

What it adds

Microsoft’s preliminary prospectus supplement filed October 29 showed total debt of $35.481 billion as of September 30, before the new notes. CreditSights analysts told clients that $25 billion would lift Microsoft’s gross lease-adjusted leverage by slightly more than a tick to 0.7 times, Bloomberg reported. Hood said leasing is another financing route Microsoft has used. A related structure, the SPV leaseback, is covered in our explainer.

The wider AI debt wave

Bloomberg said hyperscalers and data center developers raised more than $313 billion through investment-grade bond sales globally this year before Thursday, almost three times as much as in all of 2025, and that Microsoft’s was the first blue-chip hyperscaler sale since Alphabet priced $25 billion of debt on August 6. Other borrowers are signaling limits. Oracle said at its October 28 investor day it would limit additional capital raises through fiscal 2030 to $20 billion, split between $10 billion of equity and $10 billion of gross debt. Meta priced $25 billion of common stock through forward sale agreements and about $12.5 billion of mandatory convertible preferred, according to its release.

Credit markets have also grown more cautious. Default-swap costs for Broadcom and Oracle reached records in early October, Bloomberg reported. PitchBook said Microsoft’s new 2031, 2036 and 2056 notes each traded 2 to 3 basis points wider than pricing in early trades on Friday, October 30, after Amazon and Intel results, during the AI-spending selloff.

Support from suppliers is another route. The Information reported, according to Reuters, that Nvidia is in talks to give Nscale billions of dollars in credit guarantees. The deal has not been signed.

Microsoft’s sale does not settle the question. “The market remains open for issuance, but not for everybody,” Jack Janasiewicz of Natixis Investment Managers Solutions told Bloomberg.

Story so far

Microsoft is marketing a U.S. bond sale of at least $25 billion, its first investment-grade offering since 2017, Bloomberg reports (October 29, 2026)

Microsoft’s $25 billion bond sale, explained: ten series, spreads and the order book

What Microsoft has said about borrowing

How an investment-grade sale works

What it adds

The wider AI debt wave

Story so far

Sources