Microsoft enters cloud partnership with Nebius worth nearly $20 billion

Microsoft signs one of its biggest AI infrastructure deals

Microsoft has signed a massive cloud partnership with Nebius worth up to $19.4 billion. Under the agreement, Nebius will provide Microsoft with dedicated artificial intelligence computing capacity through 2031.

The initial value is $17.4 billion, with options that could raise it by another $2 billion. This long-term contract underscores just how intense the demand for AI computing has become, and why Microsoft is willing to invest billions to ensure it has the capacity it needs.

Nebius shares soar after the announcement

News of the deal sent Nebius Group’s stock skyrocketing. Shares jumped more than 50% in early trading, hitting nearly $96 before markets opened in New York.

That surge followed months of substantial gains for the Amsterdam-based company, which had already climbed over 200% in the year leading up to the announcement.

For investors, the Microsoft contract validates Nebius’ business model and positions it as one of the hottest players in the new AI cloud landscape.

Microsoft is racing to solve a capacity crunch

Despite building new data centers at record speed, Microsoft still faces a shortage of AI computing power. Demand from customers and its own products, including Azure AI services and OpenAI workloads, has consistently outpaced supply.

Microsoft CFO Amy Hood even admitted the company expects to remain “capacity constrained” through the end of this year.

Deals like the one with Nebius show how Microsoft is scrambling to secure reliable infrastructure to meet surging AI demand globally.

Nebius will provide a new data center in New Jersey

Nebius will deliver computing capacity directly from a brand-new data center in Vineland, New Jersey, as part of the deal.

Operations will begin later this year, giving Microsoft fresh capacity in one of the world’s most essential cloud markets.

Dedicated GPU infrastructure from this site will help alleviate Microsoft’s backlog of AI workloads while putting Nebius on the map as a key U.S. infrastructure player, despite being headquartered in Amsterdam.

This is a significant turnaround story for Nebius

The deal also represents a remarkable comeback for Nebius. Once part of Russian tech giant Yandex, Nebius split off in 2023 after sanctions disrupted its global ambitions.

Founder Arkady Volozh, sanctioned at the time, later condemned the invasion of Ukraine and cut ties with Russia.

That move cleared the way for Nebius to re-emerge as a Western-focused AI infrastructure company. Two years later, it signed a nearly $20 billion contract with Microsoft.

Investors now see Nebius as a global AI player

Before the Microsoft deal, Nebius was best known for offering startups and smaller businesses affordable AI cloud services. Now, the Microsoft contract changes everything.

Investors, including Nvidia and Accel Partners, had already backed the company, but this milestone confirms its ability to win long-term, high-value partnerships with the world’s biggest technology companies.

Analysts even describe Nebius as a “neocloud” player capable of challenging traditional hyperscalers with sovereign, dedicated contracts.

Microsoft’s spending spree in AI continues

Microsoft has been pouring money into AI at unprecedented levels. In July, the company revealed plans to spend over $30 billion in capital expenditures in just one quarter, mainly on cloud and AI infrastructure.

Deals with companies like CoreWeave and now Nebius reflect how aggressively Microsoft diversifies its supply chain.

By securing external GPU capacity, Microsoft can keep expanding its Azure services and supporting OpenAI, even when its capacity runs tight.

The Nebius deal runs through 2031

One striking aspect of this agreement is its duration. By committing to Nebius through 2031, Microsoft locks in long-term stability at a time when GPU supply chains are volatile and demand is unpredictable.

The structure also provides Nebius with guaranteed revenue streams to finance rapid expansion. For both sides, the length of the deal reflects a recognition that the AI revolution isn’t a short-term wave; it’s a decade-long transformation of computing.

Arkady Volozh is reinventing himself with Nebius

For Nebius founder Arkady Volozh, this deal is personal redemption. Once celebrated as the visionary behind Yandex, he resigned in disgrace when European sanctions targeted him in 2022.

After condemning the war and shedding Russian operations, Volozh pivoted to building Nebius as a Western-aligned company.

He has rebuilt his reputation around cloud and AI infrastructure by bringing hundreds of engineers with him. The Microsoft deal proves his reinvention is working, and Nebius is a force again.

Nebius was once suspended from Nasdaq trading

Nebius’ journey has been anything but smooth. After Russia invaded Ukraine in 2022, the company was suspended from Nasdaq trading. It wasn’t until late 2024 that it returned under a new ticker.

Since then, the stock has staged an extraordinary rally, rising more than 220% before the Microsoft announcement.

With the deal now in place, Nebius has transformed from a troubled spin-off into a rising growth story in just three years.

Nvidia quietly plays a role in this partnership

Nvidia is one of Nebius’ investors, and its GPUs are at the heart of the infrastructure Nebius provides. This indirectly links Microsoft, Nebius, and Nvidia, the three companies most responsible for powering AI’s rapid adoption.

As AI workloads grow, the partnership strengthens Nvidia’s market dominance while giving Microsoft guaranteed access to compute capacity.

It also positions Nebius as a credible alternative to hyperscalers, thanks to cutting-edge hardware backing from the GPU king.

Microsoft needs Nebius to balance its partnerships

Microsoft’s Azure cloud has been growing rapidly, but reliance on external providers like CoreWeave has exposed the company to challenges in capacity.

By adding Nebius to its network, Microsoft reduces risk and diversifies its supplier base. If one partner experiences delays or shortages, others can step in to ensure workloads are met.

This approach mirrors how tech giants manage semiconductor supply, spreading commitments across multiple partners to secure resilience in a high-demand, highly competitive global market.

Nebius is positioning itself as a neocloud company

Nebius doesn’t describe itself as a traditional hyperscaler like Microsoft, Amazon, or Google. Instead, analysts call it a “neocloud” player, smaller, faster, and focused on sovereign and dedicated AI contracts.

That distinction helped it win over Microsoft, which needed guaranteed GPU capacity rather than general-purpose cloud services.

If Nebius continues to secure contracts like this one, it could redefine how specialized cloud providers compete with the big three in the artificial intelligence era.

The deal puts pressure on other cloud rivals

Microsoft’s move with Nebius also pressures Amazon Web Services and Google Cloud. Both rivals face the same AI capacity constraints, and deals of this magnitude could shift competitive dynamics.

If Microsoft can serve more AI customers thanks to Nebius’ support, it may gain share in the booming AI services market.

For Nebius, the visibility from partnering with Microsoft may attract even more enterprise clients who want sovereign, dedicated infrastructure solutions.

Nebius is preparing to finance its rapid growth

Securing a $17 billion contract is only half the battle. Nebius will need to expand quickly to meet Microsoft’s demand.

The company said it is exploring financing strategies in filings, including using cash from the deal, securing debt against the contract, and potentially raising new capital.

While growth costs are high, the guaranteed revenue stream from Microsoft makes it easier to attract investors and lenders who now see Nebius as a long-term infrastructure player.

Moreover, Meta and Microsoft earnings are sparking a big move on Wall Street.

Microsoft gains credibility with sovereign contracts

By partnering with Nebius, Microsoft also addresses a growing need for sovereign cloud solutions. Governments and enterprises increasingly demand that AI workloads run on infrastructure with transparent ownership and control.

Nebius, headquartered in Amsterdam and positioned as independent from Russian ties, fits that requirement.

For Microsoft, this adds credibility in Europe and beyond, where regulators scrutinize how data and AI models are handled. Sovereign partnerships may become essential in the next phase of cloud growth.

Meanwhile, Microsoft has a most-wanted list, which is why it spells trouble for Meta CEO Mark Zuckerberg.

What do you think about Microsoft partnering with Nebius in cloud services? Please share your thoughts and drop a comment.

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This slideshow was made with AI assistance and human editing.