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Microsoft pulls out of Nscale data center deal in UK amid power supply delays, report says
Microsoft has pulled out of Nscale's UK data center deal in Essex amid power supply delays, with grid officials expecting electricity only in the 2030s.
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Microsoft has pulled out of an agreement with British cloud computing company Nscale for a data center project in the UK, Britain's The Telegraph newspaper reported on Sunday.
The US technology giant recently terminated its agreement for a data center in Loughton, Essex, according to The Telegraph. Microsoft was one of Nscale's two largest customers. The Telegraph did not specify why Microsoft decided to leave the project, Reuters reported.
Nscale data center faces power supply delays
Nscale has reportedly faced several delays in developing the Loughton data center. The delays have raised concerns about when the facility will be ready to operate, according to The Telegraph.
National power grid officials reportedly told Nscale that they did not expect to supply electricity to the data center until the 2030s, The Telegraph reported. This points to a major challenge for the project, as data centers need a reliable power supply to operate.
Nscale says Microsoft relationship remains strong
Despite the reported withdrawal from the Loughton deal, Nscale said its wider relationship with Microsoft remains positive. "Our relationship with Microsoft remains strong and long-term," an Nscale spokesperson told Reuters.
The company said the electricity supply problem affecting the London area would not impact its other agreements. "This unfortunate London-wide grid issue has no impact on our other contracts," the spokesperson told Reuters.
Nscale explores alternative power sources in UK
The company said it remains committed to the Loughton project and the UK. It is exploring alternative sources of electricity for the site, along with other locations for expansion across the country.
Nscale IPO plans and major AI customers
Nscale filed for an initial public offering (IPO) in the United States in September 2026. According to the company's IPO prospectus, Microsoft and artificial intelligence company Anthropic were expected to be among its major customers.
The company supplies computing capacity, electricity infrastructure, data centers and software used to train and run AI models, according to its IPO filing cited by Reuters. These services help companies build and operate artificial intelligence systems.
Nvidia-backed Nscale expands AI infrastructure business
The Nvidia-backed company competes with firms including CoreWeave, Nebius, Crusoe and Lambda in the AI infrastructure market. The company has expanded sharply over the past two-and-a-half years. Its total contracted value grew from $100 million to more than $103 billion during that period.
The withdrawal comes as power supply remains a challenge for data center development. The reported delay in securing electricity for the Loughton site highlights the importance of power availability for large data center projects. Nscale says it is continuing to explore alternative power sources and other UK expansion sites, even as Microsoft has reportedly ended its agreement for the project.
