Nebius invests £1.7B in UK AI cloud as neocloud model gains traction

Nebius is spending £1.7 billion to build AI cloud capacity across four UK sites, betting the neocloud model can outrun hyperscaler giants.

Nebius Group NV announced a £1.7 billion investment to expand AI cloud infrastructure across four UK sites, all powered by Nvidia's Blackwell Ultra platform, targeting 65 megawatts of combined capacity by 2027. The commitment, disclosed at London Tech Week on June 8, marks the company's largest geographic expansion to date and positions it to capture surging enterprise demand for AI compute outside the three dominant hyperscalers.

"The UK sits at the intersection of enterprise AI demand, supportive government policy and sovereign compute priorities — that combination makes it a natural anchor market for our neocloud model," Nebius Chief Executive Officer Arkady Volozh said in a statement. The company already operates a London commercial hub and counts Revolut, the fintech with more than 75 million customers across 40 markets, as a production-scale customer running both AI training and real-time inference workloads on Nebius infrastructure.

The expansion adds three new sites to Nebius's existing UK deployment of Nvidia Blackwell Ultra infrastructure, which went live in November 2025. Each location will run Nvidia's full-stack AI factory platform, pairing the Blackwell Ultra silicon with Nebius's proprietary software layer tuned for intensive AI workloads. The company said the vertically integrated approach delivers a cost and performance profile that generic hyperscaler offerings struggle to match, though it did not disclose specific pricing comparisons.

The UK bet is the latest signal that the neocloud model — specialized AI infrastructure providers that build for performance rather than general-purpose cloud — is gaining commercial validation. Nebius's first-quarter 2026 revenue surged 684 percent year over year to $399 million, while its core AI segment's adjusted EBITDA margin more than doubled to 45 percent from 24 percent in the prior quarter. The company raised its 2026 capital expenditure guidance to a range of $20 billion to $25 billion to meet what management described as unprecedented infrastructure demand.

Anchor Contracts De-Risk the Buildout

Nebius has secured two landmark agreements that validate its enterprise strategy and reduce the risk profile of its capital-intensive expansion. In September 2025, it signed a multi-year AI infrastructure contract with Microsoft carrying a base value of $17.4 billion through 2031, with an option to expand to $19.4 billion. In March 2026, it expanded its partnership with Meta Platforms into a five-year deal worth up to $27 billion, comprising $12 billion in committed dedicated capacity and up to $15 billion in additional capacity options. Major Meta deployments are set to begin in early 2027 on Nvidia's next-generation Vera Rubin platform.

These contracts demonstrate that hyperscalers themselves are choosing to source capacity from Nebius rather than build entirely in-house — a structural endorsement of the neocloud thesis. Nvidia's direct investment in Nebius during a December 2024 funding round adds further credibility to the hardware supply chain relationship.

Capital Markets Back the Ambition

Nebius has raised capital aggressively to fund its expansion. It closed approximately $4.2 billion in combined equity and convertible note offerings in September 2025, plus an additional $1 billion in convertible notes in June 2025. The company is also securing more than 1 gigawatt of total power capacity by the end of 2026, including a new Pennsylvania site of up to 1.2 gigawatts announced in May 2026.

The UK expansion coincides with a broader wave of AI infrastructure investment in Britain. AMD separately committed £2 billion to UK compute infrastructure at the same London Tech Week event, and the government announced £400 million for sovereign AI compute. UK AI startups raised more than £8.2 billion in venture capital in the first half of 2026, roughly half of all European technology investment in the same period, according to the Prime Minister's remarks at the event.

What It Means for Investors

Nebius is still burning cash on an adjusted net basis as it builds out physical data centers, and capacity deployment risk remains real until the 2027 UK ramp target is met. But the combination of triple-digit revenue growth, expanding AI segment margins and tens of billions in contracted revenue from Microsoft and Meta positions the company as the most credible challenger in the AI infrastructure race. Nebius shares trade at $218.50, up 0.23 percent on the day of the announcement. The broader neocloud sector is attracting increasing attention from institutional investors seeking exposure to AI infrastructure beyond the hyperscaler oligopoly.

This article is for informational purposes only and does not constitute investment advice.