Microsoft Forecasts Show Data Center Crunch Persisting Into 2026

Core Insights - Microsoft Corp. is facing prolonged data center capacity constraints, which are impacting its ability to meet cloud demand, particularly for Azure services [1][2][3] Data Center Capacity Issues - Many US data center regions are experiencing shortages of physical space or servers, leading to restricted new subscriptions for Azure in key areas like Northern Virginia and Texas through the first half of next year [2] - The timeframe for these constraints has been extended beyond previous estimates, with expectations now set through the end of 2025 [3] - The lack of capacity affects both graphics processing units (GPUs) used for AI and central processing units (CPUs) that support traditional cloud services [3] Azure's Growth and Challenges - Azure is a critical growth engine for Microsoft, generating over $75 billion in the 2025 fiscal year, and has been expanding faster than competitors like Amazon and Google [4] - Microsoft has consistently reported an inability to meet all customer cloud demand over the last six quarterly earnings calls, a challenge also faced by Amazon and Google [4] Customer Management and Workarounds - A Microsoft spokesperson indicated that most Azure services in the US have available capacity for existing customers, but unplanned demand spikes may require "capacity preservation methods" [5] - Customers may be directed to alternative data center regions when their preferred facilities lack space, which can complicate operations and increase latency [6] - Some customers experiencing capacity issues have opted to take their business elsewhere or limit their cloud usage until more capacity becomes available [7] Infrastructure Development and Challenges - Microsoft has been rapidly expanding its data center capacity, adding over two gigawatts in the past year, equivalent to the power output of the Hoover Dam [8] - The demand for new data centers has been significantly driven by AI applications, alongside traditional cloud infrastructure needs [9] - The process of bringing a data center online can take years, with critical components facing long delivery times [11] Regional Capacity Variations - Exceptions for key customers seeking additional capacity in regions facing supply constraints can be made, with better availability reported in European regions compared to the US [12] - Continuous supply shortages have been attributed to increasing demand, with hopes for improved supply-demand balance expressed for December [13]