Microsoft may face an oversupply of data centers, according to a report released by American multinational investment bank TD Cowen.

Analysts pointed to lease terminations with private data center operators in several United States markets as part of a shift in strategy for the tech giant.

The report, led by Michael Elias, noted that Microsoft has canceled leases accounting for “a couple of hundred megawatts.”

Analysts drew parallels to Meta’s recent efforts to reduce capital expenditures on its metaverse projects. They also suggested that Microsoft may be reallocating part of its international spending budget to the US, indicating changing priorities.

Microsoft has committed to spending over US$80 billion on infrastructure in 2025. When questioned about the situation, the company said it may “strategically pace or adjust” its investments.

This comes after CEO Satya Nadella stressed the need for data center expansion in 2023, citing supply constraints due to delays in revenue generation from AI services.

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