Microsoft is taking steps to address the persistent resource shortages in its Azure cloud platform, particularly in the heavily used US East region. The company has signed a five-year agreement with European cloud vendor Nebius, which will supply Microsoft with computing power from its new data center in Vineland, New Jersey.

Why this matters

Azure has experienced repeated capacity issues in recent months. The most notable disruption occurred on July 29, when many customers were unable to provision new virtual machines. That incident, which took over a week to stabilize, highlighted the ongoing strain across data centers in the eastern United States.

Industry analysts say these problems aren’t unique to Microsoft. IDC’s Dave McCarthy noted that cloud providers worldwide are struggling to keep pace with surging AI demand, citing supply chain delays for GPUs and the lengthy process of bringing new data centers online.

Strategic impact of the Nebius partnership

For Microsoft, the Nebius deal represents both a short-term relief measure and a hedge against the mounting infrastructure bottlenecks created by AI workloads.

• Jason Wong, Gartner VP analyst, emphasized that Azure customers will welcome the move, particularly after July’s regional shortfall.

• McCarthy added that the extra resources will support both customer workloads and Microsoft’s own research needs, though he cautioned that it won’t be a “cure-all” for capacity challenges given the distributed nature of AI systems.

Nebius enters the US market

For Nebius, the agreement is a milestone. Company founder and CEO Arkady Volozh described it as the first of several long-term contracts the firm expects to sign with major AI labs and global tech providers. The partnership gives Nebius a foothold in the competitive US AI infrastructure market.

Looking ahead

Unlike previous attempts to expand through building additional facilities, Microsoft has confirmed it will not pursue new data centers for this purpose. Instead, relying on partners such as Nebius allows the company to scale faster while bypassing supply chain bottlenecks and regulatory delays.

As Wong summarized, the arrangement helps Microsoft diversify its risks while ensuring Azure customers see improved availability during demand spikes.

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