Microsoft faced significant challenges in its AI infrastructure spending during the last quarter, leading to a $5 billion shortfall compared to expectations. Chief Financial Officer Amy Hood highlighted that delays from third-party cloud providers played a major role in this underperformance. Consequently, Microsoft adjusted its annual capital expenditure forecast downward by $5 billion.
This update affected neocloud stocks, raising concerns about their ability to live up to large-scale promises. Although Microsoft did not specify which providers were involved, satellite data analysis by research firm Aterio points to two critical projects: Iren and Nebius.
Delays in Data Center Projects
In Texas, IREN is engaged in a $9.7 billion agreement with Microsoft to construct four data centers. Aterio’s satellite images from October 21 showed that one facility, Horizon 4, was lacking essential backup power generators and cooling systems, causing it to risk missing its end-of-year delivery deadline. Earlier delays in equipment availability had already postponed the completion of Horizon 1, which Microsoft received in August.
Meanwhile, New Jersey hosts the second project with DataOne, working on behalf of Nebius under a $17.4 billion deal. Aterio noted that about 140 megawatts of this project’s capacity might get deferred to 2027. Initially, DataOne had difficulties getting generator permits, and the decision to switch to fuel cells brought further regulatory setbacks, resulting in a $1 million fine for permit violations.
Broader Industry Challenges
These delays reflect wider problems in the data center construction sector. For instance, Microsoft recently ended a deal with another neocloud, Nscale, citing power-supply delays. Research firm Currence suggests that 30% to 50% of the planned data center capacity expected to be operational this year might face postponements into 2027 or beyond due to power and other construction issues.
A Microsoft representative noted that the company’s approach to data infrastructure emphasizes flexibility, integrating its own data centers, leased sites, and third-party facilities.
Requests for comments from IREN and DataOne were declined, while Nebius did not respond to inquiries.
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