News
Microsoft Strikes $17.4 Billion Deal with Nebius to Boost AI Cloud Capacity
- By John K. Waters
- 09/10/2025
Microsoft has entered into a five-year agreement with Nebius Group to secure artificial intelligence computing infrastructure valued at $17.4 billion, a move aimed at easing strain on its cloud services.
The deal, announced Monday, could reach $19.4 billion if Microsoft exercises options for additional services. Nebius shares surged 53% in after-hours trading following the announcement.
The contract, announced Monday, includes options that could raise its total value to $19.4 billion. Shares of Nebius surged 53 percent in after-hours trading following the news. Microsoft Chief Financial Officer Amy Hood told investors in July the company expected to "remain capacity constrained" through the end of 2025.
Nebius will provide dedicated GPU infrastructure capacity from a new data center in Vineland, New Jersey, beginning later this year. The Amsterdam-based company specializes in providing Nvidia graphics processing units and AI cloud services to developers and businesses.
The partnership allows Microsoft to expand cloud capacity without additional capital expenditures on its balance sheet. Instead, Nebius will finance data center construction through cash flow from the contract and debt secured against the Microsoft agreement.
"We believe the trend is clear — capex is out and off-balance-sheet arrangements with external debt are the way forward," D.A. Davidson analyst Gil Luria wrote in a research note.
The deal caps a significant transformation for Nebius CEO Arkady Volozh, who previously built Russian technology company Yandex before the 2022 Ukraine invasion upended his international expansion plans. The European Union sanctioned Volozh but later had restrictions lifted after condemning the invasion and orchestrating Nebius's separation from Yandex's Russian operations.
Nebius emerged from the Yandex restructuring and resumed trading on Nasdaq in October 2024. The company's shares have gained 350% since returning to public markets.
The Microsoft deal positions Nebius as a significant competitor to CoreWeave, another specialized AI infrastructure provider that also serves major technology companies. CoreWeave was valued at $46 billion compared to Nebius's approximately $15 billion market capitalization before Monday's announcement.
Microsoft has previously contracted with multiple providers to address capacity shortages, including agreements with CoreWeave and commitments to provide computing power to OpenAI, the maker of ChatGPT.
The agreement reflects broader industry trends as technology companies seek alternatives to traditional capital-intensive data center expansion. Companies are increasingly turning to specialized providers that can deploy AI infrastructure more quickly than internal development.
Nebius indicated it expects to announce additional contracts with other major technology companies and AI laboratories, suggesting the neocloud infrastructure model may gain wider adoption among hyperscale providers facing similar capacity constraints.
About the Author
John K. Waters is the editor in chief of a number of Converge360.com sites, with a focus on high-end development, AI and future tech. He's been writing about cutting-edge technologies and culture of Silicon Valley for more than two decades, and he's written more than a dozen books. He also co-scripted the documentary film Silicon Valley: A 100 Year Renaissance, which aired on PBS. He can be reached at [email protected].