Microsoft is evaluating adjustments to its neocloud partner ecosystem, opting not to renew its Oracle agreement while prioritizing proprietary data center capacity.
Explore the latest infrastructure shifts, GPU contract timelines, and market dynamics affecting cloud providers.
Two sources familiar with the discussions, who asked not to be named, said Microsoft has not decided which neocloud companies it will stop providing services to. The company wants to prioritize its own network of data centers, one of the sources said. Separately, two sources said Microsoft has decided not to renew its agreement with Oracle.
Microsoft has been working with CoreWeave, Nebius, Chronoscale, IREN, Lambda and Nscale in recent years. A spokesperson said its infrastructure includes owned data centers, leased facilities and partnerships with third parties. The company, he added, regularly reviews its investments based on customer demand and adjusts its plans when conditions change.
Changes in the market and projects
Shares of CoreWeave, Nebius and IREN have fallen about 50% in the past month, despite their gains on Friday. A recent industry study listed 323 neocloud companies, and experts estimate that many will not survive.
IREN said in its earnings release on Thursday that it delivered data center capacity to Microsoft in August. Microsoft has requested an upgrade of its network equipment, so the infrastructure is expected to go live in January or February, rather than this year.
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Microsoft CFO Amy Hood said in October that some cloud deals for graphics processing units (GPUs) were being pushed back to the first half of 2027, impacting Azure growth. For the most recent quarter, Microsoft reported $45,2 billion in capital expenditures and leases. She also said that capital spending would accelerate in the second half of the fiscal year.
IREN said its AI revenue more than doubled from the previous quarter to $200 million. Its shares rose 16% on Friday. Co-CEO Daniel Roberts told CNBC that there is a difference between the picture in public markets and what the company sees from its customers. He added on the earnings call that investors are now looking not just at the size of a deal, but also at whether it can be executed, financed and operated profitably. CoreWeave and Nebius are scheduled to report results next week.
The case of Nscale and the origin of partnerships
Microsoft has already pulled out of an Nscale facility in England. Darren Hardman, Microsoft’s head of the UK and Ireland, told CNBC in October that the decision was related to Nscale’s ability to secure access to electricity. The Financial Times reported this week that Microsoft has also decided not to renew its contract with the company in Texas.
Nscale filed for a public listing in mid-September but has not updated its prospectus since. In its initial public offering filing, it said it expects Microsoft to be a significant customer in the future.
Microsoft turned more to neocloud providers after the launch of ChatGPT in 2022, when demand for GPUs skyrocketed. That's when it struck a deal with CoreWeave, a privately held startup with roots in cryptocurrency mining. When it went public last year, CoreWeave said 62% of its revenue for 2024 came from Microsoft.
Initially, OpenAI used Azure exclusively. Cloud providers it now uses also include Amazon, Cerebras, CoreWeave, Google, and Oracle.
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