Microsoft (MSFT) has pulled out of a planned AI data center in Loughton, Essex, that British cloud provider Nscale was building for it, Reuters reported on October 18, citing the Telegraph. Microsoft is one of Nscale’s two largest customers. Reuters said the Telegraph did not specify why Microsoft withdrew, and Microsoft declined Reuters’ request for comment.
The site did have an obvious problem: power. The Telegraph reported that grid officials told Nscale they didn’t expect to supply electricity until the 2030s. That matches a September report that UK Power Networks couldn’t connect the site before the early to mid-2030s. Nscale says it remains committed to Loughton and is looking at other power sources.
Loughton Was a Small Slice of Microsoft’s Buildout
Loughton was planned to house about 23,000 Nvidia (NVDA) chips for Azure, starting at 50 MW. Nscale agreed to supply Microsoft with about 200,000 Nvidia chips across the UK, Norway, Portugal and Texas, so Loughton was about 11.5% of the program. Microsoft added roughly a gigawatt of capacity in the June quarter alone, which makes Loughton’s starting load about 5% of one quarter.
The spending shows no sign of a pullback.
Cash capital expenditure reached $35.80 billion in the June quarter, more than double the $17.08 billion a year earlier. Fiscal 2026 cash capex totaled $115.95 billion, up about 80%. On management’s broader measure including finance leases, June-quarter capex was approximately $41 billion, with more than $50 billion expected in the September quarter.
Demand is keeping pace. Intelligent Cloud revenue hit $39.31 billion in the June quarter, up about 32% from $29.88 billion, and CFO Amy Hood said customer demand still exceeds available supply. Microsoft has the customers and the cash. What it can’t buy quickly is electricity.
Power First, Then Chips
Microsoft has been picky with Nscale before. It signed a letter of intent for up to 1.35 GW at Nscale’s West Virginia campus in March, then walked away over the summer, and Anthropic took the capacity. Meanwhile, it is paying up for sites with a power date. On October 16, two days before the Loughton report, NiSource (NI) announced a 20-year agreement with Microsoft, with service expected to begin in 2028 and approximately 1,100 MW of generation resources to be added in Indiana.
The other workaround is making power on-site, which is where Bloom Energy (BE) comes in. Nscale reportedly held talks with Bloom about fuel cells for Loughton.
Bloom’s revenue reached a record $1.065 billion in the June quarter, up 166% from a year earlier. Its last four quarters brought in about $3.12 billion, nearly double the $1.63 billion of the four before. Grid delays are already showing up in someone’s income statement.
The exit hurts Nscale far more than Microsoft. Nscale’s IPO filing lists Microsoft agreements worth up to $43.8 billion, and Loughton was its flagship UK site.
The Number Microsoft Reports on October 28
Microsoft reports fiscal first-quarter results after the close on October 28. Capex including finance leases is the number to check against the $50 billion guide. A figure above $50 billion would be consistent with Microsoft’s spending guidance, but would not establish whether Loughton-related commitments were redirected elsewhere. A lower figure would need to be assessed alongside lease accounting, delivery timing and management’s demand outlook before concluding that the buildout is slowing.
I don’t read Loughton as Microsoft losing its appetite for AI capacity, main reason is that the June quarter is hard to square with that: cash capex more than doubled year over year, Intelligent Cloud revenue grew about 32%, and Microsoft already has 1,100 MW lined up in Indiana from 2028. What it seems to have run out of patience with is one site’s grid date, not the buildout. Until October 28 says otherwise, I’m treating this as a power story.
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