Nebius tests the neocloud playbook with $40 billion in planned spending
Nebius plans to fund its $40 billion AI infrastructure expansion through customer prepayments and loans, even as delays at a Microsoft data center raise questions about its financing model.
In the third quarter, Nebius, a neocloud company, announced plans to spend $40 billion on projects in 2027, exceeding Wall Street's expectations. However, the ambitious project plan is facing challenges. To fund the buildout, Nebius plans to rely on customer pre-payments and loans backed by customer contracts. CEO Arkady Volozh acknowledged the difficulty of scaling up, stating that delays are common in the industry.
This strategy becomes risky if projects face delays or cancellations. The announcement follows reports that Microsoft is lessening its interest in neocloud deals that fall behind schedule. Nebius, whose financing strategy increasingly depends on repayments, is concerned about potential delays. One major customer, Microsoft, is paying for AI computing capacity at a Vineland, New Jersey data center, which is behind schedule.
The contract is worth up to $19.4 billion, but only half of the capacity is expected to be delivered by the end of 2026, with the rest arriving in Q2 2027. The delay is due to DataOne, the third-party operator, switching to Bloom Energy fuel cells faster than anticipated. New Jersey regulators fined DataOne $1.1 million for violating federal gas generator regulations, and the company faces a noise-complaint lawsuit.
If Microsoft terminates affected services due to missed deadlines, it will incur financial penalties. Nebius expects to break even on a pre-tax basis by the fourth quarter of 2027 and expects 2027 revenue to be between $12 and $13 billion.
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