CoreWeave, Nebius Drop as Microsoft Misses Spending Targets

CoreWeave and Nebius shares declined by nearly 5% in extended trading on Wednesday following a report from Microsoft. The technology giant announced that its capital expenditures and finance leases totaled $45.2 billion for the latest quarter. This figure represented a 30% year-over-year increase but fell short of the $50.7 billion average forecast by analysts surveyed by StreetAccount.

The spending gap has drawn attention to the role of neocloud providers in Microsoft’s infrastructure strategy. The company relies on these partners to secure computing capacity for its artificial intelligence initiatives. A nearly $20 billion agreement with Nebius, signed at the end of last year, secures compute resources through the 2030s. CoreWeave also ranks among Microsoft’s largest customers for computing power.

Microsoft attributed the discrepancy between its revenue growth and capital spending to timing issues and lease structures. Azure cloud revenue rose 48% year-over-year, outpacing the growth in capital outlays. In its earnings materials, the company noted that growth exceeded expenditures due to timing differences between receiving goods and making payments, alongside a reduced mix of finance leases.

Other infrastructure stocks also reacted to the earnings data. IREN shares dropped approximately 3% after the release. Alphabet, the parent company of Google, also posted spending below forecasts on Wednesday. Its capital expenditures reached $51.36 billion, lagging behind the $55.09 billion expected by analysts.

The sector has faced recent volatility amid rising interest rates and concerns over debt costs. Elon Musk, whose company SpaceX rents AI infrastructure to Anthropic and Google, predicted on social media that more than 200 neocloud companies will fail. He stated that debt markets have largely cut off access to capital for firms lacking revenue independent of AI data centers. Gartner analysts told CNBC on Monday that they expect 80% of neocloud companies to be absorbed or cease operations by 2030.

Neocloud stocks had begun to recover earlier this week after a sharp decline in October. CoreWeave shares rose 18% over the three trading days preceding Wednesday. Wolfe Research analysts projected a rebound to the mid-$70s on Tuesday. The stock closed at $63.93 on Wednesday.

Oracle provided a contrasting signal earlier in the day. The company issued a strong long-term revenue forecast and indicated it expects to return to positive free cash flow in the second half of next fiscal year. Oracle shares surged 11% in regular trading before giving back 3% following Microsoft’s announcement.