Microsoft has pulled out of its data center deal with British cloud provider Nscale for a site in Loughton, Essex, according to a Sunday report in The Telegraph covered by Reuters on October 18, 2026. Why it matters: the deal did not collapse over demand or price — it collapsed over electricity, with grid officials reportedly not expecting a power supply for the site until the 2030s.
October 18, 2026
What happened
Microsoft, one of Nscale’s two largest customers, recently terminated its agreement for the Loughton data center, The Telegraph reported. The newspaper did not specify why Microsoft withdrew, and Microsoft declined a Reuters request for comment.
What the reporting does point to is power. The Telegraph said Nscale had faced repeated delays on 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 — a timeline that makes a near-term AI facility effectively unbuildable on its original schedule.
What Nscale says
Nscale pushed back on the idea that the relationship itself is broken. A company spokesperson told Reuters that its relationship with Microsoft remains strong and long-term, described the problem as a London-wide grid issue, and said the termination has no impact on Nscale’s other contracts. The company said it remains committed to both the Loughton project and the UK, and is exploring alternative power sources for the site alongside other UK expansion sites.
The IPO context
The timing is awkward for Nscale. The company filed for an initial public offering in the US last month, and its prospectus names Microsoft and Anthropic as expected major customers. Nscale provides infrastructure — compute, power and data centers, plus software for training and running AI models — and competes with CoreWeave, Nebius, Crusoe and Lambda. The Nvidia-backed group has scaled from $100 million to more than $103 billion in total contracted value in about two and a half years, according to Reuters. Losing a flagship UK site agreement with its biggest-name customer, weeks after filing, is the kind of headline no IPO roadshow wants — even if the cause is a grid queue rather than lost demand.
Why it matters
This is the AI build-out hitting its least glamorous constraint. Models, chips and financing have all moved faster than the power grids they depend on, and Loughton is a clean example: a contracted customer, a willing builder, and no electricity until the next decade. For readers tracking the AI infrastructure race, the practical takeaway is that announced data center capacity and usable data center capacity are now two very different numbers — and the gap between them is increasingly set by grid operators, not by Microsoft or Nscale. Expect more projects to be judged on one question first: when does the power actually arrive?
Frequently asked questions
Why did Microsoft pull out of the Nscale Loughton deal?
Microsoft has not said. The Telegraph reported repeated project delays and that grid officials did not expect a power supply for the site until the 2030s; Nscale described the problem as a London-wide grid issue.
Does this affect Nscale’s other Microsoft contracts?
According to Nscale’s spokesperson, no. The company told Reuters the Loughton termination has no impact on its other contracts and that its relationship with Microsoft remains strong and long-term.
What happens to the Loughton site now?
Nscale says it remains committed to the project and is exploring alternative power sources for the site, as well as other expansion sites in the UK. No new timeline has been announced.
Who is Nscale?
Nscale is a British AI cloud provider — backed by Nvidia — that supplies compute, power, data centers and software for training and running AI models. It filed for a US IPO last month and competes with CoreWeave, Nebius, Crusoe and Lambda.
Sources: Reuters, The Telegraph