CoreWeave and Nebius Slide After Microsoft Spending Falls Short of Forecasts

Shares of neocloud companies such as CoreWeave and Nebius fell in extended trading on Wednesday after Microsoft reported capital spending below Wall Street's expectations. The shortfall points to infrastructure partners taking longer to deliver data center capacity.

Microsoft said it spent $45.2 billion on capital expenditures and finance leases in its latest quarter, roughly 30% more than a year earlier. Analysts surveyed by StreetAccount had expected an average of $50.7 billion.

The result matters for neoclouds because Microsoft depends on them for computing capacity while it invests heavily in artificial intelligence infrastructure. At the end of last year, it signed a deal worth nearly $20 billion with Nebius for compute through the 2030s. It is also one of CoreWeave's top customers.

Microsoft also reported that revenue from its Azure cloud business jumped 48% from a year earlier, much faster than the growth in capital spending. The company attributed the gap to timing and lease mix. "Growth was higher than capital expenditures driven by timing differences between receipt of goods and payment and a lower mix of finance leases," Microsoft said in its earnings deck.

After the report, CoreWeave and Nebius each slid almost 5%, while IREN fell about 3%. Alphabet, the parent of Google, also posted spending below forecasts on Wednesday. Its capex came to $51.36 billion, compared with analyst expectations of $55.09 billion.

The sector has had a rocky few weeks. Rising interest rates have stirred worries that future debt raises will become too expensive and that lenders will pull back. Over the weekend, SpaceX CEO Elon Musk, whose company rents AI infrastructure to Anthropic and Google, predicted that more than 200 neocloud companies will collapse. He wrote on X that "debt markets have almost entirely shut off access to money for any company that doesn't have substantial revenue independent of AI data centers." Last Monday, Gartner analysts told CNBC they expect 80% of neocloud companies to be absorbed or to cease operations by 2030.

Neocloud shares had been staging a modest recovery this week after a steep plunge earlier in October. CoreWeave led the gains, rising 18% over the previous three trading days. Analysts at Wolfe Research wrote on Tuesday that they see the stock rebounding into the mid-$70s. It closed Wednesday at $63.93.

Earlier in the day, the infrastructure theme had received a lift from Oracle, which issued a strong long-term revenue forecast and said it expects to return to positive free cash flow in the second half of next fiscal year. Oracle's stock jumped 11% in regular trading, then gave back 3% after Microsoft's report.