AI data center firm IREN delays Microsoft AI deliveries, plans $15 billion spending push

Nov 5 (Reuters) - AI data center firm IREN on Thursday delayed some infrastructure deliveries for Microsoft and laid out another $15 billion in spending, even as a rout in AI stocks puts the sector's massive buildout under pressure.

Australia-based IREN also beat quarterly revenue estimates on strong growth in its AI cloud business, lifting its shares 4% in extended trading. The stock closed down about 17% during a broader selloff that hit chipmakers and so-called neocloud companies, including IREN rival CoreWeave, particularly hard as Democrats' sweeping victory in the US midterms fanned fears of tougher regulation of the technology.

IREN said the delay to infrastructure being built for Microsoft would not result in financial penalties as it stemmed from the software giant requesting network-design changes.

However, the company pushed the timeline for making operational its more than $4 billion annualized run-rate revenue target to January from year-end, and said the timing could extend to the end of February. The company said the shift followed a customer-requested design change and supplier timing.

The Windows maker is tightening oversight of some data center projects run by neocloud providers including IREN, Nebius and Nscale amid delays and rising costs, Bloomberg News reported earlier on Thursday.

Microsoft is stepping away from projects it considers risky and weighing whether to sign new deals with such providers as it focuses more heavily on expanding its own data centers, according to the report.

IREN, valued at some $7 billion, is building 200 megawatts of data-center capacity for Microsoft in Texas.

The company said it would keep investing significantly in computing equipment and infrastructure as it expands its AI cloud business, estimating about $15 billion in capital expenditure over the rest of its fiscal year.

Its quarterly filing showed capital commitments of $18.95 billion at the end of September, up from $13.81 billion three months earlier, while GPU hardware on its balance sheet nearly tripled to $5.82 billion from $2.04 billion. Construction in progress stood at about $4.61 billion.

IREN's AI cloud revenue in the first quarter rose to $200 million from $71 million in the prior three months. Total revenue rose to $228 million in the quarter ended September 30, compared with analysts' average estimate of $221.28 million, according to data compiled by LSEG.

The company said its assets and revenue were supported by contracts with Nvidia, Microsoft and 13 others, with roughly two-thirds of its revenue backlog tied to investment-grade counterparties.

IREN executives said on a post-earnings call that the company exited September with $1 billion in annualized run-rate revenue and expects roughly one-quarter of that amount to be recognized in the December quarter.

(Reporting by Prathik Jayaprakash in Bengaluru; Editing by Sriraj Kalluvila and Subhranshu Sahu)