Microsoft is phasing out a 2023 agreement to lease AI computing power from Oracle after choosing not to extend the contract, according to a Bloomberg report on Friday that cited people familiar with the matter.
The rented servers relied on older Nvidia chips that no longer fit Microsoft's changing requirements, the report said. Microsoft has been turning off that capacity over recent months.
This step reflects a wider review of more than $80 billion in deals with external cloud providers, according to Bloomberg. Microsoft has pledged that amount to companies including CoreWeave, Nscale and Nebius, yet its executives have become frustrated by rising costs and project delays.
The original Oracle arrangement, announced in 2023, provided Microsoft with Oracle Cloud Infrastructure servers to run its AI-driven Bing search. Bloomberg could not establish the full value of the deal. Separate negotiations for Microsoft to lease additional Oracle capacity fell apart in June, Business Insider reported.
"Demand for OCI's AI infrastructure remains strong, including for earlier-generation GPUs," an Oracle spokesperson told Reuters. Oracle shares dropped about 3% on the news.
Microsoft declined to comment. The company also passed on an option to broaden a Nscale deal in Texas this week, weeks after exiting a Nscale site in the UK, The Next Web reported.
The development adds to Oracle's difficulties. Heavy investment in AI data centres has driven its free cash flow negative and pushed its credit rating to just above junk status, The Next Web said. Oracle shares have more than halved since a June peak.
AI cloud firm IREN said on Thursday it had postponed some infrastructure deliveries after Microsoft asked for changes to its network design, Channel News Asia reported. That delay pushes IREN's revenue target from year-end to January, with a possible further slip to late February.