Microsoft is developing a new data transmission technology designed to significantly reduce energy use inside data centers, as demand for cloud and artificial intelligence services continues to grow.

The system, built around MicroLED technology, is being positioned as a more efficient alternative to traditional laser-based optical cables used to move data between servers. It is expected to be commercialized with industry partners by 2027.

According to Microsoft researchers, the new approach could use about 50 percent less energy than current systems, based on early laboratory tests and performance estimates.

The shift comes as existing networking technologies are reaching physical limits in power consumption, reliability, and scalability due to rising demand from data-intensive workloads.

Unlike conventional fiber cables that rely on lasers to transmit data through a limited number of channels, the MicroLED system uses thousands of channels within a single cable. This allows it to deliver similar volumes of data more efficiently, using what researchers describe as a “wide and slow” approach rather than the traditional “narrow and fast” model.

The technology also draws from existing innovations in imaging fiber, commonly used in medical equipment, enabling it to transmit multiple data streams simultaneously within one cable.

Microsoft said the system could address limitations of both copper and fiber connections. Copper cables are limited in distance, while fiber cables, though capable of long-range transmission, face challenges in energy consumption and reliability.

In parallel, the company is expanding the use of hollow core fiber technology across its cloud infrastructure. This system transmits data through air rather than glass, allowing signals to travel faster and with lower latency.

Microsoft said hollow core fiber can deliver up to 47 percent faster transmission speeds and about 33 percent lower latency compared with conventional fiber systems.

Together, the technologies are part of the company’s effort to improve the efficiency of what it calls the “digital plumbing” behind cloud services.