The Data Centers Signed For but Not Yet Delivered

REDMOND, Wash., Oct. 28 — AtAt Sept. 30, Microsoft had $364.6 billion of leases, primarily for data centers, that had not yet commenced, more than three times the $106.2 billion of a year earlier, its quarterly report filed on Wednesday shows. They are due to begin by June 2034 and to run for up to 20 years.

Microsoft’s capital spending in the quarter was $45.2 billion, short of the more than $50 billion it had forecast in July, “as some third-party capacity deliveries we expected in Q1 were delayed,” Amy Hood, its chief financial officer, said on its earnings call.

A lease that has not begun is not a debt; it is not on Microsoft’s balance sheet at all. Nor has Microsoft said that any contract was broken: it said deliveries were delayed. But the leases are Microsoft’s order book for capacity, space that landlords and cloud providers have agreed to hand over and that Microsoft has agreed to rent. By this paper’s arithmetic, that order book has grown much faster than Microsoft’s capital spending; separately, some third-party deliveries fell behind what Microsoft expected, and it has not linked the two.

Who carries that gap matters to three groups: the developers and cloud providers building to order, who must deliver before a lease can begin; those who lend to them; and the tenants’ shareholders, who take on years of payments once it does.

The Order Book

By this paper’s sum of the operating and finance leases Microsoft then listed separately, the order book stood at $116.1 billion at Sept. 30, 2024, and fell for three quarters, to $92.7 billion at June 30, 2025. It has risen in every quarter since, to $106.2 billion, $155.1 billion, $196.6 billion, $329.1 billion and $364.6 billion.CommencementMicrosoft puts an operating lease on its balance sheet at the commencement date, as an asset and a liability based on the present value of its payments, its annual report says. A finance lease enters its capital spending at full principal value at commencement, Ms. Hood said on Wednesday.

The horizon has lengthened with it. A year ago the leases were to begin by fiscal 2031; now some are not due to begin until fiscal 2034. Since Microsoft’s annual report for the year to June 30, the disclosure has carried a new qualification: “some arrangements” are “subject to certain contractual conditions being met.” Microsoft does not say what the conditions are, or how much of the total they cover.

Set against Microsoft’s spending, the order book has pulled ahead. In the 12 months to Sept. 30 it grew by $258.4 billion, by this paper’s arithmetic, while capital spending, including finance leases, came to $155.6 billion, and the growth is net of leases that began during the year. At Sept. 30 the figure was about eight times the quarter’s spending; a year earlier, about three times.

The comparison is one of scale; the leases do not all pass through that spending. Microsoft’s capital spending counts finance leases but not operating leases, and since July more of its future data-center leases are to be operating leases, because it has lengthened the lives it assigns its data centers.The ChangeFrom July 1, Microsoft extended the estimated useful lives of its data centers and office buildings from 15 to 25 years. “Finance leases are included in capital expenditures while operating leases are not,” Ms. Hood said in July. The order book also grew more slowly in the latest quarter: by $35.5 billion, less than the quarter’s spending, after $132.5 billion in the three months to June.

Microsoft did not say how much capacity slipped, from whom, or whether it is counted in the $364.6 billion. Ms. Hood spoke of “3P GPU lease deliveries” and of “3P GPU as a service contracts that have been delayed to H2”: graphics processors rented from third parties. Delivery timing has moved Microsoft’s spending before, and it has described that variability as normal.BeforeIn April 2025 Ms. Hood said spending was “slightly lower than expected due to normal variability from the timing of delivery of data center leases.” In April 2026 she said it was “down sequentially due to the normal variability from cloud infrastructure buildouts and the timing of delivery of finance leases.”

The Others

Alphabet describes a shortage. Anat Ashkenazi, its chief financial officer, said on its call on Wednesday that “given the supply constrained environment, we started utilizing third-party compute capacity at the end of Q3 and will ramp usage in Q4,” according to a transcript published by The Motley Fool.

Ms. Ashkenazi put Alphabet’s future purchase commitments at $924 billion and its “pre-commencement leases and other obligations” at $152 billion at the end of September, figures she said “reflect the maximum contractual obligations.” A number of the agreements, she said, have “variable pricing and volume flexibility, which could result in lower spend.”

At June 30, Alphabet’s quarterly report listed $811.0 billion of purchase commitments and other contractual obligations, including content licenses and energy contracts, and $85.2 billion of leases not yet commenced; it separately disclosed a short-term lease, with a commitment of about $5.8 billion, due to begin in the third quarter. The categories are not drawn the same way, and its third-quarter report, which should give the detail, was not on the S.E.C.’s EDGAR system at 5:42 a.m. Eastern on Thursday. Meta’s report, filed on Oct. 22, put its leases not yet commenced at $355.73 billion at Sept. 30, a little less than Microsoft’s.

Who Carries It

How much of the cost of a delay falls on the tenant depends on the contract. CoreWeave, which rents out AI computing, has leases with some data-center developers under which, its August quarterly report says, it will pay rent “upon lease commencement,” based on the construction costs the developer incurs; its maximum exposure to loss under them was its $108 million of prepayments at June 30. Under such leases, rent starts only at commencement, so the developer finances construction before any rent arrives; the tenant, for its part, has its prepayments at stake and, its filing warns, its forecast sales.

Some of the biggest tenants also stand behind other parties’ payments. At June 30, Alphabet had backstopped certain payment obligations relating to data centers, with maximum potential future payments of $43.8 billion in credit derivatives and $7.6 billion in financial guarantees, its quarterly report says; on a default, it may take over the underlying leases or sublease them. Where a company gives such backstops, the risk of a default comes back to its own shareholders.

For Microsoft’s shareholders, the leases become years of payments once they begin, and the dependence runs both ways: Microsoft relies on “colocation facilities, leased datacenters, and cloud infrastructure providers” for portions of its operations, its quarterly report says. Asked on Wednesday how Microsoft would raise capital, Ms. Hood said: “There’s a form of financing called leasing, and we’ve been using that one as a vehicle.” She expects Microsoft to remain free-cash-flow positive in fiscal 2027.

There’s a form of financing called leasing, and we’ve been using that one as a vehicle.

The companies’ answer is that they are short of supply, not of demand. “Customer demand continues to exceed available supply,” Ms. Hood said, and Azure’s revenue grew 48 percent even with the delays. In July she told analysts that investment in land and data-center builds “is actually quite flexible,” and that “timing can be changed on much of that.”

The next readings come soon: Amazon reports after the close on Thursday, Alphabet’s quarterly report should show the detail behind its $152 billion, and CoreWeave, which names Microsoft among its significant customers, reports on Nov. 10. At June 30, Amazon listed $137.21 billion of leases not yet commenced. CoreWeave warned in August that delays in making capacity available “could impair our relationships with our customers.” Microsoft’s own test comes in the first half of 2027, when it expects spending to accelerate with “the 3P capacity deliveries that shifted to H2.”