During its third-quarter earnings call on Thursday, the emerging cloud computing company Nebius unveiled a $40 billion capital expenditure plan through 2027—a figure that far exceeded Wall Street’s expectations. While the plan is ambitious, the projects it hinges upon have already begun to encounter difficulties.
Nebius intends to fund its infrastructure development through customer prepayments and loans secured against client contracts—essentially leveraging the future value of its data centers to finance their construction. However, should these projects stall due to delays or cancellations, this strategy could prove highly risky.
“Building on such a massive scale is extremely challenging, and our industry is currently grappling with widespread delays,” CEO Arkady Volozh stated during Thursday’s earnings call. “We are not immune to this.”
This update comes amid reports that Microsoft is scaling back its investment in cloud service projects that have failed to meet delivery timelines. This poses a significant challenge for companies like Nebius, whose financing models are increasingly dependent on timely project completion and subsequent payments. Failure to reach projected capacity on schedule leads to spiraling costs and declining revenue.
One of Nebius’s largest clients, Microsoft, has contracted for AI computing capacity at a data center in Vineland, New Jersey—a project that is now running several months behind schedule. While the contract with Microsoft is valued at $19.4 billion, delivery deadlines have already begun to slip. By the end of this year, only slightly more than half of the contracted computing capacity is expected to be delivered, with the remainder deferred until the second quarter of 2027.
According to Andrey Korolenko, Chief Product and Infrastructure Officer, the delays stem from a decision by the site’s third-party operator, DataOne, to “cease temporary power generation sooner than anticipated” as the facility transitions to using Bloom Energy fuel cells.
This transition, however, was not entirely voluntary. In August, the investigative news outlet Floodlight revealed that DataOne had been operating at least 45 natural gas-powered generators without the necessary permits. New Jersey regulators imposed a $1.1 million fine, determining that DataOne’s use of these generators violated federal law.
DataOne is also facing a lawsuit involving noise complaints from nearby residents, who allege that the data center emits a persistent humming sound.
According to an overview provided by Nebius regarding its contract with Microsoft, if the company fails to meet delivery deadlines—and cannot provide alternative capacity—Microsoft has the right to terminate the affected services once a grace period has expired. Since these services were originally scheduled for phased deployment throughout 2025 and 2026, a delivery date in the second quarter of 2027 falls well outside the initial timeframe. The contract also includes penalty clauses for delayed delivery.
Nebius stated that Microsoft has “been involved in the planning process.” While Nebius did not disclose whether Microsoft has agreed to the new timeline, Microsoft has not publicly canceled any of the planned activities.
TechCrunch has reached out to Nebius, Microsoft, and DataOne for comment.
During a conference call, Nebius Chief Revenue Officer Mark Boroditsky stated that the company’s agreements with Microsoft and Meta include substantial upfront payments, which were received well in advance of any project delivery. However, Bloomberg reported last week that Microsoft is tightening its oversight of third-party projects—including those involving Nebius, IREN, and Nscale—and is evaluating whether entering into new agreements remains worthwhile. Bloomberg also noted that Microsoft has dispatched staff to project sites in New Jersey.
In its quarterly earnings report, Microsoft indicated that its capital expenditures fell short of projections, citing delays on the part of third-party partners. It is clear that Microsoft will not hesitate to terminate existing agreements if its partners fail to meet their obligations. Bloomberg further reported that Microsoft has opted against exercising an option to more than double the scale of its agreement with Nscale for a data center in Texas; additionally, due to delays in power supply, Microsoft has recently ceased to be the anchor tenant for Nscale’s data center project in Essex County.
Nebius maintains that the delays it has encountered stem from sites beyond its control, whereas data centers built by the company itself have come online on or ahead of schedule. Nebius stated that these self-developed data centers will account for the majority of its new capacity starting in 2027. Boroditsky noted that new agreements signed in the third quarter include upfront payments sufficient to cover the construction costs for the associated capacity. As of the end of the third quarter, Nebius held a cash balance of $7.4 billion.
The company anticipates that the combination of upfront payments from investment-grade contracts and asset-backed financing will cover 85% of its projected $40 billion to $45 billion in capital expenditures for 2027. Chief Financial Officer Maria Del Dado Alonso Sanchez cited contracts with companies like Microsoft and Meta as examples of agreements that can be leveraged for such financing. Boroditsky added that Nebius could “utilize these upfront payments to address any additional cash requirements.” Nebius forecasts revenue of $12 billion to $13 billion by 2027 and expects to reach a break-even point (before tax) in the fourth quarter.
Nebius reported third-quarter revenue of $981 million, a 571% year-over-year increase. Approximately one-third of this figure consists of one-time payments linked to a new partnership model. The company has lowered its 2026 revenue projection by $200 million to $3 billion, citing delays in the progress of third-party projects, such as those in New Jersey. Its stock price closed down 17% for the day.