Nebius This “neocloud” company disclosed during its third-quarter earnings conference call on Thursday that it plans to invest $40 billion in capital expenditures in 2027, far exceeding Wall Street's previous expectations. This is an ambitious plan, but it is based on a series of projects that are still in progress, and cracks have already begun to appear in these projects.
Nebius plans to finance its expansion through customer prepayments and loans supported by customer contracts – essentially using the future value of its data centers to fund the construction. However, if these projects are hindered by delays or cancellations, this strategy may pose risks.
It is not easy to build on such a scale, and delays are currently also a part of our industry.CEO Arkady Volozh stated during the financial report conference call on Thursday."We too cannot escape it."
Not long before the release of this financial report, there were reports that Microsoft was cooling down on those neocloud transactions that failed to be delivered on time. For companies like Nebius, this becomes a problem, as their financing strategy relies increasingly on cash receipts. The reason is that if a company cannot put production capacity into operation on time, costs will continue to accumulate, while revenue will be delayed.
One of Microsoft, Nebius,'s largest customers, is paying for the AI computing power of a data center in Vineland, New Jersey. However, this project is now several months behind schedule. The contract amount with Microsoft can reach up to $19.4 billion, but there have already been delays in delivery timelines. Currently, only just over half of the Microsoft-related capacity that was planned to be delivered by the end of this year has been delivered, with the remaining portion to be delivered in the second quarter of 2027.
Chief Product and Infrastructure Officer Andrey Korolenko stated that the reason for the delay was that the third-party operator DataOne of the site "decided to gradually stop temporary power generation faster than expected," as the site was transitioning to Bloom Energy fuel cells.
However, this conversion was not entirely a voluntary choice. In August, an investigative website Floodlight discovered that at least 45 natural gas generators were in operation at the DataOne site, despite the site not having any permits to operate such generators. Subsequently, New Jersey's regulatory authorities fined the DataOne facility $1.1 million for using these generators, determining that their use violated federal laws.
DataOne is also facing noise complaints from nearby residents, with the plaintiffs claiming that the data center continuously emits a buzzing sound.
According to the summary of their contract with Microsoft provided by Nebius, if the delivery is not completed on time and no alternative capacity is provided, Microsoft may terminate the affected services after a grace period. The related phased deployments were originally planned to be completed in 2025 and 2026, so the delivery deadline for the second quarter of 2027 has clearly exceeded the original schedule. The contract also includes financial penalty clauses for delayed deliveries.
Nebius indicates that Microsoft 'has been involved in the planning process throughout.' Nebius does not state whether Microsoft has agreed to the new delivery date, but Microsoft has also not publicly canceled any projects yet.
TechCrunch indicates that comments have been sought from Nebius, Microsoft, and DataOne on this matter.
During the conference call, Nebius Chief Revenue Officer Marc Boroditsky stated that the company's transactions with Microsoft and Meta included large upfront payments, which were received well in advance of delivery. However, Bloomberg reported last week that Microsoft is strengthening its supervision of third-party operations projects, including those involving Nebius, IREN, and Nscale, and is considering whether it is worthwhile to sign new agreements. According to Bloomberg, Microsoft also sent employees to the New Jersey site.
Microsoft stated in its own quarterly financial report that due to delays by third parties, its capital expenditures were lower than expected. Clearly, if partners fail to fulfill their responsibilities, Microsoft does not rule out scaling back the original agreements. Bloomberg also reported that Microsoft will not exercise an option to double the scale of its agreement with Nscale for a data center in Texas; moreover, after delays in power supply, Microsoft no longer serves as the anchor customer for the Essex site in the Nscale project.
Nebius indicates that the delays it faced came from sites that were not under its control, while the data centers it built itself went live on time or even ahead of schedule. Nebius states that these self-built projects will provide for most of its new production capacity in 2027. Boroditsky indicates that the upfront payments associated with the new contracts signed by the company in the third quarter are sufficient to cover the construction costs of the corresponding production capacity. Nebius ended this quarter with $7.4 billion in cash on hand.
The company expects that customer prepayments, combined with asset-backed financing supported by investment-grade contracts, can cover up to 85% of the capital expenditures of $40 billion to $45 billion for the year 2027. Chief Financial Officer Maria Del Dado Alonso Sanchez specifically mentioned that contracts with Microsoft and Meta can be financed in this manner. Boroditsky also stated that Nebius can “use prepayments to meet any additional cash needs.”
Nebius expects revenue to reach $12 billion to $13 billion in 2027, and indicates that it is anticipated to achieve pre-tax break-even in the fourth quarter.
Nebius announced third-quarter revenue of $981 million, a year-on-year increase of 571%. Approximately one-third of this revenue came from a one-time payment related to a new collaboration model. Nebius lowered its revenue forecast for 2026 by $200 million to $3 billion, due to delays in third-party sites, including the New Jersey project. The stock closed down 17% on that day.
