Nebius Group accelerates AI industry positioning with $19.4 billion Microsoft deal and new AI platform

Nebius Group announces a landmark $19.4 billion AI infrastructure contract with Microsoft, alongside the launch of its Nebius Token Factory, signalling its rising prominence in the AI cloud sector and aggressive expansion efforts.

Earlier this month, Nebius Group announced the launch of its Nebius Token Factory, a comprehensive AI production inference platform designed to facilitate enterprise adoption of AI by addressing scale, governance, and performance challenges. This rollout accompanies a landmark agreement with Microsoft valued at up to $19.4 billion over five years for GPU infrastructure capacity, alongside Nebius’s ambition to expand its data centre footprint backed by substantial recent capital raises exceeding $4.2 billion. Together, these developments underscore Nebius’s emerging role as a critical infrastructure partner within the fast-growing AI cloud sector, enabling businesses to efficiently scale and manage both open-source and custom AI models at production scale.

The Microsoft deal is a pivotal milestone for Nebius, reflecting the escalating demand for high-performance AI computing. Initially announced as a $17.4 billion contract, Microsoft’s possible increase of this commitment to $19.4 billion signals confidence in Nebius’s technology, centred on NVIDIA-powered GPU infrastructure, tailored cloud software, and bespoke hardware. This contract not only bolsters Nebius’s near-term revenue visibility but markedly enhances its positioning against competitors in the AI cloud space, such as CoreWeave. The first supply of GPU resources is expected from Nebius’s forthcoming Vineland data centre in New Jersey later this year, signifying an important operational ramp-up contributing to anticipated business growth in 2026 and beyond.

Nebius’s strategic transformation follows the restructuring of the former Russian tech giant Yandex. After Russia’s invasion of Ukraine led to a trading suspension on the Nasdaq and a $5.4 billion split of Yandex’s assets with a Russian consortium, Nebius has repositioned itself as a leading European tech company dedicated to AI infrastructure, cloud services, and autonomous driving technology. This pivot is characterised by a clear focus on leveraging GPU technology and its engineering prowess to build one of the world’s largest specialised AI infrastructure providers. CEO Arkady Volozh has expressed strong confidence in Nebius’s growth trajectory, aiming to more than double revenue from an annualised run rate of $120 million as of September 2024 to between $170 million and $190 million by year-end.

Complementing these commercial advances is Nebius’s aggressive capital expansion strategy. The company has raised $700 million in a private placement led by prominent investors including Nvidia and Accel, and plans a further $3 billion fundraising package consisting of a $2 billion convertible note offering and $1 billion in public equity. These funds are earmarked to accelerate the deployment of GPU clusters, develop cloud platforms, secure strategically located data centre sites, and scale infrastructure to meet soaring AI market demand. Management projects 2025 revenues to reach between $500 million and $1 billion, with further revenue growth targeting $3.2 billion by 2028, supported by a robust annualised revenue growth rate exceeding 130%. Despite the ambitious growth outlook, Nebius acknowledges risks around regulatory compliance and localisation costs, especially as the company navigates complex global expansion.

The launch of the Nebius Token Factory is integral to addressing enterprise requirements within AI production environments. By enhancing control, governance, and operational efficiency for AI model deployment, this platform is designed to deliver recurring revenue streams while meeting the stringent demands of hyperscalers and large enterprise clients. It represents a strategic extension of Nebius’s toolkit, underpinning its ability to capture value from long-term contracts like the one with Microsoft.

Market sentiment has been bullish but cautious, reflected in a wide range of fair value estimates from industry analysts and investment communities, which span from around $9 to over $170 per share. The divergence stems from differing assumptions about Nebius’s ability to navigate global regulatory complexities and fully capitalise on its AI infrastructure investments.

In summary, Nebius Group is aggressively positioning itself as a dominant player in the AI infrastructure sector with significant contracts, a comprehensive AI platform offering, and substantial financial backing. While execution risks and regulatory compliance challenges remain critical factors, the company’s recent developments point to a compelling long-term growth narrative, driven by the expanding AI cloud ecosystem and enterprise adoption of AI technologies.

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Source: Fuse Wire Services