Neocloud stocks fall after Microsoft capex misses estimates

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Neocloud stocks fall after Microsoft capex miss

Highlights

CoreWeave and Nebius shares drop nearly 5%, and IREN declines about 3% after Microsoft reports quarterly capex of $45.2 billion, missing the $50.7 billion estimate.
Rising interest rates and a near-shutdown of debt markets raise concerns over neocloud sector durability, with Gartner predicting 80% of companies will be absorbed or cease operations by 2030.
Microsoft's Azure revenue jumps 48% year-over-year, while broader sector volatility remains after Oracle's strong forecast briefly boosts infrastructure sentiment before being offset by capex disappointments.

Capex figures revive delivery and demand concerns

As reported by CNBC, shares of neocloud companies including CoreWeave, Nebius and IREN drop in extended trading after Microsoft reports quarterly capital expenditures and finance leases of $45.2 billion, below the $50.7 billion average analyst estimate compiled by StreetAccount.

Microsoft says the lower-than-expected figure points to infrastructure partners taking longer to deliver data center capacity, even as the company remains heavily dependent on neocloud providers to expand its artificial intelligence footprint. The software group signs a nearly $20 billion deal with Nebius at the end of last year for compute through the 2030s, and it is also a major customer of CoreWeave.

CoreWeave and Nebius each fall almost 5% after Microsoft's report, while IREN declines about 3%. Alphabet also reports capital spending that misses expectations on Wednesday, with capex of $51.36 billion against analyst forecasts of $55.09 billion.

Funding pressure clouds sector outlook

Recent market volatility has already unsettled the sector, with rising interest rates fueling worries that future debt financing could become more expensive and less available. Microsoft's earnings nevertheless show Azure revenue jumping 48% from a year earlier, outpacing concern over the latest spending miss but not preventing a negative market reaction in neocloud shares.

Warnings about the sector's durability have intensified in recent days. SpaceX CEO Elon Musk says over the weekend that more than 200 neocloud companies will collapse, writing on X that debt markets have nearly shut off funding for companies without meaningful revenue outside AI data centers, while Gartner analysts tell CNBC last Monday that by 2030, 80% of neocloud companies will either be absorbed or cease operations.

Even so, some stocks in the group have recently shown signs of recovery. CoreWeave rises 18% over the previous three trading days before Wednesday and closes at $63.93, while Wolfe Research says in a Tuesday note that it sees the stock rebounding into the mid-$70s. Broader infrastructure sentiment also gets a lift earlier on Wednesday after Oracle issues a strong long-term revenue forecast and says it will return to positive free cash flow in the second half of its next fiscal year, though its shares later give back ground after Microsoft's report.

Our earlier coverage of the U.S. AI data center buildout highlighted that soaring funding costs, construction delays, and power constraints are increasingly challenging developers’ ability to deliver new capacity on schedule. We noted that only a fraction of planned projects looked realistic, with examples such as CoreWeave share weakness and project cost overruns underscoring the risks to investor confidence and long-term economics.

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