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The Redmond giant freezes part of its own construction and halts new capacity hiring amid a global restructuring of its infrastructure.
In an unexpected maneuver that has taken analysts and investors by surprise, Microsoft has drastically slowed its data center expansion, freezing its own construction projects of over 1.5 gigawatts (GW) and canceling capacity lease contracts worth more than 2 GW. While at first glance, the news has created uncertainty about the demand for digital infrastructure, a deeper analysis reveals a medium- to long-term adjustment strategy.
According to an exclusive report by SemiAnalysis, the freeze affects multiple megaprojects by Microsoft in the U.S. and other countries, many of which already have land acquired, permits granted, and power supply secured. Despite this, construction has come to a halt or slowed down, with orders for electrical equipment and cooling systems delayed or canceled.
What has changed?
During 2023 and the first half of 2024, Microsoft was the main growth driver in the data center leasing market, capturing more than 60% of the globally contracted capacity. The company signed non-binding Letters of Intent (LOIs) with numerous suppliers, locking in future capacity while acquiring thousands of acres of land and accelerating its own construction projects. By mid-2024, Microsoft was pre-leasing more capacity than Amazon, Google, Meta, and Oracle combined.
However, starting in the second half of last year, it began quietly withdrawing from several of those agreements and froze new hiring. The real shift came with the decision to pause 1.5 GW of its own projects that were set to activate between 2025 and 2026. This includes campuses with hundreds of megawatts of power in states like Iowa, Georgia, and Texas, where the pace of development has drastically slowed.
The market misinterpreted the magnitude
While news headlines spoke of “cancellations of 2 GW,” the reality is that these were non-binding pre-contracts. Microsoft still maintains firm construction commitments of over 5 GW that will come online between 2025 and 2028, meaning that the slowdown does not jeopardize its immediate growth but does postpone some of the anticipated supply starting in 2027.
This nuance has led to misunderstandings among Wall Street analysts, some of whom predicted a decline in revenues for suppliers like Vertiv, a leader in electrical and cooling solutions for data centers. However, SemiAnalysis clarifies that much of the committed capacity has yet to show up in these suppliers’ order books, so the real impact on the supply chain is limited… for now.
Why is Microsoft hitting the brakes?
The answer seems to be a combination of factors. On one hand, the previous acceleration led to an overload of commitments and logistical pressures. On the other, the pressure to optimize costs and reassess strategic priorities in artificial intelligence has prompted Microsoft to rebalance its focus between own construction, leasing, and partnerships like those recently announced with G42 in the United Arab Emirates.
There is also speculation about increased internal scrutiny regarding the efficiency of invested capital and a review of how global capacity is distributed in a rapidly evolving landscape for AI, training chips, and edge solutions.
What’s next?
While some projects are slowing down, others continue to move forward. The company has not abandoned its growth ambitions; rather, it seeks to avoid unbalanced expansion. Additionally, the transition of some investment towards partner-managed campuses (such as in the Middle East) indicates a shift in model toward more flexible and shared structures.
In the short term, this adjustment represents a technical pause. In the medium term, Microsoft is still positioning itself as a global leader in infrastructure for artificial intelligence. But the message is clear: even giants need to breathe between strides.
For the tech ecosystem and data centers, the key now is to accurately interpret market rhythms. Because what seemed like a signal of cooling may simply be a reformation of the sprint.