Meta Platforms (NASDAQ:META) shares rallied sharply in early trading Wednesday following a Bloomberg report that the company is exploring a cloud service to monetize its surplus artificial intelligence computing power. The stock surged 6.8% to $601.46, adding roughly $98 billion to its market capitalization, as investors welcomed the potential new revenue stream that could help offset the company's massive AI infrastructure spending.
The positive sentiment for Meta weighed heavily on its cloud capacity partners. CoreWeave (NASDAQ:CRWV) tumbled 10.9% to $88.66, shedding approximately $5.7 billion in market value, while Nebius Group (NASDAQ:NBIS) plunged 12.3% to $242.13. The contrasting moves highlight investor concerns that Meta's entry into the cloud compute market could disrupt the current supply-demand dynamics that have benefited neocloud providers.
Capacity Contracts Under Scrutiny
Meta has disclosed potential capacity agreements with CoreWeave and Nebius totaling up to $62.2 billion, representing 46% of the midpoint of its 2026 capital expenditure forecast of $125 billion to $145 billion. The multi-year deals include a $21 billion contract with CoreWeave running through December 2032, building on a prior $14.2 billion agreement, and a $12 billion deal with Nebius that could expand by an additional $15 billion if capacity isn't sold elsewhere.
During Meta's shareholder meeting in May, CEO Mark Zuckerberg acknowledged that selling cloud compute capacity is "definitely on the table" if the company builds more than it needs. He noted that outside firms approach Meta "almost every week" seeking access to models or leftover computing power, though the company has yet to begin selling due to its own requirements.
Market Implications
The potential shift in Meta's strategy poses a dual threat to pure-play AI cloud providers. Not only could Meta become a competitor rather than just a customer, but the hyperscaler's massive scale could pressure pricing and margins across the sector. For CoreWeave, which counts Meta among its largest customers and Microsoft as 67% of revenue, the risk extends beyond any single contract cancellation to a broader reassessment of its valuation multiple.
Amazon.com (NASDAQ:AMZN) edged 1.4% lower, while Microsoft (NASDAQ:MSFT) gained 1.1% and Alphabet (NASDAQ:GOOGL) added 0.7%, reflecting the nuanced impact on established cloud players who already operate at scale.
Financial Context
Meta's Q1 results showed $56.31 billion in revenue against $19.84 billion in capital expenditures, which consumed 35% of revenue and ran 1.6 times free cash flow of $12.39 billion. The company raised its 2026 capex forecast in April from $115-$135 billion to $125-$145 billion, citing higher component and data center costs.
Unlike Amazon, Microsoft, and Alphabet, which report cloud revenue and backlogs, Meta lacks a disclosed cloud business. AWS generated $37.6 billion in Q1 sales with a 37.8% operating margin, Microsoft Cloud revenue reached $54.5 billion with a $627 billion commercial backlog, and Google Cloud posted $20.03 billion in revenue with a $460 billion backlog.
