Microsoft is falling well short of its near-term climate targets. The company's annual sustainability report shows that emissions rose 25 percent in fiscal year 2025 compared to the year before. The main driver is the enormous energy demand of new data centers being built for artificial intelligence workloads. Despite the setback, leadership is sticking to its goal of becoming carbon negative by 2030.
Data centers drive consumption
Microsoft's energy use grew by 24 percent in fiscal year 2025, and that fed straight into its emissions. In total, the company was responsible for around 34 million tons of CO2 equivalent. After subtracting certified carbon removals, net emissions come to 20 million tons, roughly on par with the total emissions of countries like Panama or Lithuania.
Microsoft isn't alone here. Amazon's carbon footprint grew by 16 percent over the past year, while Google's greenhouse gas emissions climbed 18 percent. The AI-driven expansion of cloud infrastructure is leaving a mark on the climate balance of every major provider.
Natural gas and fewer credits draw criticism
Beyond the data center buildout, Microsoft's decision to stop buying short-term renewable energy certificates played a role. According to sustainability chief Melanie Nakagawa, the company is now focusing on long-term initiatives with greater impact. Climate advocates are skeptical of the approach. Microsoft recently signed a deal with Chevron to build a 2.67 gigawatt natural gas plant in Texas that will supply the company with power for 20 years. There are also reports that Microsoft may scale back its pledge to run entirely on carbon-free electricity around the clock by 2030.
Progress on water and recycling
The report also highlights some wins. On paper, Microsoft fully offsets its worldwide electricity use with clean energy sources. For the first time, the company put more fresh water back into circulation globally than it consumed. For decommissioned cloud servers, the reuse and recycling rate hit 92 percent for the second year running. Its portfolio of clean power contracts now totals 40 gigawatts across 26 countries, with 19 gigawatts already online. Microsoft is also making greater use of lower-carbon steel, concrete, and mass timber when building its data centers.