Nebius Shares Fall More Than 16% as Microsoft Tightens Scrutiny of Data Center Projects
Key Facts
Nebius shares fell more than 16% in afternoon trading on November 5 after Reuters reported that Microsoft had stepped up scrutiny of some data center projects run by emerging cloud computing providers, including Nebius, IREN and Nscale. Reuters cited a Bloomberg report and people familiar with the matter. That puts projects by the three companies under scrutiny as Microsoft reassesses how to secure the computing capacity needed for its expansion. Reuters said Microsoft is pulling back from projects it classifies as risky. The company is also discussing internally whether to sign new agreements with these providers.
The reported shift is linked to Microsoft’s preference for expanding data centers it owns rather than adding new agreements with emerging cloud computing companies. But the company has not ruled out such deals entirely, Reuters reported. A Microsoft spokesperson said its infrastructure approach is based on flexibility and a range of options, combining company-owned data centers, leased facilities and partnerships with outside providers. This mix indicates that partnerships remain among the company’s options, while individual projects are assessed for their risks and viability. The report did not announce the termination of Microsoft’s existing agreement with Nebius.
In a separate move involving Nscale, Reuters said Microsoft would not exercise an option that would have allowed it to more than double an existing agreement to lease additional computing capacity at a data center in Texas. Weeks earlier, the company had withdrawn from an agreement that would have made it the main tenant at Nscale’s project in Loughton, Essex. The withdrawal followed delays in connecting electricity that pushed the expected availability of power into the 2030s, according to the report. These decisions show that Microsoft’s review extends beyond negotiations over future deals to existing projects affected by execution and infrastructure risks. The moves coincided with a decline in sector shares in afternoon trading on November 5.
Concerns about projects’ ability to move forward come amid uncertainty in Texas, after Gina Hinojosa won the governorship. The governor-elect said she would block new projects until state lawmakers approve rules for the sector, Reuters reported. That political stance adds another factor to data center expansion decisions, alongside the power connection challenges faced by the Loughton project. In the broader market, Reuters reported separately that the Nasdaq Composite fell 5.5% on November 5 amid concerns that Democratic gains in the midterm elections could slow the expansion of AI infrastructure. The report also linked those concerns to smaller companies’ difficulty securing financing amid higher interest rates and tighter financial conditions.
On Nebius’s agreement with Microsoft, the company disclosed in September 2025 a contract to provide dedicated GPU capacity at its data center in Vineland, New Jersey, for five years. The contract’s estimated total value is about $17.4 billion through 2031, subject to services being available and delivered. The value could rise to about $19.4 billion if Microsoft buys additional services or capacity under the agreement. Nebius also said Microsoft can terminate the relevant GPU service if the company misses agreed delivery deadlines after a grace period and cannot provide replacement capacity. These terms put execution at the center of the commercial relationship, without in themselves meaning the existing agreement has been canceled.
In an earlier disclosure, Nebius said it had delivered the latest planned tranche of capacity to Microsoft and remained on track to deliver the remaining tranches under the contractual schedule. It also announced in July a secured debt facility worth about $775 million, backed by its deployed GPU infrastructure and contracted customer cash flows. The company said the facility, together with cash flows under the customer agreement, covered more than 100% of the capital expenditure required to deploy the relevant infrastructure. In its first-quarter update, it said it had met all capacity commitments to customers in its AI cloud and under its long-term strategic contracts, including its agreements with Microsoft and Meta. It kept its year-end connected power forecast at between 800 megawatts and 1 gigawatt, while expecting a significant increase in commissioned capacity during the third quarter.
Nebius will release its third-quarter 2026 financial results before the market opens on November 12, the company said. It is scheduled to hold a call to discuss the results the same day at 8:00 a.m. U.S. Eastern Time. The results will be the next milestone for investors tracking the company’s operational and financial progress amid scrutiny of data center projects. In its first-quarter update, Nebius had said it expected a significant increase in commissioned capacity during the third quarter. The company also maintained its year-end connected power target at 800 megawatts to 1 gigawatt.