Microsoft has canceled up to 2GW of data center projects across the US and Europe, with analysts from TD Cowen suggesting that oversupply in the data center market may be driving the move. The cancellations, which include both lease terminations and project deferrals, follow the company’s earlier withdrawal from 200MW of data center developments in February 2025. The decision comes on the heels of several canceled leases in the US last month, with two private data center operators. In Europe, some of the abandoned leases have reportedly been taken over by Google, while Meta has claimed part of the capacity.
In response to the cancellations, Microsoft reassured the market, stating that it is still well-positioned to meet current and growing customer demand. The company highlighted its significant investments in infrastructure, noting that it added more capacity last year than ever before. “We will continue to grow strongly in all regions,” the company said, reaffirming its commitment to expansion despite the adjustments. However, TD Cowen analysts Michael Elias, Cooper Belanger, and Gregory Williams pointed to an oversupply in the data center sector relative to current demand forecasts, suggesting that this could be a key factor behind the cancellations. “We continue to believe the lease cancellations and deferrals of capacity point to data center oversupply relative to its current demand forecast,” they noted.
This cancellation of projects comes amid Microsoft’s commitment to invest $80 billion in AI data centers in 2025, although spending is expected to slow in the subsequent fiscal year. The broader AI infrastructure market has raised concerns, with Alibaba Group Chairman Joe Tsai at the HSBC Global Investment Summit suggesting that the sector might be entering a speculative phase. “People are talking, literally talking about $500 billion, several hundred billion dollars. I don’t think that’s entirely necessary,” Tsai said, highlighting the potential misalignment between projected investments and current demand. Alibaba plans to invest around $53 billion in cloud and AI infrastructure over the next three years, its “most concentrated and highest level of investments.” Following the report on Microsoft’s cancellations, the company’s stock dropped by 1.31%.
