Iren vs. Nebius: Which Neocloud Provider Is the Better AI Stock?

Neocloud providers have been gaining more traction as the AI build-out continues to take shape. While AI chips remain the foundational hardware of this infrastructure, a lot of other components and prerequisites are necessary for those chips to be deployed effectively.

Iren (NASDAQ: IREN) and Nebius (NASDAQ: NBIS) are two of the leaders in the emerging neocloud industry. Both have signed lucrative multiyear deals with tech giants for access to the massive data centers they are building, but assessing which one is the better buy now requires a nuanced examination.

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The business model

Iren and Nebius have similar business models. They both build AI data centers and rent them out to hyperscalers like Microsoft (NASDAQ: MSFT) and Meta Platforms (NASDAQ: META). Their customers have vast budgets, which have helped the neoclouds land contracts that guarantee more than $1 billion in annual recurring revenue.

When any deal gets announced, investors carefully look at how much each firm will generate from its energy. For instance, in November, Iren and Microsoft signed a five-year, $9.7 billion agreement for 200 megawatts of critical IT load. Meanwhile, Nebius signed a 5-year deal with Microsoft for $17.4 billion last September that gives the latter access to Nebius's 300-megawatt AI data center in Vineland, New Jersey.

It's normal for Iren and Nebius to sign lucrative contracts before they can provide energized data centers to fulfill their end of the deals. For instance, Nebius' SEC filing regarding its Microsoft deal says that the GPU services will be deployed in "several tranches during 2025 and 2026."

Tech companies are willing to reach agreements and fund projects long before the processing power or electricity becomes available. For instance, Meta Platforms reached an agreement with nuclear power startup Oklo (NYSE: OKLO) to support a 1.2-gigawatt site that will not be fully energized until 2034. Iren and Nebius already have megawatts available and are pressing forward with new sites.

Nebius has been signing more deals recently

Nebius has undoubtedly been the better performer when it comes to recent dealmaking. While Iren hasn't announced a big deal since November, Nebius signed two new deals with Meta Platforms, which add up to a combined $27 billion over the next five years.

The only blemish on those announcements was that the companies did not disclose the total megawatts involved in the deals, which makes it impossible to tell whether Nebius has been able to raise its prices. However, Nebius commanded a higher rate per megawatt in its Microsoft deal than Iren, partly due to its software-integrated technology stack.

Iren's failure to deliver any new deals in its fiscal 2026 Q2 disappointed investors. The company hinted at "multiple, advanced negotiations as execution continues and financing progresses," so there will be an even more intense spotlight on its fiscal 2026 Q3 results, which come out on Thursday.

Even news of a single deal with a tech giant would strengthen the bull thesis for Iren. It's also in a good position to sign such a deal since its 1.4-gigawatt Sweetwater 1 project is supposed to be energized by now. Iren pegged April 2026 as its date of completion for a while, and management has been adamant about never missing deadlines.

Iren has more gigawatts

Nebius has secured more deals right now, but Iren has the capacity to support more big tech agreements in the future. Iren announced it acquired a new site in Oklahoma that will provide 1.6 gigawatts of critical IT load once the AI data center is constructed. That brought Iren's total portfolio potential to 4.5 gigawatts.

Only 810 megawatts of its 4.5 gigawatts of secured power are operational. As more gigawatts of computing capacity come online, Iren's annual recurring revenue will expand.

Nebius is aiming for more than 3 gigawatts of contracted power by the end of 2026. It recently received approval for a site that can provide up to 1.2 gigawatts of energy and hinted that it would secure additional large projects like this in the future. The company also said it will construct a 310-megawatt AI data center in Finland.

Iren's ability to secure a 1.6-gigawatt site in Oklahoma shows how its AI data center portfolio can grow significantly with a single new site. While Nebius has more deals right now, Iren's secured power advantage is meaningful. The company said it generates $3.4 billion in annual recurring revenue from 460 megawatts in capacity that is supporting current AI deployments.

Applying that same rate to the more than 4 gigawatts of computing capacity it could add with its currently secured power supplies would result in more than $30 billion in annual recurring revenue once those data centers are constructed. Nebius enjoys the same opportunities and can earn more per megawatt with its software stack, but Iren's larger potential based on its power deals makes it more attractive in the long run.

Marc Guberti has positions in Iren. The Motley Fool has positions in and recommends Meta Platforms and Microsoft. The Motley Fool has a disclosure policy.