Inside Microsoft’s two-decade push to cut water intensity while scaling for growth
As demand for cloud and AI services continues to grow, datacenters are becoming more essential than ever. Communities also want to better understand how this infrastructure affects local resources, particularly water. At Microsoft, water stewardship has been a priority since our first datacenter builds in the early 2000s and remains a core part of our strategy today and into the future. It underpins both our Community-First AI Infrastructure initiative and our company-wide commitment to become water positive by 2030, meaning we will replenish more water than we withdraw. We are pairing our progress with continued transparency so people can understand not only how much water we use, but also how we are working to reduce that use over time.
Through continuous innovation and advancements in cooling technologies, we have improved our water use effectiveness (WUE), measured in liters per kilowatt-hour (L/kWh), by nearly 90% since our first generation of datacenters in the early 2000s. Our average WUE has decreased from 2.3 L/kWh to 0.27 L/kWh in 2025, reflecting decades of innovation and our ongoing commitment to reducing the water intensity of our datacenters while meeting the growing demand for cloud and AI services.
Across our entire owned fleet of datacenters, we are committed as a company to a 40 percent improvement in datacenter water-use intensity by 2030. As of 2025, we have reduced our water-use intensity by 25 percent, putting us well over halfway toward our goal. This strong progress reflects the impact of our continued investments in water-efficient cooling technologies, operational improvements and responsible water management practices.*
In FY25, Microsoft reached an important milestone toward its 2030 water positive commitment, replenishing more water than it withdrew across its global operations for the year. We have made this progress by decoupling datacenter growth from water use through resilient, responsible water stewardship practices and the deployment of increasingly efficient cooling technologies — demonstrating that digital growth and sustainable water management can advance together. We are committed to building on this progress and working toward sustaining water positive performance over time as we continue advancing toward our 2030 goal.
Early water stewardship by designBeginning with some of our earliest datacenter designs, we prioritized water efficiency while minimizing impacts on energy use through the deployment of high-efficiency economizing chillers operating at elevated water temperatures. As early as 2008, we adopted direct air cooling with evaporative assist as the primary cooling approach across our datacenter fleet. This design uses significantly less electricity and up to 90% less water than traditional water-based cooling systems by relying on water only when outside temperatures exceed 85°F (29.4°C). In parts of Northern Europe, no water is required for cooling throughout the year, while in other cooler regions like Dublin and Amsterdam, water is used less than 5% of the time. In more temperate climates like Virginia, water is typically required only 10% of the year, while in the hottest climates like Phoenix, water use may increase to as much as 40% of the year. As a result, approximately 90% of our 2025 owned fleet operates using highly efficient, low- to zero-water cooling systems.
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While the majority of our existing datacenters are already highly water efficient, we did not stop there. In 2024, Microsoft introduced a new datacenter design optimized for AI workloads that consumes zero water for cooling during operations, further reinforcing our commitment to water stewardship by design. This chip-level cooling solution delivers precise zonal temperature control without water evaporation by recirculating water through a closed-loop, direct-to-chip cooling system. As our datacenter fleet continues to expand, the addition of these zero-water designs will further reduce Microsoft’s water use intensity over time.
Datacenter cooling methods, explained:
- Cooling towers: Traditional systems that remove heat by evaporating water year-round.
- Hybrid fluid coolers: Evaporates water for cooling during hot summer conditions and switches to dry mode when ambient temperatures cool down.
- Direct air: Uses outside air for cooling, with little to no water use. Water is used only when outside air is above 85°F.
- Air cooled chillers: Uses mechanical refrigeration and outside air to remove heat from closed coolant loops with zero water evaporation.
- Liquid-cooled AI DCs: Uses closed-loop, direct-to-chip cooling to provide precise chip-level temperature control, removing heat efficiently with zero water evaporation.
Design innovation is only part of the story. We are also improving the efficiency of existing facilities that use water through a continuous focus on optimizing temperature and humidity setpoints, enabling more precise environmental control and eliminating overcooling. In addition, we regularly audit water use and compare actuals against design expectations using real-time weather data and operational analytics. This helps ensure our datacenters are performing as intended and enables us to quickly identify and address any unexpected water use. These efforts, combined with ongoing hardware and operational improvements, are all aimed at using as little water as possible.
Specifically in our Phoenix, Arizona, datacenters, implementation of these advancements led to a 23% year-over-year improvement in WUE in FY25 alone. We are now deploying these advancements across our direct-evaporatively cooled datacenters globally.
Operational improvements like these are one reason Microsoft has been able to report significant long-term reductions in water intensity across datacenter generations. They also point to the next phase of our work: expanding the use of recycled and alternative water sources wherever possible.
Leveraging recycled, reused and non-potable waterIn addition to driving efficiency, we also prioritize using recycled, reused or non-potable water wherever possible in our operations. We have expanded the use of these non-potable water sources in some of our most water-intensive regions, helping reduce demand on freshwater supplies. For example, in Quincy, Washington, Singapore and San Antonio, Texas, three of our key locations for advancing water stewardship, we leverage 74%, 99% and 79% recycled, reused or non-potable water sources, respectively.
Rainwater harvesting systems are now operational at select datacenters in the Netherlands, Sweden and Ireland, with additional installations planned in Canada, the United Kingdom, Finland, Italy, South Africa and Austria. To illustrate the potential impact, Microsoft’s new datacenters in Quebec are expected to collect up to 1.5 million liters of rainwater annually, depending on local precipitation levels. This water can be used to further offset the already low water withdrawal at these sites. Expanding the use of alternative water sources in this way helps reduce pressure on municipal water supplies while supporting efficient datacenter operations.
As needed, we implement on-site water treatment systems that enable facilities to recycle water multiple times for cooling operations. These systems produce purified water suitable for reuse within cooling systems, reducing overall dependence on utility water supplies. Together, these efforts demonstrate how engineering innovation and operational excellence can work in concert to meaningfully reduce water use at the facility level.
Advancing water stewardship through investment and community partnershipWe work closely with local utilities to reduce strain on community resources, and plan ahead for the sourcing and infrastructure needs associated with our operations. Beyond our operations, Microsoft’s Datacenter Community Pledge commits us to protecting local watersheds, engaging stakeholders and investing in projects that strengthen regional water resilience — helping ensure datacenter growth supports both environmental sustainability and long-term community well-being. Where system improvements are required, Microsoft funds those upgrades in full so communities do not have to shoulder the cost of supporting our operations.
Beyond our own footprint, we invest directly in community water infrastructure by modernizing water systems, expanding access, increasing reliability and helping utilities maintain stable rates and pressure. These investments create shared value for both Microsoft and the local communities we work closely with by strengthening critical infrastructure and supporting long-term water resilience. For example, near our datacenter in Leesburg, Virginia, Microsoft is funding more than $25 million in water and sewer improvements to help ensure that the cost of serving our facilities does not fall on local ratepayers. Since 2020, we have invested more than $500 million in more than 75 water and wastewater infrastructure projects that deliver meaningful community co-benefits.
ReplenishmentFinally, we pair all of this work with our broader water positive commitment, our goal to replenish more water than we withdraw by 2030, while advancing our Community-First AI Infrastructure approach, which prioritizes delivering measurable benefits to the communities where we operate. This approach extends across our entire datacenter footprint, including leased facilities. In FY25, we replenished more water than we withdrew globally, marking a significant milestone in our water stewardship journey.**
We prioritize and pursue projects designed to deliver meaningful water contribution to each local community. For example, in the greater Phoenix area and nearby Nevada communities, we partner with FIDO Tech and local utilities to deploy AI-enabled leak-detection that identifies and repairs hidden breaks in aging water systems. By preventing water loss before it occurs, these efforts help keep more water in circulation, improving reliability for residents and effectively increasing the amount of usable water available across the system.
Across the Midwest, we work with The Nature Conservancy to restore historic oxbow wetlands — crescent-shaped water bodies that naturally recharge groundwater, reduce flood risk and enhance habitat for native species. These wetlands act as natural reservoirs, capturing and slowly returning water to local aquifers over time. The goal is to create more stable water availability for agriculture, healthier ecosystems and increased resilience for nearby communities throughout the year.
Looking aheadAs water challenges become increasingly complex around the world, Microsoft remains deeply committed to protecting water as a vital natural resource. We continue to advance datacenter innovations that reduce water use intensity while supporting the growing performance demands of cloud and AI services. Through zero-water cooling designs optimized for AI workloads, water reuse initiatives both on and off our campuses and community-focused stewardship programs, we are working toward a future where digital growth and responsible water management go hand in hand.
We are also exploring zonal cooling architectures that more precisely align cooling approaches with the needs of different hardware types, improving efficiency while supporting a diverse mix of AI and traditional workloads.
Datacenters are essential infrastructure for the digital economy, and we believe they should be built and operated in ways that benefit the communities they serve. Over the last decade, we have demonstrated that technological advancement and environmental stewardship can progress together, and we remain committed to continuing that journey as we build the datacenters of the future.
Top image caption: Aerial view of Microsoft datacenter campus in Wisconsin.
Judy Priest leads technology strategy, innovation and research for Microsoft’s global cloud and AI infrastructure, driving advances in datacenter architecture, sustainability, power, cooling, energy and emerging technologies that enable reliable, scalable services.
Steve Solomon is a professional engineer leading the engineering strategy behind the company’s global cloud and AI infrastructure. He specializes in datacenter design, sustainability, power and cooling innovation, helping advance reliable, efficient and community-focused infrastructure at hyperscale.
*Footnote 1: Measured as water withdrawals per megawatt (MW); based on a 2022 baseline.
**Footnote 2: To understand how Microsoft calculates and tracks water replenishment data, please refer to our FY 2024 Environmental Data Fact Sheet.
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Rethinking cloud operations with agentic observability
Cloud operations are entering a new era as AI-driven and autonomous agents become a larger part of modern software systems. As software becomes increasingly agentic, the challenge is no longer just managing greater scale and complexity. Operators must also contend with systems that evolve faster, act more autonomously and interact across an expanding network of dependencies.
As applications, models, APIs and infrastructure become increasingly interconnected, their behavior is harder to understand end to end. Systems no longer fail in isolation. They fail through interactions across dependencies, services and environments that are constantly changing in real time.
To help organizations operate effectively in these increasingly dynamic environments, today we’re announcing the general availability of the Azure Copilot Observability Agent. Built on Microsoft Azure Monitor, it correlates signals across agents, applications, infrastructure and services to provide the context needed to operate confidently in this new environment.
Observability becomes foundational in an agentic worldIn a recent survey of 250 IT decision-makers, Microsoft and Material found that 84% of organizations report increased cloud complexity, with 69% saying it is outpacing their current operating model. The impact is most acute across security, cost management and performance, and it extends across the entire operations lifecycle.
As the pace and scale of change accelerate, no individual or team can realistically maintain the full context required to diagnose and resolve issues quickly enough. This is driving a shift toward agentic operations, where intelligence augments how systems are understood and managed.
Observability is foundational to this shift. It provides the real-time understanding of system behavior that agents depend on to reason, adapt and act. Without a connected view across signals, even the most advanced agents lack the context required to operate reliably.
From signals to resolution with the Observability AgentWe designed the Observability Agent to help operators move more quickly from detection to understanding. It connects logs, metrics, traces, topology and operational context across environments, reducing the time it takes to identify the root cause of an issue.
As telemetry spreads across systems, operators are often forced to piece together context across multiple tools. The Observability Agent addresses this fragmentation by reasoning across signals in real time and unifying that context into a single operational view. These agentic capabilities are integrated directly into existing workflows, helping teams move from investigation to resolution faster with clear, actionable insight.
We’re already seeing customers use the Observability Agent to reduce manual effort, accelerate incident resolution and improve operational clarity:
“The biggest value is speed! The [Azure Copilot] Observability Agent helps us resolve incidents faster and reduce operational overhead by turning logs, metrics and traces into plain English insights. These agents run deep investigations and provide remediation recommendations almost immediately, compared to hours or even days previously.
Since adopting these capabilities, we’ve reclaimed an estimated 250 engineering hours monthly that are now redirected toward supporting new applications and features. We can use natural language to detect, diagnose and remediate issues faster than ever before.”
— Narmada Krishnaswamy, Head of KPMG Audit Application Support and Operations
“Azure Copilot Observability Agent helped us move from manual incident hunting to faster, AI-guided investigations. For PolicyVault, it pulls together the telemetry from our service, correlates it with Azure resource health and gives us actionable next steps based on the investigation. That means we’re not just seeing what broke; we’re getting a much clearer idea of why it happened and what to do about it, which saves us a lot of time during incidents.”
— Vladimir Gusarov, Founder & CEO, PolicyVault
“Azure Copilot’s Observability Agent helps us move faster from signal to insight. By bringing together our telemetry and guiding us toward likely root causes, it reduces the time and effort needed to investigate incidents and keeps our teams focused on what matters most.”
— Theus Hossmann, Chief Technology Officer at Ontinue
Beyond improving incident response, this shift reflects a new approach to cloud operations, where systems can continuously reason across signals and act on that understanding.
Check out our Tech Community blog post to learn more about the Azure Copilot Observability Agent.
From observability to agentic operations across the cloud lifecycleObservability is part of a broader shift to agentic operations. As systems become more autonomous, operations expand from understanding what is happening in production to continuously improving how those systems behave over time.
In an agentic model, this forms a lifecycle. Systems generate signals, agents interpret those signals, take action and learn from outcomes. Over time, this creates a feedback loop where each operational cycle improves the next, increasing system resilience and efficiency.
This shift requires more than better visibility. It requires a coordinated approach across the lifecycle, from observability and diagnosis to optimization and remediation where insight and action are tightly connected.
As agents take on a greater role in that lifecycle, governance becomes central to how systems are trusted and controlled. Policy, auditability and guardrails ensure that actions taken by agents align with organizational intent and operate within defined boundaries. Human oversight remains essential, not as a bottleneck, but as a mechanism for building confidence and ensuring reliability as automation scales.
This is where Azure is uniquely positioned. By bringing together observability, automation and governance within a connected platform, Azure enables organizations to move from isolated tools to an integrated operational model that spans the full lifecycle.
Azure Copilot Observability Agent plays a key role in this model by grounding agentic systems in real-time operational context. As organizations build and deploy more agents, this foundation becomes critical for ensuring those systems operate effectively and responsibly.
Cloud operations are shifting from reactive management to a continuous, agent-driven lifecycle of learning, adaptation and control. This vision of agentic cloud operations is already taking shape across Azure. Read our companion Azure Blog post for more details.
Brendan Burns is a co-founder of the Kubernetes open source project and corporate vice president for Azure cloud-native open source and the Azure management platform including Azure Arc. He is also the author and co-author of several books on Kubernetes and distributed systems.
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CVE-2026-33840 Win32k Elevation of Privilege Vulnerability
Powering the next wave of AI: Expanding capacity with our new datacenter in Pecos
Today, Microsoft is announcing one of the largest single capacity additions in our history. In Pecos, Texas, we will build a new datacenter campus, expanding our global datacenter capacity by approximately 2 gigawatts (GW) to meet strong and sustained customer demand for AI and cloud services across industries and regions. Beyond the technology, this is a major investment in West Texas. We expect to support over 6,000 construction jobs at peak build-out and to create hundreds of permanent operational jobs that will add a new industry that supports the local economy when the new datacenter campus is operational.
This multibillion-dollar datacenter campus investment over the next five to seven years reflects both the immediate needs we are seeing today and the future trajectory of AI and advanced compute, where reliable infrastructure at scale is essential to unlocking the next generation of innovation. This expansion is grounded in a simple principle: we build where our customers need us, and we build for the long term. We have a track record of doing exactly that in Texas. In the San Antonio region, where we have operated datacenters for nearly a decade, our investment has generated billions of dollars in local economic activity and supported thousands of local jobs. We are committed to delivering the same lasting value in Pecos.
Meeting customer demand with reliable infrastructureCustomer demand for AI and cloud services continues to grow rapidly, from startups building new applications to governments, healthcare providers and educational institutions modernizing critical systems. Meeting this demand requires not only more datacenter capacity, but capacity that is predictable, resilient and able to scale quickly.
The datacenter campus in Pecos enables us to deliver on that need. By pairing new datacenter infrastructure with dedicated energy supply located onsite, we can bring capacity online at the pace our customers require while maintaining operational reliability. Critically, the energy infrastructure required to power this datacenter is being funded by Microsoft. We are paying for the new generation and supporting infrastructure needed to serve our own operations. The capacity we bring online in Pecos is built to meet our demand, ensuring that our growth strengthens, rather than strains, the energy resources the community relies on.
Putting Community First in West TexasWhile meeting customer demand is critical, how we grow is equally important. At Microsoft, our Community First approach guides us where we build, own and operate our datacenters, including our new datacenter campus in Pecos.
This work begins with a simple commitment: we show up as a lasting partner, not just a builder of infrastructure.
As shared in our letter to the community in Pecos and Reeves County, we are approaching this project as a new neighbor, with a focus on partnership, transparency and listening. We recognize that earning trust takes time, and we are committed to ongoing engagement with local residents, leaders and organizations as this project moves forward. The region’s elected leadership has welcomed the investment. Reeves County Judge Leo Hung, the county’s top elected official, said:
“We are excited to welcome Microsoft to Pecos. This investment reflects the strength of our region and its ability to support innovation at a global scale. It will create new opportunities for local businesses, support workforce development and reinforce Pecos as a place where forward-looking companies can grow and thrive.”
Our Community First approach in this region focuses on three priorities:1. Listening and engaging early
We engage early and often through community meetings, local partnerships and ongoing communication across the life of the project, which gives residents multiple ways to ask questions and share feedback, just as we have in other Texas communities.
2. Creating local economic opportunity
This project is built to drive lasting regional growth. As well as supporting thousands of construction jobs, the hundreds of permanent operational roles will add a new industry to the local economy. We will also invest in workforce development and small-business support. We are focused on ensuring that local residents are prepared to take advantage of the opportunities created by the AI economy. This is part of a sustained commitment to the region, building on more than a decade of experience in Texas, including our operations in San Antonio:
Near San Antonio, where we have operated for nearly a decade, our Datacenter Academy partners with local colleges to prepare students for datacenter careers, including a $545,000 investment that has already reached more than 450 students. Statewide, workforce programs like TechSpark have helped create more than 1,100 jobs and engaged 20,000 Texans in digital skilling. We will bring the same model of local hiring, training and small-business support to West Texas.
3. Partnering for lasting community impact
Our investment reaches well beyond the datacenter, into education, digital inclusion and nonprofit partnerships. In fiscal year 2024, Microsoft and its employees contributed $11 million in cash and $103.3 million in donated software and cloud technology to more than 10,000 Texas nonprofits, alongside 42,000+ employee volunteer hours. In Pecos, we will direct that same commitment toward the priorities that matter most to West Texas residents.
As we expand our datacenter footprint, we remain equally committed to building and operating our infrastructure in ways that reduce environmental impact.
Energy and emissions
This includes improving energy efficiency across our infrastructure, from compute to hardware, and building on the 4.7 GW of renewable electricity we have already contracted for our electricity use in Texas, advancing carbon-free electricity through renewable generation and other technologies. This investment is intentionally designed with flexibility in mind, allowing Microsoft to adjust capacity over time as demand evolves.
At launch, the datacenter campus will operate with a co-located natural gas power facility, an arrangement known as “behind the meter.” This serves the campus directly and independently of the public grid, so this demand does not take from the current grid. The plant’s design will integrate state-of-the-art air emissions controls, such as Selective Catalytic Reduction systems to lower nitrogen oxide emissions. Over time, we anticipate connecting the power facility and the datacenter to the broader grid and becoming part of the regional energy system, working in close coordination with utilities and local authorities. We will continue to drive additional improvements in environmental performance in line with our corporate commitments. This evolution reflects our long-term mindset in the region: as we grow, we intend to contribute to a more resilient and reliable grid that delivers value not only to our operations, but to the wider West Texas community.
Water stewardship
We plan to deploy closed loop cooling systems, which significantly reduce water requirements. This approach is expected to limit water usage by requiring only an initial charge of the cooling system at the start of operations, with no additional water consumption during steady-state operation. As a result, the total lifecycle water use of this datacenter is only a fraction of that consumed annually by a typical fast-food restaurant.
We are also designing our operations to minimize reliance on freshwater sources by utilizing nonpotable water where possible, helping to reduce pressure on shared community resources.
This builds on the way we approach water stewardship across Texas. Near San Antonio, Microsoft has helped fund the permanent protection of more than 1,500 acres in the Edwards Aquifer recharge zone — safeguarding a critical water source for over two million Texans — as part of our broader commitment to be water positive by 2030. In Pecos, we will continue to prioritize responsible water use, efficient design and close coordination with local authorities as our operations grow, and we will share our progress with the community over time.
Building for the future, responsiblyThe datacenter in Pecos represents an important step forward in how we build infrastructure for the AI era by combining capacity at scale, energy and a commitment to responsible growth.
But just as importantly, it reflects how we do this work: in partnership with communities, with an enduring mindset and with a focus on creating shared value.
As we move forward, we will continue to engage closely with the community in West Texas, provide updates on our progress and ensure that this investment delivers lasting benefits for both our customers and our neighbors. Community members can learn more at Open letter to Pecos and Reeves County – Microsoft Local.
We look forward to building that future together.
Noelle Walsh leads the organization that powers the global Microsoft Cloud. She oversees the company’s physical cloud infrastructure and operations, with a charter focused on safety, security, availability, sustainability and competitive infrastructure growth — bringing decades of global operational leadership.
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