News

Microsoft Signs $17.4 Billion AI Infrastructure Deal with Nebius

• By John K. Waters
• 09/09/2025

Microsoft Corp has signed a five-year agreement with Nebius Group to provide AI computing infrastructure worth at least $17.4 billion, addressing capacity constraints in the technology giant's cloud services division.

The deal, announced Monday, could reach $19.4 billion if Microsoft exercises options for additional services. Nebius shares surged 53% in after-hours trading following the announcement.

The agreement reflects Microsoft's struggle to meet surging demand for artificial intelligence cloud services. Microsoft Chief Financial Officer Amy Hood told investors in July the company expected to "remain capacity constrained" through the end of 2025.

Nebius will provide dedicated GPU infrastructure capacity from a new data center in Vineland, New Jersey, beginning later this year. The Amsterdam-based company specializes in providing Nvidia graphics processing units and AI cloud services to developers and businesses.

The partnership allows Microsoft to expand cloud capacity without additional capital expenditures on its balance sheet. Instead, Nebius will finance data center construction through cash flow from the contract and debt secured against the Microsoft agreement.

"We believe the trend is clear — capex is out and off-balance-sheet arrangements with external debt are the way forward," D.A. Davidson analyst Gil Luria wrote in a research note.

The deal caps a significant transformation for Nebius CEO Arkady Volozh, who previously built Russian technology company Yandex before the 2022 Ukraine invasion upended his international expansion plans. The European Union sanctioned Volozh but later had restrictions lifted after condemning the invasion and orchestrating Nebius's separation from Yandex's Russian operations.

Nebius emerged from the Yandex restructuring and resumed trading on Nasdaq in October 2024. The company's shares have gained 350% since returning to public markets.

The Microsoft deal positions Nebius as a significant competitor to CoreWeave, another specialized AI infrastructure provider that also serves major technology companies. CoreWeave was valued at $46 billion compared to Nebius's approximately $15 billion market capitalization before Monday's announcement.

Microsoft has previously contracted with multiple providers to address capacity shortages, including agreements with CoreWeave and commitments to provide computing power to OpenAI, the maker of ChatGPT.

The agreement reflects broader industry trends as technology companies seek alternatives to traditional capital-intensive data center expansion. Companies are increasingly turning to specialized providers that can deploy AI infrastructure more quickly than internal development.

Nebius indicated it expects to announce additional contracts with other major technology companies and AI laboratories, suggesting the neocloud infrastructure model may gain wider adoption among hyperscale providers facing similar capacity constraints.

Microsoft Corp has signed a five-year agreement with Nebius Group to provide AI computing infrastructure worth at least $17.4 billion, addressing capacity constraints in the technology giant's cloud services division.

The deal, announced Monday, could reach $19.4 billion if Microsoft exercises options for additional services. Nebius shares surged 53% in after-hours trading following the announcement.

The agreement reflects Microsoft's struggle to meet surging demand for artificial intelligence cloud services. Microsoft Chief Financial Officer Amy Hood told investors in July the company expected to "remain capacity constrained" through the end of 2025.

Nebius will provide dedicated GPU infrastructure capacity from a new data center in Vineland, New Jersey, beginning later this year. The Amsterdam-based company specializes in providing Nvidia graphics processing units and AI cloud services to developers and businesses.

The partnership allows Microsoft to expand cloud capacity without additional capital expenditures on its balance sheet. Instead, Nebius will finance data center construction through cash flow from the contract and debt secured against the Microsoft agreement.

"We believe the trend is clear — capex is out and off-balance-sheet arrangements with external debt are the way forward," D.A. Davidson analyst Gil Luria wrote in a research note.

The deal caps a significant transformation for Nebius CEO Arkady Volozh, who previously built Russian technology company Yandex before the 2022 Ukraine invasion upended his international expansion plans. The European Union sanctioned Volozh but later had restrictions lifted after condemning the invasion and orchestrating Nebius's separation from Yandex's Russian operations.

Nebius emerged from the Yandex restructuring and resumed trading on Nasdaq in October 2024. The company's shares have gained 350% since returning to public markets.

The Microsoft deal positions Nebius as a significant competitor to CoreWeave, another specialized AI infrastructure provider that also serves major technology companies. CoreWeave was valued at $46 billion compared to Nebius's approximately $15 billion market capitalization before Monday's announcement.

Microsoft has previously contracted with multiple providers to address capacity shortages, including agreements with CoreWeave and commitments to provide computing power to OpenAI, the maker of ChatGPT.The agreement reflects broader industry trends as technology companies seek alternatives to traditional capital-intensive data center expansion. Companies are increasingly turning to specialized providers that can deploy AI infrastructure more quickly than internal development.

Nebius indicated it expects to announce additional contracts with other major technology companies and AI laboratories, suggesting the neocloud infrastructure model may gain wider adoption among hyperscale providers facing similar capacity constraints.