Microsoft is winding down Oracle deal to rent AI cloud capacity: Report

The trend is not unique to Microsoft: Meta forecast $135-145 billion in capital expenditure for calendar 2026, while Alphabet raised its forecast to $195-205 billion. (File image)

Microsoft is winding down an arrangement to rent AI computing from Oracle as part of a larger reassessment of billions of dollars in cloud partnerships, Bloomberg News reported on Friday, citing people familiar with the matter.

Shares of Oracle and Microsoft were flat in afternoon trading. Both stocks had come under pressure this week ⁠after ​a Democratic midterm election sweep in the US raised worries about tighter scrutiny that could threaten the AI industry’s breakneck expansion.

Microsoft had been turning off rented computing capacity from Oracle in recent months after ​declining ​to renew the contract, according to the ⁠Bloomberg report.

The rented computing capacity became less valuable over time as it no longer met Microsoft’s ‌evolving needs, the report added, noting that the Oracle hardware used an older generation of Nvidia chips.

“Demand for OCI’s (Oracle Cloud Infrastructure) AI infrastructure remains strong, including for earlier-generation GPUs,” an Oracle spokesperson told Reuters.

Microsoft did not immediately respond to a Reuters request for comment.

The report adds to signs that Microsoft ⁠is rethinking how ⁠it secures computing capacity to get more out of its massive AI investments.

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AI cloud company IREN ⁠said on ‌Thursday it had delayed some infrastructure deliveries after ​Microsoft requested changes to its network design.

The ‌move pushed back IREN’s target for bringing more than $4 billion in annualized revenue capacity online from year-end to January, ‌with a possible ​further delay ​until ​late February.

Earlier on Thursday, Bloomberg News reported Microsoft was tightening oversight of some data center projects ​run by neocloud providers including IREN, Nebius and ⁠Nscale amid delays and rising costs.

Oracle had announced the multi-year deal with Microsoft in 2023, saying the Windows maker would use ‌OCI AI ⁠infrastructure to power the AI-assisted version of the Bing search engine. The financial terms were not disclosed.