Microsoft trims neocloud partner list to focus on own data centers

Microsoft is narrowing its list of neocloud partners as it shifts emphasis toward its own data-center footprint and a smaller set of strategic suppliers, according to people familiar with the discussions. The company, which has previously worked with providers such as CoreWeave, Nebius, Chronoscale, IREN, Lambda, Nscale and Oracle, is still assessing which relationships to maintain and which to discontinue. A Microsoft spokesperson said the firm’s infrastructure strategy is "built on flexibility and choice" and that it regularly reviews investments against customer demand, adjusting plans as circumstances change.

The move comes amid broader pressure on the AI-cloud market, where rising borrowing costs and heavy debt loads have strained many neocloud operators. Shares of CoreWeave, Nebius and IREN have fallen sharply in recent weeks. Industry analysts have noted that a large number of neoclouds may not survive long-term.

In its latest earnings call, Microsoft finance chief Amy Hood said some cloud contracts involving graphics processing units have been delayed until the first half of 2027, affecting Azure growth. The company reported $45.2 billion in capital expenditures and finance leases for the quarter and expects spending to accelerate in the second half of the fiscal year.

IREN co-CEO Daniel Roberts told CNBC that capital markets have become more selective, with investors focusing on delivery, financing and profitability of contracts. He also noted that AI revenue at IREN more than doubled from the prior quarter to $200 million.

Microsoft has already ended work with U.K.–based neocloud Nscale, citing the provider’s difficulty securing electricity, and decided not to renew a contract with Nscale in Texas, according to the Financial Times. The company’s earlier expansion into neoclouds followed the 2022 launch of ChatGPT, which spurred demand for GPU capacity.

The spokesperson added that reviewing neocloud investments is "a normal and responsible way to manage large, complex infrastructure projects" and that the pace of new agreements reflects current needs.