Microsoft has dramatically reduced its datacenter expansion, freezing 1.5GW of self-build projects slated for 2025-2026 and halting all new leasing activity. This follows a period of aggressive expansion in 2023 and the first half of 2024, where Microsoft accounted for over 60% of new leased turnkey capacity.
While the market focuses on 2GW of lease cancellations (non-binding LOIs), Microsoft still holds ~5GW of binding pre-leased capacity. The self-build slowdown is more significant in the short term, impacting 2025 and 2026 capacity. Construction on multiple campuses has slowed, with delays or cancellations of orders for cooling and electrical equipment.
The slowdown's impact on equipment suppliers like Vertiv is being misunderstood. The article highlights that a substantial portion of Microsoft's pre-leased capacity is not yet reflected in Vertiv's order book. The overall consequences for the datacenter equipment and broader AI infrastructure markets are less dire than initially perceived.
The reasons behind Microsoft's strategic shift are not fully detailed in the provided excerpt, which is a subscription-based article. The article indicates a further explanation is provided in the full version.