Microsoft and Alphabet Spending Miss Triggers Neocloud Sell-off
Microsoft and Alphabet reported capital expenditures below analyst expectations, sparking share declines for neocloud providers amid warnings of a sector-wide debt crisis.
Shares of neocloud providers, including CoreWeave and Nebius Group, declined in extended trading after Microsoft Corporation reported quarterly capital expenditures of $45.2 billion. While this figure represents a 30% increase over the previous year, it fell short of the $50.7 billion average analyst estimate. Because Microsoft relies on neocloud partners for AI infrastructure capacity, the lower spending suggests a slower delivery of data center capacity.
Alphabet Inc. also reported capital expenditures of $51.36 billion, missing analyst expectations of $55.09 billion. The combined misses have intensified pressure on the neocloud sector, which is already struggling with rising interest rates and limited access to capital. CoreWeave and Nebius Group both saw their shares slide nearly 5% following the reports.
Industry outlooks for the sector remain bleak. Elon Musk predicted that over 200 neocloud companies will collapse due to restricted access to debt markets. Similarly, analysts from Gartner forecast that 80% of these companies will either be absorbed by larger firms or cease operations by 2030.
