Neocloud Stocks Drop: Microsoft Misses Capex Forecast

CoreWeave and Nebius shares fell approximately 5% in extended trading on Wednesday. The drop followed Microsoft's disclosure that its quarterly capital expenditures and finance leases totaled $45.2 billion. That figure came in below the $50.7 billion average expected by analysts surveyed by StreetAccount.

Microsoft attributed the lower-than-expected spending to timing differences in the receipt of goods and a lower mix of finance leases. The company noted that Azure cloud revenue grew 48% year over year, outpacing the growth in capital spending. This divergence suggests that infrastructure partners are taking longer to deliver the data center capacity Microsoft requires for its artificial intelligence initiatives.

The results carry direct implications for neocloud firms that supply computing power to major tech companies. Nebius holds a nearly $20 billion contract with Microsoft for compute services through the 2030s. CoreWeave also lists Microsoft as one of its primary customers. The shortfall in spending signals that these partners may face delayed revenue recognition or slower capacity utilization than anticipated.

Alphabet also reported lower-than-expected infrastructure costs on Wednesday. The Google parent spent $51.36 billion on capital expenditures, missing the $55.09 billion analyst consensus. IREN shares declined by about 3% following the reports. The broader sector has faced headwinds in recent weeks, with rising interest rates fueling concerns about the cost of future debt financing.

Market sentiment has been volatile for neocloud stocks. Elon Musk, whose company SpaceX rents AI infrastructure to Anthropic and Google, predicted on X over the weekend that more than 200 neocloud companies will collapse. He cited a debt market that has largely cut off funding for companies lacking substantial independent revenue. Gartner analysts told CNBC on Monday that they expect 80% of neocloud firms to be absorbed or cease operations by 2030.

CoreWeave shares had risen 18% over the three trading days prior to the report, reaching a closing price of $63.93 on Wednesday. Wolfe Research analysts had projected the stock could rebound to the mid-$70s. Oracle provided a different perspective earlier in the day, issuing a strong long-term revenue forecast and stating it expects to return to positive free cash flow in the second half of next fiscal year. Oracle stock jumped 11% in regular trading before giving back 3% of those gains after Microsoft's earnings release.