Microsoft spent $5 billion less than expected on AI infrastructure last quarter, with CFO Amy Hood attributing part of the shortfall to delays at third-party cloud providers. Satellite-image analysis suggests two data center projects linked to IREN and Nebius may miss their schedules, highlighting how power supply, equipment shortages and permitting are constraining AI capacity expansion. The delays also put the delivery timelines of large contracts with emerging cloud providers under investor scrutiny.
IREN’s Texas site still lacks backup generators and cooling equipment
IREN is building four data centers in Texas under a $9.7 billion agreement with Microsoft. Aterio said satellite images dated Oct. 21 showed that the building known as Horizon 4 was still missing backup generators and cooling equipment, potentially putting its planned year-end delivery at risk.
IREN has previously said equipment shortages delayed its first building, Horizon 1, which Microsoft accepted in August. Further slippage at Horizon 4 could affect the pace at which Microsoft adds computing capacity. Microsoft has not publicly linked its lower-than-expected spending to these specific projects.
Nebius-linked New Jersey capacity may slip to 2027
A separate project is being developed in New Jersey by data center operator DataOne for a $17.4 billion agreement between Nebius and Microsoft. Aterio said the project’s planned capacity of about 140 megawatts may not come online until 2027.
Daud Shiraz, a data analyst at Aterio, said the project initially ran into difficulties obtaining permits for generators. After switching to fuel cells, it faced further approval delays. In September, regulators fined DataOne $1 million for operating generators without the required permits. Available information does not establish whether the entire project will be delayed or only part of its capacity.
Power constraints weigh on other emerging cloud providers
Shares of emerging cloud providers, often called neoclouds, fell after Microsoft disclosed a $5 billion cut to its annual capital expenditure forecast, as investors reassessed whether these companies can deliver large AI infrastructure contracts on schedule. In October, Microsoft also canceled an agreement with another neocloud provider, Nscale, over power-related delays.
Research firm Currence estimates that about 30% to 50% of data center capacity scheduled to come online this year could be pushed to 2027 or later because of power shortages and other construction issues. A Microsoft spokesperson said the company’s infrastructure strategy prioritizes flexibility and combines owned data centers, leased facilities and third-party suppliers. IREN and DataOne declined to comment, while Nebius did not respond to a request for comment. The extent of any delays and the projects’ revised delivery dates remain unclear.