Microsoft has struck a $19.4 billion deal with Nebius to secure AI cloud infrastructure, tapping the Amsterdam-based provider as demand for compute power surges.

Nebius said it will provide dedicated capacity to Microsoft from a new data center in Vineland, New Jersey, beginning later this year. The company described the long-term contract as its first with a major tech player and said the pact will “accelerate AI cloud growth beyond 2026.”

Investors back Nebius expansion strategy

Nebius counts Nvidia and Accel among its major backers, giving the company both industry credibility and financial support.

The $17.4 billion contract with Microsoft, which could rise to $19.4 billion with additional services, is expected to reinforce that trajectory. Nebius said proceeds from the agreement will support expansion, while debt secured against the contract and other financing options are being considered to accelerate growth.

The company described the deal as a key step in its long-term strategy, signaling to investors that Nebius can compete for marquee contracts in the crowded AI cloud market.

From Yandex origins to a growing US presence

Nebius was created after Yandex split off its Russian operations, leaving the company to focus on global AI infrastructure. The rebrand marked its shift from search and consumer internet roots to enterprise-grade cloud computing.

The Microsoft agreement extends its US presence, anchored by the new data center in New Jersey and offices in San Francisco, Dallas, and New York, to serve American AI developers and enterprises.

Capacity crunch drives Microsoft to outside providers

Microsoft has been pouring record sums into new data centers and servers, but demand for AI workloads continues to outstrip its in-house capacity. Chief Financial Officer Amy Hood told investors in July that the company expected “to remain capacity constrained” through the end of this calendar year.

To meet demands, the company has increasingly turned to external partners. Microsoft already sources additional GPU power from CoreWeave, and OpenAI, one of its largest Azure customers, has signed its own multibillion-dollar agreement with CoreWeave to secure computing resources.

The Nebius contract adds another supplier to that mix, giving Microsoft guaranteed access to new infrastructure as it races to support its own products and customer demand for generative AI services.

First big tech agreement sets stage for more deals

Nebius founder and Chief Executive Arkady Volozh said the Microsoft pact marks the company’s first long-term contract with a major tech player, adding that he expects “more to come”. He described the agreement as both financially attractive and a catalyst for expansion, positioning Nebius to pursue additional commitments with leading AI labs and enterprises.

With Microsoft on board, the deal sets a new high-water mark for Nebius as it targets additional contracts in the AI cloud sector.

Beyond cloud deals, Microsoft is also exploring optical computers designed to cut the energy demands of AI.