Volkswagen And Microsoft CEOs Hold "Fireside Chat"

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Nadella: “I feel very, very good” about the pace of Microsoft’s data center plans

Microsoft plans an increase in capital expenditures for AI, but say it’s being careful not to get “upside down” on demand.

Jon Keegan

5/1/25 11:08AM

Yesterday Microsoft delivered a blowout earnings report, beating expectations fueled by strong demand for AI on its Azure cloud computing services. Investors were quite happy, with the stock up over 9% in early trading today.

On the earnings call, everyone was eager to hear more about Microsoft’s capex plans.

Year on year, capital expenditures were up 52% to $16.2 billion for the quarter. But what about the recent reports of Microsoft pulling back on data center construction?

On an earnings call with analysts yesterday, CEO Satya Nadella led with an update on infrastructure:

“We continue to expand our data center capacity. This quarter alone, we opened DCs in 10 countries across four continents. Model capabilities are doubling in performance every six months, thanks to multiple compounding scaling laws.”

Basically, it’s a complicated moment that AI infrastructure builders face now.

All of the buildings, servers, networking, and energy hardware that are allocated for data centers today will be running models that will have already jumped ahead in capabilities and efficiencies — the field is moving really fast, and building huge data centers is comparatively really slow.

In response to an analyst’s question about the reports of a pullback, Nadella said:

“The reality is we’ve always been making adjustments to build, lease, what pace we build all through the last whatever 10, 15 years. It’s just that you all pay a lot more attention to what we do quarter over quarter nowadays.”

Nadella emphasized that they did not want to find themselves in a situation where they overshot demand.

“You don’t want to be upside down on having one big data center in one region when you have a global demand footprint. You don’t want to be upside down when the shape of demand changes.”

Overall, Nadella expressed confidence in the company’s capex plans, which are expected to increase next quarter. Nadella said, “I feel very, very good about the pace.”

And so far today, investors do too.

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American Airlines joins the flock, hiking bag fees amid higher jet fuel prices

American Airlines on Thursday announced that it, too, will be hiking the fees it charges customers to check luggage.

With the move, all four of the major US airlines, which together control about 80% of the US market, have now hiked their baggage fees in recent days amid surging jet fuel prices.

The change will go into effect on tickets bought on or after Thursday, the same day Southwest’s hike begins.

Since late March, JetBlue, Delta Air Lines, United Airlines, Canada’s WestJet, and Southwest have hiked their fees. Experts expect more major carriers to follow, and to potentially tweak the pricing of other ancillary revenue sources like seat assignments and carry-on luggage.

American Airlines updates bag fees and Basic Economy fares

The change will go into effect on tickets bought on or after Thursday, the same day Southwest’s hike begins.

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Less than a year after implementing them, Southwest is also hiking its bag fees

Southwest Airlines has joined the growing list of airlines opting to hike their bag fees amid sustained higher jet fuel costs.

Starting today, the first checked bag at the carrier — which implemented bag fees less than a year ago — will jump from $35 to $45, and the second from $45 to $55. Southwest quietly disclosed the change Tuesday.

Southwest assigned the decision to “part of an ongoing analysis of the business and against the evolving global backdrop.”

As of Wednesday, jet fuel prices dropped to $4.16 a gallon, per the Argus US Jet Fuel Index, down from $4.81 on Tuesday following President Trump’s ceasefire announcement, which sent travel stocks soaring. Major airlines have shed some of those gains in premarket trading Thursday.

With the move to hike bag fees, Southwest joins JetBlue, United Airlines, Delta Air Lines, and Canada’s WestJet, all of which also boosted fees this month. Experts expect more major carriers to follow, and to potentially tweak the pricing of other ancillary revenue sources like seat assignments and carry-on luggage.