Questions arise about reasons why Microsoft has cancelled data center lease plans

This, the company said, “allows us to invest and allocate resources to growth areas for our future. Our plans to spend over $80 billion on infrastructure this fiscal year remains on track as we continue to grow at a record pace to meet customer demand.”

When asked for his reaction to the findings, John Annand, infrastructure and operations research practice lead at Info-Tech Research Group, pointed to a blog released last month by Microsoft president Brad Smith, and said he thinks the company “is hedging its bets. It reaffirms the $80 billion AI investment guidance in 2025, $40 billion in the US. Why lease when you can build/buy your own?”

Over the past four years, he said, Microsoft “has been leasing more data centers than owning. Perhaps they are using the fact that the lessors are behind schedule on providing facilities or the power upgrades required to bring that ratio back into balance. The limiting factor for data centers has always been the availability of power, and this has only become more true with power-hungry AI workloads.”

The company, said Annand, “has made very public statements about owning nuclear power plants to help address this demand. If third-party data center operators are finding it tough to provide Microsoft with the power they need, it would make sense that Microsoft vertically integrate its supply chain; so, cancel leases or statements of qualification in favor of investing in the building of their own capacity.”

However, Gartner analyst Tony Harvey said of the report, “so much of this is still speculation.” Microsoft, he added, “has not stated as yet that they are reducing their capex spend, and there are reports that Microsoft have strongly refuted that they are making changes to their data center strategy.”

The company, he said, “like any other hyperscaler, will need to balance their supply and demand forecasts and at the moment it looks like this is what they are doing. Some of this will have been driven by the Stargate project and OpenAI’s involvement with Oracle and Softbank, but it also looks to be them reallocating capex into different locations.”