Microsoft is tightening oversight of cloud computing startups known as Neoclouds. The move follows data center project delays and rising construction and operating costs. Its capital spending came in about US$5 billion below expectations in the third quarter.
Closer project review
Microsoft is increasing oversight of projects tied to IREN, Nebius, and Nscale. It is also reconsidering new agreements with outside cloud service providers. The IREN facility in Texas faced cable problems, an April generator fire, and late equipment in August.
Nscale pullback
Microsoft stepped back from some arrangements with Nscale. The startup faced electricity supply issues, including at a project in Lofton, UK. Microsoft also passed on a Texas expansion option that could have reached tens of billions of dollars, while the current deal stayed intact.
What Neoclouds provide
Neoclouds supply cloud infrastructure for AI applications. Their expansion requires large investments in data centers, chips, and electricity supplies. Microsoft is now more cautious about contracts with outside providers.
Microsoft and IREN met last week to discuss the Texas project. A revised schedule may delay some phases by several weeks or months. Microsoft is reviewing new outside cloud contracts with a focus on project readiness.
Read more: bloomberg.com