Microsoft Pulls Back From Neocloud Bets With Nscale, Nebius, IREN

Microsoft is pulling back from some of the data center deals it signed to rent AI capacity from upstart "neocloud" operators, Bloomberg reported, with "some key Microsoft leaders" said to have "developed a case of buyer's remorse" as IREN, Nebius and Nscale run into delays, cost overruns and permitting problems.

The three partners have disclosed Microsoft contracts totaling up to about $70.9 billion in SEC filings: up to roughly $43.8 billion at Nscale through December 2033 per its Form S-1, up to about $17.4 billion at Nebius through 2031 per its Form 20-F, and roughly $9.7 billion at IREN through 2031 per its Form 10-K. That is the on-paper scale now under review.

At IREN's Texas campus, cabling issues have disrupted construction, with Bloomberg citing a "generator fire at the site in April and disclosed hardware delivery delays in August." Microsoft and IREN officials met last week and negotiated a revised timeline that could push completion back by weeks or months.

Microsoft has already walked away from several Nscale projects, including a roughly $3 billion UK data center at Loughton, after the local grid operator said it "may not be able to power the site until the early-to-mid 2030s." Separately, the company declined to exercise an option that would have more than doubled its Nscale Texas computing-capacity agreement.

Microsoft cut its 2026 capex forecast by $5 billion on the third-party delays. Investors punished the partners immediately: IREN shares fell 18%, Nebius more than 16%, and CoreWeave 12.29% in the session following the report.