Bloomberg: Microsoft winds down deal to rent AI computing capacity from Oracle

Microsoft is winding down a deal to rent AI computing capacity from Oracle, sources told Bloomberg. The move is part of a broader reassessment of the billions of dollars it spends on contracts with cloud partners, Bloomberg writes.

In recent months, Microsoft has gradually been shutting off computing capacity rented from Oracle after declining to renew the contract, sources told Bloomberg. Over time, that capacity no longer met Microsoft’s requirements because Oracle’s hardware used older-generation Nvidia chips, the sources said.

Demand for Oracle’s AI infrastructure remains strong, including capacity using earlier-generation graphics processing units, an Oracle spokesperson told Bloomberg. Microsoft declined to comment.

Oracle fell as much as 5% in the wake of Bloomberg’s report, touching its lowest level in around three years before paring some losses. The stock had been up as much as 4% earlier in the session. Microsoft was down 0.7% in Friday trading as of this writing.

Microsoft and Oracle announced their partnership in 2023, with Oracle agreeing to provide Microsoft with access to servers to power a new AI-assisted version of its Bing search engine. The full value of the deal was not disclosed.

Microsoft has soured in recent months on its strategy of renting computing capacity from other companies and has tightened oversight of data center projects its partners are building under contracts with it, Bloomberg reported on Thursday, citing sources. The company has begun walking away from projects it considers risky, while its leadership is debating internally whether to sign new deals with neoclouds, the sources said. Project delays, regulatory hurdles, and high costs are behind the reassessment.

Microsoft, the world’s largest software maker, helped fuel the neocloud boom by signing major contracts with CoreWeave, Nscale, IREN, and Nebius. In total, it committed more than $80 billion to rent third-party capacity to support its own AI projects, on Bloomberg’s numbers.

Oracle’s cloud infrastructure business has grown rapidly since 2023, also benefiting from major AI contracts with OpenAI and Meta. Revenue from the segment reached $18 billion in the fiscal year ended in May. Oracle was initially seen as one of the biggest beneficiaries of the AI boom, but investors are now concerned about heavy capital spending that has turned its free cash flow negative.

Oracle is down 41% year to date. Still, bullish ratings dominate: the stock has a combined 36 “buy” and “overweight” calls versus seven “hold” ratings and just one “sell,” according to MarketWatch data. Microsoft, by comparison, is up 10% in 2026 and has 58 "buy" calls versus five "hold" recommendations.