Satya Nadella Explains Why Microsoft Cancelled Data Centre Projects in US and Europe

Microsoft CEO Satya Nadella said the company is evaluating factors such as demand, workload patterns, and location before committing to data centre projects. He made the remarks during the company’s earnings call, addressing reports based on a memo by TD Cowen analysts that Microsoft has abandoned data centre projects in the US and Europe that would have used 2 gigawatts of electricity, due to an oversupply relative to its near-term demand forecast.

“The key thing for us is to have our builds and leases be positioned for what is the workload growth of the future,” Nadella said. He pointed to the evolving nature of AI workloads, distinguishing between traditional training and emerging patterns like pre-training combined with test-time compute. “There’s Moore’s Law, there’s system software, there’s model architecture changes, there’s the app server efficiency.”

Nadella also cautioned against concentrating too much infrastructure in any one location. “You don’t want to be upside-down on having one big data center in one region, when you have a global demand footprint,” he said.

Similarly, Microsoft CFO Amy Hood said that these are long-term decisions. “Just a reminder, these are decisions with long lead times, from land acquisition to build-out, it can take five to seven years, or two to three years," Hood said. “So we're constantly in a balancing act as we monitor demand curves.”

Despite scaling back some leasing activity, Microsoft continues to invest aggressively in its infrastructure. “We continue to expand our datacenter capacity. This quarter alone, we opened DCs in 10 countries across four continents,” Nadella said. 

Microsoft also plans to expand its data centre capacity in Europe by 40 per cent over the next two years.

Microsoft has committed $80 billion in fiscal year 2025 (ending June 2025) on AI-enabled data centres to support AI model training, deployment, and cloud services.

The update came alongside Microsoft’s earnings for the quarter ended March 31, 2025, in which it reported $70.1 billion in revenue, up 13% year-over-year (15% in constant currency). Net income rose 18% to $25.8 billion, with operating income up 16% to $32.0 billion. 

Revenue from the Intelligent Cloud segment was $26.8 billion, a 21% increase. This included a 22% rise in server products and cloud services revenue, led by a 33% growth in Azure and other cloud services.

“In Azure, we expect Q4 revenue growth to be between 34% and 35% in constant currency driven by strong demand for our portfolio of services,” said Hood. “In our AI services, while we continue to bring datacenter capacity online as planned, demand is growing a bit faster. Therefore, we now expect to have some AI capacity constraints beyond June.”

The company attributed its strong performance to growth in cloud and AI offerings. “Cloud and AI are the essential inputs for every business to expand output, reduce costs, and accelerate growth,” Nadella said. “From AI infra and platforms to apps, we are innovating across the stack to deliver for our customers.”

Microsoft Cloud revenue reached $42.4 billion, up 20%. Nadella also shared that more than 15 million people are now using GitHub Copilot, four times as many as last year.