TMTPOST -- Microsoft Corp. has to take more time to address the datacenter crunch as the supply situation is tougher than it expected before, according to a report on Thursday.
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Many of Microsoft’s data center regions in the United States are facing shortages of physical space or servers, Bloomberg cited people with knowledge of the company’s internal forecasts. In crucial datacenter hubs like Northern Virginia and Texas, new Microsoft Azure cloud service subscriptions are reported to remain restricted through the first half of 2026.
This timeline extends beyond what Microsoft had publicly stated. Chief Financial Officer (CFO) Amy Hood in an earnings call in July had indicated that current constraints would last through the end of 2025. Hood said that continual supply shortages were due to increasing demand. “I talked about it — my gosh — in January and said I thought we’d be in better supply-demand shape by June,” she told analystsl. “And now I’m saying — I hope I’m in better shape by December. ”
The capacity restrictions reportedly affect both graphics processing unit(GPU)-powered machines typically used for artificial intelligence (AI) workloads and traditional central processing unit (CPU)-dominated data centers that handle standard cloud services.
The report noted negative knock-on effect of individual datacenters. Microsoft salesmen typically refer to customers to other facilities with capacity if they find their preferred facility runs out of space, but things could get worse as these workarounds can increase complexity and the time it takes for data to travel between server farms and customers.
A Microsoft spokesperson said most of Azure services and regions in the U.S. have available capacity so that existing customers can continue to grow their deployed workloads. In the event of certain unplanned surges in demand, the company will introduce a "capacity preservation methods" to balance customer demand across its data center fleet, said the spokesperson.
The report came on the heels of announcement that Microsoft decided to drop its plans for building a datacenter in Caledonia, Wisconsin. The decision was made on opposition from local residents and elected officials. "Based on the community feedback we heard, we have chosen not to move forward with this site," Microsoft said in a statement on Wednesday.
"We remain committed to investing in Southeast Wisconsin and look forward to working with the Village of Caledonia and Racine County leaders to identify a site that aligns with community priorities and our long-term development goals," according to the statement.
The Caledonia data center was planning to serve as a backup for Microsoft’s AI operations in Mount Pleasant. The company on September 18 said that it would more than double its data center complex in Mount Pleasant, spending another $4 billion on what the company calls a state of the art AI facility. The new phase was announced as work is close to wrapping up on the first part of the complex, a $3.3 billion data center that is expected to come online in 2026. The second datacenter was planned to be online in 2028.
Microsoft in late July disclosed strong results across the board for fourth fiscal quarter ended June 30, 2025. CEO Satya Nadella said Azure surpassed $75 billion in revenue this fiscal year, up 34% YoY. That was the first time for Microsoft to disclose Azure revenue.
Microsoft executives have indicated that the company will match increases in demand for AI services by building up its data centers. Nadella on an earnings call said Microsoft now has more than 400 data centers across 70 regions worldwide. The company anticipated more than $30 billion in capital expenditure (Capex) for the current quarter, or the first quarter of this fiscal year, said CFO Hood. That forecast marks a new record high for Capex with an quarter-over-quarter rise of more than 24%.
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