Microsoft has started to phase out artificial intelligence compute capacity rented from Oracle. According to Bloomberg, the company chose not to renew an expiring contract and over recent months has gradually disconnected the compute resources leased from Oracle.
Background of the agreement
The two companies agreed in 2023 that Oracle servers would support the AI-powered version of the Bing search engine. At the time, that arrangement signaled how acute compute shortages were in the industry, since Microsoft relied on infrastructure from a direct rival.
Why the partnership is being wound down
Bloomberg’s reporting indicates Microsoft found the rented infrastructure increasingly unsuitable because Oracle’s servers used older-generation NVIDIA GPUs that no longer met Microsoft’s technical requirements. Microsoft declined to comment on the report; an Oracle spokesperson emphasized that demand for their AI infrastructure remains strong, including for earlier-generation GPUs.
Pricing and demand
Oracle said that as recently as September it was able to renew some four-year-old GPU contracts with other customers at about 20 percent above their original prices, suggesting there is still market demand for older hardware.
Part of a broader strategic shift
The move away from Oracle-supplied capacity fits a wider change in Microsoft’s sourcing strategy. Microsoft previously signed more than $80 billion of agreements with emerging, AI-focused cloud providers such as CoreWeave, Nscale and Nebius to support its internal development. Company leadership grew increasingly dissatisfied with high costs and recurring delays on data center projects, tightened oversight in recent months, and pulled back from deals judged too risky.
Oracle’s financial position and market impact
Oracle’s cloud division expanded rapidly since 2023, driven in part by AI contracts with large technology firms like OpenAI and Meta Platforms. In the fiscal year that ended in May 2026, that business generated $18 billion in revenue. However, heavy capital expenditures for building new data centers pushed Oracle’s free cash flow into negative territory, worrying investors: Oracle’s shares have lost more than half their value compared with the $248.15 peak reached on June 1 of this year.
What this means for the market
Microsoft’s decision to reduce Oracle-supplied capacity highlights ongoing reshuffling among technology partners. It underscores that technical requirements, costs and timing all affect where companies source high-performance AI hardware. While Oracle says there remains demand for older GPUs, Microsoft’s changing technical needs and strategic priorities led to the recent disconnections.
Bloomberg reported the developments; Microsoft did not respond to requests for comment, and Oracle’s statements are quoted in that reporting.
An AI assistant contributed to the preparation of this article; a journalist edited and verified the final content.
