Microsoft capex miss hits CoreWeave, Nebius shares

Shares of CoreWeave and Nebius dropped approximately 5% in extended trading Wednesday following Microsoft's earnings report. The decline followed the tech giant's disclosure of $45.2 billion in capital expenditures and finance leases for the quarter. This figure represented a roughly 30% year-over-year increase but fell short of the $50.7 billion average estimate from StreetAccount analysts.

Microsoft relies heavily on neocloud providers to secure artificial intelligence infrastructure capacity. The company signed a nearly $20 billion agreement with Nebius at the end of last year for compute access through the 2030s and remains a major customer for CoreWeave. The lower-than-expected spending figure suggests these partners may take longer to deliver the data center capacity Microsoft requires.

In its earnings materials, Microsoft noted that Azure revenue increased 48% year-over-year, outpacing the rise in capital spending. The company attributed the disparity to timing differences between receiving goods and making payments, as well as a lower proportion of finance leases in its spending mix.

Other neocloud stocks also experienced losses. IREN shares fell about 3% after the report. Alphabet, which also announced its results on Wednesday, reported capital expenditures of $51.36 billion, missing the $55.09 billion analyst consensus.

Market sentiment toward neoclouds has been volatile in recent weeks due to rising interest rates and concerns over expensive debt financing. SpaceX CEO Elon Musk predicted over the weekend that more than 200 neocloud companies would collapse. He stated on X that debt markets have largely closed access to funds for companies without substantial revenue independent of AI data centers. Gartner analysts also told CNBC last Monday that they predict 80% of neocloud firms will be absorbed or cease operations by 2030.

CoreWeave had seen a recent recovery, rising 18% over the three trading days prior to Wednesday's report. Wolfe Research analysts wrote on Tuesday that they expect the stock to rebound into the mid-$70s. The company's shares closed Wednesday at $63.93.

Oracle provided a contrasting data point earlier in the day. The company issued a strong long-term revenue forecast and stated it will return to positive free cash flow in the second half of next fiscal year. Oracle stock jumped 11% during regular trading but retreated 3% after Microsoft's figures were released.