Microsoft has recently pulled back from significant data center expansions, with a notable reduction in its international spending. According to a report from TD Cowen Insight, Microsoft has canceled several leases in the U.S., amounting to several hundred megawatts (MWs), with two private data center operators. The cancellations are reportedly due to delays in facility power. The hyperscaler has also opted not to convert a significant portion of its negotiated Statements of Qualification (SOQs) into leases, instead reallocating a large part of its international investments to the U.S. According to the report, this shift signals a potential oversupply of capacity, reflecting a substantial slowdown in Microsoft’s international data center leasing activities.
The decision to reduce international capacity development may have wider implications, including for Africa. Microsoft has been making significant investments in the continent, including plans to accelerate AI skill development for one million Nigerians, with a $1 million investment over the next two years to promote digital innovation and economic empowerment. The company is also reportedly developing a new data center campus in Centurion, South Africa, and is working on a $1 billion geothermal-powered data center in Kenya, in collaboration with Dubai-based AI company G42.
While these projects remain on the radar, it is not yet clear whether Microsoft’s broader pullback from international spending will affect these initiatives. The company’s decision to scale back on some regions’ data center development raises questions about its long-term capacity planning, particularly as it adjusts to the evolving needs of cloud and AI services. Microsoft’s previous actions, such as pausing construction on a data center in Wisconsin (originally thought to be in support of OpenAI), indicate that it may have over-procured capacity in certain areas, and the company is now adjusting its strategy accordingly.
Microsoft’s retreat from some international investments – coupled with its recalibration of domestic capacity – suggest shifts in its overall data center strategy and it remains to be seen how this will impact its projects in Africa.
