Microsoft's first bond offering since 2017 sparked a rush of demand

A rare Microsoft bond offering sparked a rush of demand—investor bids totaled $115 billion, exceeding the offering size by 4.6 times, Bloomberg reports, citing sources. This is one of the most sought-after corporate debt offerings in the U.S. in recorded history, according to the agency’s data.

The company issued $25 billion in bonds across ten tranches with maturities ranging from two to 40 years, according to sources who spoke with Bloomberg. The yield on the longest-maturity tranche—bonds maturing in 2066 — fell by 0.3 percentage points from the initial guidance during the offering, to a spread of 1.05 percentage points over Treasury yields. By comparison, Alphabet bonds maturing in 40 years with a lower credit rating trade at a spread of about 1.33 percentage points, according to TRACE data.

Unlike its competitors, Microsoft has not tapped the debt market for nearly ten years. The company last raised funds on the market in 2017, issuing $17 billion in debt. Aside from Johnson & Johnson, Microsoft remains the only publicly traded company in the U.S. with the highest AAA rating from Moody’s and S&P Global Ratings.

High demand was expected due to the “uniqueness of these very rare long-term bonds with an AAA rating,” whose yields are likely to exceed 6%, noted Brett Kozlowski, portfolio manager at GW&K Investment Management. “This combination appears to reflect the market’s demand for diversification across issuers, even amid a massive supply,” he added.

On Wednesday, the day before the earnings release, Microsoft reported its results for the first quarter of the fiscal year. The company reported a 48% increase in revenue from cloud services while maintaining control over capital expenditures, which reassured investors concerned about the scale of spending on artificial intelligence. Chief Financial Officer Amy Hood said during a conference call with analysts that Microsoft would raise additional capital “when it deems it appropriate.”

The company will use the funds raised for general corporate purposes, including capital expenditures, sources told the agency. Representatives from Microsoft and the banks either declined to comment or did not respond to the agency's request.

The deal served as a test of investors’ appetite for funding artificial intelligence expenditures amid growing concerns over the technology’s high costs and payback periods, according to Bloomberg. This is the first offering by a hyperscale issuer since August, when Alphabet sold $25 billion in bonds. Investors, who had previously been actively buying such debt, periodically showed caution and demanded a higher risk premium, while rising benchmark interest rates further increased the cost of borrowing, the agency notes.

Since the beginning of the year, hyperscalers and data center operators have raised more than $313 billion through investment-grade bond offerings worldwide—nearly three times as much as in all of 2025. This sector helped push the global volume of bond issuances to a record $6.61 trillion two months before the end of the year.

The surge in AI-related debt is causing concern among some investors, who are bracing for a further increase in borrowing to fund the industry’s large-scale capital plans. This is evident in the credit default swap (CDS) market—insurance against debt default. According to ICE Data Services, five-year swaps on Meta’s AA-rated bonds traded at around 116 basis points on Thursday—62 points higher than the cost of insuring Microsoft’s debt. Swaps on Oracle bonds—which have the weakest credit rating among hyperscalers and are viewed by the market as an indicator of AI debt risk—are trading at around 275 basis points — 221 points higher than Microsoft’s.

This article was AI-translated and verified by a human editor