Microsoft (NASDAQ: MSFT) has locked in electricity supply for an Indiana data-center campus two full years before the power is scheduled to arrive.
NiSource (NYSE: NI) announced the 20-year energy agreement on Friday, with the contract set to begin in 2028 and add approximately 1,100 MW to NiSource’s generation pool.
Under the terms of the deal, Microsoft will cover all generation and transmission costs required to serve the Indiana site.
The scale of the agreement is striking: 1,100 MW is roughly equivalent to what Microsoft now brings online across an entire quarter of operations.
During the company’s July 29 earnings call, CEO Satya Nadella said Microsoft added “another gigawatt of capacity” in the June quarter and is on track to roughly double its total capacity within two years.
CFO Amy Hood added on that same call that customer demand continues to exceed available supply, underlining the urgency behind long-term power commitments of this kind.
Microsoft’s capital spending has grown at a pace that has outrun available grid infrastructure, with cash capital expenditure rising from $23.9 billion in fiscal 2022 to $116 billion in fiscal 2026, nearly five times as much in just four years.
Fiscal 2026 alone represented a spending increase of approximately 80%, with around two-thirds of last quarter’s roughly $41 billion in capex directed toward short-lived assets such as CPUs and GPUs.
Those servers generate no revenue until a site has power, and new electricity generation takes years to plan, permit, and construct, creating a structural bottleneck for hyperscale operators.
Management has indicated that the broader capex measure is expected to grow again in fiscal 2027, beginning with more than $50 billion in the September quarter alone.
The NiSource deal also highlights that Microsoft is joining an increasingly competitive queue for grid capacity in Indiana, as NiSource signed an agreement with Alphabet (NASDAQ: GOOGL) and expanded its contract with Amazon (NASDAQ: AMZN) in April.
Three of the world’s largest hyperscalers now hold power agreements with the same Indiana utility, signaling how concentrated demand for new electricity capacity has become in specific regional markets.
NiSource has promised to provide additional financial detail on the Microsoft agreement during its October 28 earnings call, which investors will be watching closely for project timelines and cost structure.
The broader pattern emerging from this deal is clear: in the current AI infrastructure buildout, power must be secured first, before chips can be deployed and before cloud revenue can follow.
