Microsoft plans to expand data centers to 38 gigawatts

Microsoft plans to expand its global data center capacity to more than 38 gigawatts by 2032, according to reporting from Bloomberg News and Reuters citing people familiar with the matter. The plan would more than triple its current footprint of roughly 12 gigawatts. Dedicated artificial intelligence capacity would rise from about 2 gigawatts today to roughly one-third of the 38-gigawatt total, although Microsoft has not publicly confirmed the target.

The planned expansion comes as capacity constraints limit cloud demand. Azure and other cloud services revenue increased 43% year over year in the fourth fiscal quarter. Total Microsoft Cloud revenue reached $59.3 billion for the quarter and $214.4 billion for fiscal 2026. The company added 1 gigawatt of capacity in the fourth quarter and is on track to double overall capacity within two years. To secure electricity, Microsoft signed a 20-year power agreement with Constellation Energy tied to the restart of the 835-megawatt Three Mile Island Unit 1.

Commercial remaining performance obligations rose 84% year over year to $678 billion, with Microsoft expecting to recognize about 30% of that total as revenue over the next 12 months. This backlog supports a heavy investment cycle. The company reported roughly $145 billion in fiscal 2026 capital expenditures, with cash additions to property and equipment totaling about $116 billion. It projects more than $50 billion of capital expenditures in the first quarter of fiscal 2027 and about $175 billion across calendar 2026 under its broader measure that includes finance leases.

Securing energy and approvals remains a key hurdle. Texas temporarily halted approvals for new data center grid connections while assessing power and water use, and New York imposed a moratorium on large facilities over electricity costs. Because the 38-gigawatt goal is an internal roadmap rather than formal guidance, construction timelines and shifting efficiency needs may alter the final buildout.