Microsoft winds down Oracle AI cloud capacity deal

Microsoft declined to renew an Oracle AI-compute rental arrangement, Bloomberg exclusively reported, and has been turning off the rented capacity as part of a broader reassessment of its cloud partnerships.

The wind-down removes at least some externally rented infrastructure from Microsoft’s AI capacity mix. Bloomberg’s sources said the Oracle systems used older-generation Nvidia chips that had become less useful because they no longer met Microsoft’s specifications. The reporting did not identify the GPU generation or models.

That broader partnership review also includes Microsoft’s separate Nscale capacity decision. Available evidence does not show whether the two decisions share contractual or technical terms.

The scale and economics of the Oracle change remain unclear. It is not known how much capacity Microsoft rented, how much has been shut off, whether any Oracle capacity remains active or when the wind-down will finish. The contract’s value, pricing and any wind-down costs have not been disclosed. Neither company has publicly said whether the reported non-renewal covers the entire arrangement or only part of it.

Oracle announced the original arrangement in November 2023 as a multi-year agreement. It said Microsoft would use Oracle Cloud Infrastructure, or OCI, alongside Azure infrastructure for the inference work behind Bing conversational search. Inference is the process of running a trained AI model to produce answers.

Oracle said Microsoft connected OCI to Azure through Oracle Interconnect for Microsoft Azure and used Azure Kubernetes Service to direct workloads to OCI Compute. That setup let Microsoft manage computing in Oracle’s cloud through tools in its Azure environment. The announcement did not state the agreement’s financial terms or quantify the rented capacity.

An Oracle spokesperson said demand for OCI AI infrastructure remained strong, including for earlier-generation GPUs, without confirming or denying the Microsoft non-renewal or saying whether the affected capacity had been reassigned. In a portfolio-wide update, Oracle said 92% of 35,000 GPUs up for renewal in its fiscal fourth quarter were renewed and global GPU utilization was 97.5%. Those company-reported figures cover Oracle’s broader portfolio and do not establish the status or financial effect of Microsoft’s capacity.