Neocloud Stocks Slip as Microsoft Capex Miss Signals Slower Data Center Buildouts

Shares of neocloud providers including CoreWeave and Nebius fell almost 5% in extended trading Wednesday after Microsoft reported quarterly capital expenditures and finance leases of $45.2 billion, up about 30% year over year but below the $50.7 billion analysts expected, according to StreetAccount.

The shortfall points to infrastructure partners taking longer to deliver data center capacity. Microsoft leans heavily on neoclouds for capacity as it expands its artificial intelligence infrastructure, including a nearly $20 billion deal with Nebius late last year for compute through the 2030s; CoreWeave counts Microsoft among its top customers. IREN dropped about 3%.

Alphabet also reported capex below estimates at $51.36 billion versus $55.09 billion expected. The neocloud group has had a rocky stretch, with rising interest rates raising concerns that future debt raises will be too costly and lenders may pull back.

Microsoft said Azure revenue jumped 48% from a year earlier, outpacing capex growth, which it attributed to timing differences between receiving goods and payment and a lower mix of finance leases.

Over the weekend, SpaceX CEO Elon Musk predicted on X that more than 200 neocloud companies will collapse, saying debt markets have almost entirely shut off access to money for companies without substantial revenue independent of AI data centers. Last Monday, Gartner analysts told CNBC they predict 80% of neocloud companies will be absorbed or cease operations by 2030.

After a steep plunge this month, neoclouds had been recovering modestly this week, with CoreWeave up 18% over the prior three trading days. Wolfe Research analysts said Tuesday they see the stock rebounding into the mid-$70s; it closed Wednesday at $63.93.

Earlier Wednesday, Oracle issued a strong long-term revenue forecast and said it will return to positive free cash flow in the second half of next fiscal year, sending its stock up 11% in regular trading before a 3% retreat following Microsoft's report.

Source: CNBC