Microsoft has pulled out of a data center agreement with British cloud provider Nscale for a site in Loughton, Essex, according to a report in Britain's Telegraph newspaper on Sunday that was reported by Reuters on October 18. Microsoft, described as one of Nscale's two largest customers, recently terminated its agreement for the Loughton facility. Neither company immediately responded to Reuters requests for comment outside regular business hours, and the Telegraph report did not specify why Microsoft withdrew.
Reporting cited by Reuters points to power, not demand, as the central problem. The Telegraph said Nscale had faced repeated delays with the project, and that national power grid officials had told the company they did not expect a power supply for the data center until the 2030s. For an AI data center, a connection date that far out changes the economics completely: compute contracts, customer commitments and financing all depend on energized capacity arriving on schedule.
Nscale pushed back on any suggestion that the wider relationship is at risk. "Our relationship with Microsoft remains strong and long-term, and this unfortunate London-wide grid issue has no impact on our other contracts," a spokesperson told Reuters. The company said it remains committed to both the Loughton project and the UK, and that it is exploring alternative power sources for the site in addition to other expansion sites in the UK.
The timing matters for Nscale. The Nvidia-backed company filed for an initial public offering in the United States last month, with Microsoft and Anthropic expected to be its major customers, according to its prospectus. Nscale provides infrastructure including compute, power and data centers, as well as software for training and running AI models. It competes against CoreWeave, Nebius, Crusoe and Lambda in the fast-growing market for GPU-heavy AI infrastructure.
According to Reuters, Nscale has grown rapidly since its launch, scaling from 100 million dollars to more than 103 billion dollars in total contracted value in just two and a half years. That growth story depends heavily on delivering large sites on time for a small number of very large customers. Losing one site agreement with a top customer, even for grid reasons outside the company's direct control, will draw investor attention to customer concentration and execution risk as the IPO process continues.
For enterprise IT and cloud buyers, the lesson is broader than one Essex site. AI capacity is increasingly constrained by electricity, grid interconnection and local planning timelines rather than by server supply alone. Hyperscalers and specialist providers alike are signing compute deals years ahead, but a data center without power is not capacity. Microsoft's exit from Loughton is a reminder to verify energization dates, not just contracted megawatts, when evaluating any AI infrastructure partner.