Microsoft is shrinking its roster of neocloud partners. CNBC spoke on Friday with two people familiar with the plans: the company wants to narrow down to a few suppliers and build out its own data centers instead. Bloomberg reported the plans first.
The roster in question is long. Microsoft has worked with CoreWeave, Nebius, Chronoscale, IREN, Lambda and Nscale in recent years, plus Oracle. Two people told CNBC that the 2023 Oracle deal was not renewed. Which of the others get dropped is still open — Microsoft is in the evaluation stage.
A spokesperson said the infrastructure strategy is “built on flexibility and choice”: owned data centers, leased facilities and partnerships with third-party providers. The company reviews those investments regularly against customer demand.
Why that is dangerous for the landlords
An industry review now counts 323 neoclouds, and experts expect many of them not to survive. Shares of CoreWeave, Nebius and IREN have each lost roughly half their value over the past month, even after Friday’s rally.
How dependent these companies are on one customer is in their own filings. CoreWeave disclosed at its IPO that 62 percent of its 2024 revenue came from Microsoft. Nscale, which filed to go public in September and has not updated the prospectus since, wrote that it expects Microsoft to be a “significant customer in future periods.” Microsoft has already cut its work with Nscale and walked away from a site in England; Darren Hardman, Microsoft’s CEO for the UK and Ireland, named Nscale’s access to electricity as the reason back in October. This week the Financial Times reported that a Nscale contract in Texas will not be renewed either. I wrote about Nscale’s IPO and its 85 percent dependence on Anthropic and Microsoft in September.
At IREN you can date the delay precisely. The company handed data center capacity to Microsoft in August, Microsoft then asked for a networking equipment upgrade, and the infrastructure now comes online in January or February rather than this year. CFO Amy Hood said in October that some GPU cloud contracts had slipped into the first half of 2027, slowing Azure growth. The same quarter shows $45.2 billion in capital expenditures and finance leases on Microsoft’s books.
The question has changed
IREN co-CEO Daniel Roberts said one thing on the earnings call that sums up the year: capital markets have become more selective in recent weeks, and the question has moved from how big a contract is to whether it can be delivered, financed and run at a profit.
For Anthropic that is not a footnote. The company rents from neoclouds itself and, by its own account, needs up to $100 billion in debt in November. When the market’s largest tenant starts letting contracts lapse, it changes the interest rate every other tenant pays. CoreWeave and Nebius report next week. Those are the first real data points.