Microsoft is tightening oversight of some data center projects from the neocloud providers Nebius, IREN and Nscale, Bloomberg News reported on 5 November, citing people familiar with the matter, as summarised by Reuters. According to the report, Microsoft is stepping away from projects it deems risky and is debating internally whether to sign new neocloud deals.
Those three companies have put a value on their Microsoft contracts in SEC filings: up to about $43.8 billion at Nscale, up to about $17.4 billion at Nebius and about $9.7 billion at IREN, up to $70.9 billion together, by our arithmetic in our explainer on how Microsoft rents AI capacity.
Business Pill · Concentration
A one-minute explainer of concentration risk, when one customer or supplier carries much of a business. It teaches the general idea only and does not discuss Microsoft or the neoclouds.
The key insight: Bloomberg reports that Microsoft is tightening oversight of some data center projects from Nebius, IREN and Nscale, three neoclouds whose disclosed Microsoft contracts add up to as much as $70.9 billion by our arithmetic. In Nasdaq’s quotes at 12:34 p.m. ET, Nebius was down 16.24% and IREN 15.98%.
Update, 6 Nov, 12:00 UTC: the official 5 November closes. The quotes above were taken at 12:34 p.m. ET on 5 November. At the close that day, Nebius ended at $120.37, down 14.94% from its 4 November close of $141.52, and IREN ended at $18.03, down 16.95% from $21.71, according to Nasdaq’s historical price data (Nebius, IREN) (percentages are our arithmetic). Nebius traded 48.3 million shares, about 2.1 times the 23.0 million of the session before (our arithmetic).
IREN reported its fiscal first-quarter results after the 5 November close, so its later moves also reflect those results, not only the Microsoft report.
Bloomberg’s story, by Brody Ford, was published at 15:42 UTC under the headline “Microsoft Sours on Neoclouds IREN, Nebius, Nscale on Delays, Costs”. Its opening says Microsoft “helped create the ‘neocloud’ boom, signing tens of billions of dollars in contracts with upstart data center operators”, and continues: “Now, as neocloud companies grapple with delays, regulatory snags and high costs, some key Microsoft leaders have developed a case of buyer’s remorse.”
Reuters’ summary of the report adds these points:
Microsoft is focused on expanding its own data centers rather than adding neocloud deals, though it has not fully ruled them out, the report said.
Microsoft will not exercise the option to more than double the size of its existing agreement with Nscale to rent more computing power at a Texas data center.
Microsoft pulled out weeks ago of a deal to anchor Nscale’s flagship data center in Loughton, Essex, after power connection delays pushed supply into the 2030s.
Investors and data center developers face rising uncertainty in Texas after Gina Hinojosa won the governor’s race; she has said she would ban new projects until state lawmakers pass rules for the industry.
Microsoft, Nebius, IREN and Nscale did not immediately respond to Reuters’ requests for comment.
Share-price change against the 4 November close at 12:34 p.m. ET (17:34 UTC) on 5 November 2026, from Nasdaq real-time quotes. The $70.9 billion is the combined value of Microsoft contracts that Nscale, Nebius and IREN disclosed in SEC filings, our arithmetic.
Reuters said shares of neocloud firms fell in afternoon trading, with Nebius and IREN down more than 13% and CoreWeave down 11%. In Nasdaq’s real-time quotes at 12:34 p.m. ET (17:34 UTC), against the 4 November close:
Update, 6 Nov, 19:45 UTC: Microsoft said to shrink its neocloud roster.CNBC reported on 6 November, citing people familiar with the matter, that Microsoft is looking to shrink the number of neoclouds it counts as partners, keeping some key suppliers while it builds out its own infrastructure. CNBC says Microsoft has signed deals with half a dozen neoclouds in recent years, including CoreWeave and Nebius, and that CoreWeave said in its IPO filing that 62% of its 2024 revenue came from Microsoft. A Microsoft spokesperson told CNBC its approach to reviewing neocloud investments is “a normal and responsible way to manage large, complex infrastructure projects,” and that “the pace of our new agreements reflects what we need today.”
CNBC also quotes IREN co-CEO Daniel Roberts on the earnings call: “Capital markets have become more selective in the last few weeks, and the questions have undoubtedly moved from how big the contract is to whether it can be delivered, financed, and run at a profit.” CNBC names no neocloud being dropped beyond its earlier report on Nscale, and gives no dollar figure for the commitments under review. The same day, Microsoft was reported to be winding down an Oracle rental deal; see our Oracle piece. Related: how Microsoft rents AI capacity and the neocloud debt load.
As we read the Reuters summary, two of the specific items concern Nscale: the Texas option Microsoft will not exercise and the Essex anchor deal it left weeks ago.
As we read the contract figures, Nscale’s up to $43.8 billion is the largest of the three, about 62% of the $70.9 billion, by our arithmetic.
As we read the report, the stated choice is between building Microsoft’s own data centers and adding neocloud deals; Bloomberg says new deals have not been fully ruled out.
Bloomberg News, 5 November 2026
“Now, as neocloud companies grapple with delays, regulatory snags and high costs, some key Microsoft leaders have developed a case of buyer’s remorse.”
Three Implications
FOR NSCALEMicrosoft will not exercise its Texas expansion option and left the Loughton, Essex anchor deal weeks ago, according to the report.
FOR NEBIUS AND IREN Nebius was down 16.24% and IREN 15.98% at 12:34 p.m. ET against the 4 November close, in Nasdaq’s quotes.
FOR MICROSOFT The report says it is focused on expanding its own data centers rather than adding neocloud deals.
The analysis says: “The structural bottleneck isn’t computing, it’s electrons.”
As we read it, the Essex item in the Reuters summary is a power case: supply was pushed into the 2030s by power connection delays. The framework predates this report and does not discuss Microsoft’s neocloud deals.
What Is Not Established
We have read Bloomberg’s headline and first two paragraphs, and Reuters’ summary of the full report; we have not read the rest of Bloomberg’s article. The report, in what we read, does not list which projects Microsoft deems risky or put a dollar figure on them. None of the four companies had responded to Reuters’ requests for comment at the time of its report. The $70.9 billion is the contract value the three neoclouds disclosed, not an amount at risk.
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Bloomberg reports that Microsoft is pulling back from neocloud projects it deems risky and weighing whether to sign new neocloud deals; Nebius, IREN and Nscale are three neoclouds whose disclosed Microsoft contracts add up to as much as $70.9 billion.
A note on sourcing. Microsoft’s plans are as reported by Bloomberg News (Brody Ford, 5 November 2026, 15:42 UTC), read through its first two paragraphs and Reuters’ full-text summary of the report. Share prices are Nasdaq real-time quotes at 12:34 p.m. ET. Contract values are from Nscale, Nebius and IREN SEC filings; the $70.9 billion total is our arithmetic.
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
