Nebius Pledges $40 Billion Spend Amidst Infrastructure Delays

Nebius announced an ambitious $40 billion capital expenditure plan for 2027 during its third-quarter earnings call, a figure that significantly exceeded market expectations. The neocloud provider intends to finance this rapid infrastructure expansion by leveraging customer prepayments and loans secured against long-term service contracts. As detailed in reporting reviewed by The Scale Report, the strategy hinges on the future value of data centers that the firm is currently rushing to bring online.

Operational Challenges and Regulatory Scrutiny

The company is grappling with significant setbacks at a facility in Vineland, New Jersey, operated by third-party firm DataOne. Andrey Korolenko, chief product and infrastructure officer at Nebius, attributed these delays to the premature decommissioning of temporary power generators. However, the site has been plagued by legal issues, including a $1.1 million fine from New Jersey regulators following an investigation by Floodlight that revealed the unauthorized use of natural gas generators. Residents have also initiated a lawsuit against the facility citing noise pollution.

Strained Ties with Microsoft

Microsoft remains one of the largest customers for Nebius, with a contract valued at $19.4 billion. Due to the issues in New Jersey, capacity delivery that was originally scheduled for 2025 and 2026 is now spilling into the second quarter of 2027. Arkady Volozh, chief executive of Nebius, acknowledged the difficulty of the buildout, stating that delays are an industry-wide reality. While Microsoft has not formally terminated the agreement, the tech giant has reportedly increased oversight of Nebius and other third-party partners as it re-evaluates its capital commitments.

Financial Outlook and Strategy

To balance its books, Maria Del Dado Alonso Sanchez, chief financial officer of Nebius, noted that the company expects prepayments and asset-backed financing to cover up to 85% of its 2027 expenditure. Marc Boroditsky, chief revenue officer, added that current contracts with Microsoft and Meta remain central to this model. Despite reporting a 571% year-over-year revenue increase for the third quarter, shares fell 17% as the company lowered its 2026 revenue guidance by $200 million.

The reliance on future cash flows to build immediate infrastructure represents a high-stakes gamble in a cooling market for third-party AI capacity. Should Nebius fail to meet its revised delivery timelines, the resulting financial penalties and potential contract terminations could place immense strain on the company's balance sheet.