Why is Nebius spending $40 billion in 2027?
Nebius laid out $40 billion in planned spending for 2027 during its third-quarter earnings call Thursday, far more than Wall Street had expected. The plan is ambitious, but it rests on a string of data center projects that are already showing strain. Shares ended the day down 17%.
How will Nebius pay for its data center buildout?
The company intends to pay for the buildout mostly with customer prepayments and loans backed by customer contracts. In effect, Nebius is borrowing against the future value of the data centers it is building. That strategy works only if the projects arrive on time. When they slip, costs keep piling up while revenue waits.
"Building at this scale is hard, and delays are part of our industry right now," said CEO Arkady Volozh. "We are not immune."
The timing is awkward. The earnings report came days after reports that Microsoft was losing patience with neocloud deals that aren't delivering on schedule.
Why are Nebius data center projects running late?
Microsoft is one of Nebius's largest customers. It pays for AI computing capacity at a data center in Vineland, New Jersey, that is now months behind schedule. Nebius's contract with Microsoft is worth up to $19.4 billion, and the timeline is already slipping. Only a little more than half of the Microsoft capacity is now planned for delivery by the end of the year. The rest is slated for the second quarter of 2027.
The site's third-party operator, DataOne, is to blame for part of the delay, according to Andrey Korolenko, Nebius's chief product and infrastructure officer. DataOne "decided to wind down the temporary generation faster than it was expected," he said, as the site switches over to Bloom Energy fuel cells.
That switch was not entirely voluntary. In August, the investigative site Floodlight identified at least 45 natural gas generators operating at the DataOne site, though the operator had not received any permits to run them. New Jersey regulators fined the facility $1.1 million, finding that the use of the generators violated federal law. DataOne also faces a lawsuit from nearby residents who say a constant humming noise from the data center is disrupting their lives.
Nebius's summary of the Microsoft contract offers a sense of what is at stake. If dates are missed and no alternative capacity is offered, Microsoft can terminate the affected service after a grace period. The capacity tranches were originally meant to be deployed in 2025 and 2026, so a delivery date in the second quarter of 2027 falls well outside that window. The contract also includes financial penalties for late delivery.
Nebius said Microsoft "has been part of the planning process." The company did not say whether Microsoft had agreed to the new dates. Microsoft has not publicly canceled anything.
On the call, chief revenue officer Marc Boroditsky said the company's deals with Microsoft and Meta both came with significant prepayments, which arrived long before the capacity was delivered. Bloomberg reported last week, however, that Microsoft is tightening oversight of projects run by third parties, including Nebius, IREN and Nscale, and is debating whether to sign new agreements with them. Bloomberg also reported that Microsoft sent employees to the New Jersey site.
Microsoft's own quarterly report said its capital spending came in below expectations because of delays at third-party partners. Bloomberg reported that Microsoft will not exercise an option to more than double its Nscale agreement for a Texas data center. It also stopped being an anchor customer for Nscale's planned Essex site after power delays.
Nebius argues that the problems are concentrated in sites it does not control. The data centers it builds itself are coming online on time or early, and those facilities will supply most of its new capacity starting in 2027. Boroditsky said prepayments on the deals signed in the third quarter more than cover the cost of building the capacity behind them. Nebius ended the quarter with $7.4 billion in cash.
The company's chief financial officer, Maria Del Dado Alonso Sanchez, said prepayments and asset-backed financing on investment-grade contracts are expected to cover up to 85% of the $40 billion to $45 billion in 2027 capital spending. She named the Microsoft and Meta contracts as examples that can be financed this way. Boroditsky said Nebius could "tap prepayments to shore up any additional cash requirements."
Nebius forecast 2027 revenue of $12 billion to $13 billion. It expects to break even on a pre-tax basis by the fourth quarter.
Third-quarter revenue came in at $981 million, up 571% from a year earlier. Roughly a third of that total came from a one-time payment tied to a new partnership model. Even so, the company cut its 2026 revenue forecast by $200 million, to $3 billion, citing delays at third-party sites such as the one in New Jersey.
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