In Thursday’s third-quarter earnings release, neocloud company Nevius unveiled a $40 billion 2027 spending plan, far exceeding Wall Street expectations. It’s an ambitious plan, but it builds on a series of planned projects that are already showing cracks.
Nebius plans to rely on customer upfront payments and loans backed by customer contracts to finance construction, essentially using the future value of the data center to fund construction. But if these projects stall due to delays or cancellations, it can be a risky strategy.
“Building at this scale is difficult and delays are part of the current industry,” CEO Arkady Volozh said on an earnings call Thursday. “We are not immune.”
The earnings announcement comes on the heels of reports that Microsoft is cooling neocloud deals that aren’t delivered on time. That’s a problem for companies like Nevius, whose financing strategy increasingly relies on repayments. If you don’t reach capacity on time, your costs will continue to rise while your revenue declines.
One of Nebius’ biggest customers is Microsoft, which is paying for AI computing power at its Vineland, New Jersey, data center, but is several months behind schedule. Nebius’ deal with Microsoft, worth up to $19.4 billion, is already overdue. Currently, just over half of Microsoft’s production capacity is scheduled for delivery by the end of the year, with the remainder expected to be delivered in Q2 2027.
Chief product and infrastructure officer Andrei Korolenko said the reason for the delay was that the site’s third-party operator, DataOne, had “decided to scale back temporary power generation sooner than expected” as the site switches to Bloom Energy fuel cells.
Still, the transition wasn’t entirely by choice. In August, research site Floodlight identified at least 45 natural gas generators operating at the DataOne site, even though the generators were not licensed to operate. New Jersey regulators have fined the DataOne facility $1.1 million for using generators that violate federal law.
Data One is also facing a noise complaint lawsuit from nearby residents over the constant hum allegedly emanating from the data center.
According to Nebius’ Microsoft contract summary, Microsoft may terminate affected services after a grace period if replacement capacity is not provided after the deadline. The tranche was originally scheduled to be deployed in 2025 and 2026, so the Q2 2027 delivery date is well beyond that window. The contract also includes financial penalties for late delivery.
Nebius said Microsoft “has been involved in the planning process.” Nebius wouldn’t say whether Microsoft has agreed to a new date, but Microsoft hasn’t canceled anything publicly.
TechCrunch has reached out to Nebius, Microsoft, and DataOne for comment.
Mark Boroditsky, Nebius’ chief revenue officer, said on a conference call that the company’s deals with Microsoft and Meta both involved large upfront payments that arrived well in advance of delivery. But Bloomberg reported last week that Microsoft is increasing its oversight of projects run by third parties such as Nebius, IREN and Nscale, and is debating whether it’s worth signing new contracts. According to Bloomberg, Microsoft also sent employees to its New Jersey location.
Microsoft noted in its quarterly earnings report that capital spending was lower than expected due to third-party delays. It is clear that the company is willing to walk out of a planned agreement if its partners do not meet their share of the bargain. Bloomberg also reported that Microsoft did not take advantage of the option to more than double the Nscale contract for its Texas data center, and recently quit being an anchor customer for Nscale’s planned Essex site following power delays.
Nevius said the delays the company is facing are coming from sites it doesn’t control, and that the data centers it builds are coming online on or ahead of schedule. These facilities will provide most of the new production capacity starting in 2027, Nevius said. New contracts signed in the third quarter included upfront payments that were sufficient to cover the underlying cost of building capacity, Boroditsky said. Nebius ended the quarter with $7.4 billion in cash.
Total upfront payments and asset-backed financing of investment grade contracts are expected to cover up to 85% of the $40 billion to $45 billion in 2027 capital expenditures. CFO Maria Del Dado Alonso Sanchez named Microsoft and Meta as deals that could be funded in this way. Boroditsky also said Nevius may “leverage upfront payments to cover additional cash needs.”
Nevius said it expects sales of $12 billion to $13 billion in 2027 and expects to break even on a pre-tax basis by the fourth quarter.
Nebius reported third-quarter sales of $981 million, an increase of 571% year-over-year. About a third of that was one-off payments related to new partnership models. Nevius lowered its 2026 revenue forecast by $200 million to $3 billion, citing delays to third-party sites such as New Jersey. The stock ended the day down 17%.
If you buy through links in our articles, we may earn a small commission. This does not affect editorial independence.
