From Ritu Raj | Product & Market Analysis
Microsoft Has $329 Billion of Leases Not Yet Commenced, 2.3x Its Annual Capex
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On 30 June 2026, Microsoft had $329.1 billion of signed leases, primarily for datacenters, that had not yet started. A year earlier the same line read $92.7 billion. Microsoft's leases not yet commenced now run at about 2.3 times the $140.6 billion it put into property and finance leases during fiscal 2026, and none of it appears in reported capex.
Key takeaways
- Microsoft's uncommenced leases reached $329.1 billion at 30 June 2026. The figure comes from Note 13 of the fiscal 2026 10-K, and it was $92.7 billion at 30 June 2025, a rise of about 3.5 times in 12 months.
- The June 2026 quarter alone added $132.5 billion. The balance moved from $196.6 billion at 31 March to $329.1 billion at 30 June, more than three times that quarter's roughly $41 billion of reported capex.
- Capex plus uncommenced leases comes to about $470 billion. Cash spent on property in fiscal 2026 was $115.9 billion and new finance lease assets were $24.6 billion, so the uncommenced balance is the largest of the three pieces.
- Reported capex will capture less of the build from fiscal 2027. Microsoft said a useful life change shifts more future datacenter leases from finance to operating, and operating leases are excluded from capex.
What Microsoft's leases not yet commenced figure measures
Every Microsoft 10-K and 10-Q carries a lease note. Near the bottom sits one sentence that most readers skip. It states the total value of leases the company has signed where the landlord has not yet handed over the building.
Under US lease accounting, a lease goes onto the balance sheet at commencement, which is the date the tenant gets the right to use the asset. A datacenter that is still being built has not commenced. So a lease signed today for a hall that energises in 2029 sits in a footnote until 2029.
That is the whole mechanism. It is not an accounting trick, and the existing breakdown of the $662 billion in hyperscaler leases off the balance sheet covers the rule across five companies. This post does something narrower. It follows one company's own number through its own filings, quarter by quarter, and puts it next to the capex figure everyone quotes.
The exact disclosure
The fiscal 2026 wording is specific. Microsoft wrote that as of 30 June 2026 it had "additional leases, primarily for datacenters, that had not yet commenced of $329.1 billion", with some arrangements subject to contractual conditions. The leases will commence between fiscal 2027 and fiscal 2033, with terms of 1 to 20 years.
Two details matter. The figure is undiscounted, so it is the sum of every future payment rather than a present value. And since fiscal 2025 Microsoft has stopped splitting it into operating and finance leases. The last split, at 30 June 2024, showed $8.6 billion of operating and $108.4 billion of finance leases not yet commenced.
Why capex does not include it
Microsoft's headline capex counts cash paid for property and equipment plus finance leases at the point they start. Chief financial officer Amy Hood said it directly on the July 2026 call: "Finance leases are included in capital expenditures while operating leases are not."
So the uncommenced balance is excluded twice over. It is not cash yet, and it has not commenced. Some of it will enter capex later as finance leases start. Some will never enter capex at all, because it will commence as operating leases. Our view is that this footnote, not the capex line, is the best single read on how far ahead Microsoft has committed.
How the leases not yet commenced figure grew in five quarters
The balance did not climb in a straight line. It fell in fiscal 2025, then grew in every quarter of fiscal 2026, with the largest step at the very end.
| Period end | Uncommenced leases | Change on prior filing | Commencement window |
|---|---|---|---|
| 30 June 2024 (10-K) | $117.0 billion ($8.6B operating, $108.4B finance) | Starting point | FY2025 to FY2030 |
| 30 June 2025 (10-K) | $92.7 billion | Down $24.3B, or 21%, over the year | FY2026 to FY2031 |
| 30 September 2025 (10-Q) | $106.2 billion | Up $13.5B, or 15% | FY2026 to FY2031 |
| 31 December 2025 (10-Q) | $155.1 billion | Up $48.9B, or 46% | FY2026 to FY2031 |
| 31 March 2026 (10-Q) | $196.6 billion | Up $41.5B, or 27% | FY2026 to FY2031 |
| 30 June 2026 (10-K) | $329.1 billion | Up $132.5B, or 67% | FY2027 to FY2033 |
Every figure is quoted from the lease note of the filing named. The 30 June 2024 total is the sum of the two figures Microsoft disclosed. Percentages are Zan Digital arithmetic. Each figure is a balance, so a change nets new signings against leases that commenced and left the footnote during the quarter.
The 2025 dip had a known cause
The fall from $117.0 billion to $92.7 billion lines up with a period when Microsoft was pulling back from new leasing. In March 2025, analysts at TD Cowen wrote that Microsoft had "walked away" from pending leases totalling 2 gigawatts in the US and Europe over six months. They tied it largely to a decision not to support incremental OpenAI training workloads.
That claim came from analyst channel checks, not from Microsoft, and the company said at the time it would continue to grow strongly in all regions. The filings are consistent with a pause. Leases kept commencing and leaving the footnote, while fewer new ones were signed to replace them.
The June 2026 quarter was a break in pace
Then the pause reversed. Over fiscal 2026 the balance rose by $236.4 billion, and more than half of that arrived in the final quarter. Bloomberg reported the jump as more than $130 billion in new data center leases in one quarter. Investor relations head Jonathan Neilson told Bloomberg it was "really a signal of the continued demand strength that we see".
The commencement window also moved out by two years, from fiscal 2031 to fiscal 2033. That tells you a meaningful part of the new signing is for capacity that does not exist yet and will not be delivered soon. You are looking at a contract book for the end of this decade, signed in the middle of it.
Adding Microsoft's lease commitments to reported capex
The target question for this post is simple. If you add the uncommenced leases to the capex Microsoft reports, how big is the real commitment? Answering it needs one judgement call and three numbers from the 10-K.
Building the capex figure from the 10-K
The cash flow statement shows additions to property and equipment of $115.9 billion in fiscal 2026, up from $64.6 billion in fiscal 2025. That is cash out of the door.
Microsoft's own capex definition adds finance leases. The 10-K does not print an annual capex-including-leases figure, but the lease note does show $24.6 billion of right-of-use assets obtained through finance leases in the year. Adding the two gives a proxy of $140.6 billion.
Treat that $140.6 billion as a close approximation, not Microsoft's number. The quarterly check is reassuring. For the June quarter, cash paid for property was $35.8 billion and Hood put finance leases at $5.6 billion, against reported capex she described as $41 billion.
The $470 billion total
Now stack the pieces. Cash capex of $115.9 billion, plus finance leases of $24.6 billion, plus uncommenced leases of $329.1 billion, gives $469.7 billion. The uncommenced block is 70% of that total.
This sum mixes timings, and that is the honest objection to it. Capex is one year of spend. The uncommenced figure is many years of rent. Our view is that the comparison is still the right one. Both numbers describe obligations Microsoft has already chosen to take on, and only one of them is in the figure investors argue about each quarter.
For a wider view of how capex across the sector compares with what it earns, the analysis of the $725 billion capex bet and its missing payback math covers the four largest spenders together.
Microsoft's lease commitments against its cash generation
A commitment only matters relative to the cash that will pay for it. On that test the uncommenced balance is large but not alarming, and the ratios below are the fairest way to see both halves of that sentence.
Three ratios worth keeping
Against cash from operations, the uncommenced balance is 1.8 times. Microsoft generated $182.9 billion of operating cash flow in fiscal 2026. Less cash capex of $115.9 billion, free cash flow was $67.0 billion, which makes the uncommenced balance 4.9 times one year of free cash flow.
Against leases already on the books, it is 2.9 times. The fiscal 2026 maturity table shows $114.4 billion of undiscounted payments on leases that have already commenced, $24.7 billion operating and $89.7 billion finance. The footnote carries nearly three times what the balance sheet carries.
A rough present value narrows the gap, and it is worth stating because the headline number overstates the burden. On Microsoft's existing finance leases, the recorded liability of $66.6 billion is 74% of undiscounted payments of $89.7 billion. Applied to the uncommenced balance, that ratio gives about $244 billion. That is illustrative only, since the new leases have different terms and may carry different rates.
Finance lease liabilities on the balance sheet already rose 44% in the year, from $46.2 billion to $66.6 billion. The uncommenced leases are the queue behind that line, and the related analysis of hyperscaler capex against operating cash flow shows how much of the sector's cash is already spoken for.
Why reported capex will understate the build more from fiscal 2027
This is the part of the story that changes how you should read every Microsoft capex number from here on. On the July 2026 call, Hood announced that from the start of fiscal 2027, Microsoft is extending the estimated useful lives of its datacenters and office buildings from 15 to 25 years.
She said the depreciation effect was only about timing. The larger effect was elsewhere. In her words, "the greater impact is on capital expenditures as more of our future datacenter leases will shift from finance leases to operating leases". That shift cut the calendar 2026 capex expectation to about $175 billion, while she said the underlying investment plans were unchanged.
The mechanics follow from lease classification. A lease that covers most of an asset's economic life is a finance lease. Stretch the assumed life of a building to 25 years and a 15 or 20 year lease covers a smaller share of it, so more leases classify as operating. Operating leases never enter Microsoft's capex.
Put plainly, the same buildings, the same rent and the same plans now produce a smaller capex number. We think that makes the uncommenced footnote more important, not less. It is the one disclosure that still captures the full signed book regardless of how each lease ends up classified.
| Item | In reported capex? | On the balance sheet? | Where to find it |
|---|---|---|---|
| Cash paid for property and equipment | Yes | Yes, as property | Cash flow statement |
| Finance leases that have commenced | Yes, in the quarter they start | Yes, as asset and liability | Lease note, supplemental table |
| Operating leases that have commenced | No | Yes, as asset and liability | Lease note, maturity table |
| Leases signed but not yet commenced | No | No | One sentence in the lease note |
The last row grew from $92.7 billion to $329.1 billion in a year. The third row is where more of it will land from fiscal 2027. Neither touches the capex line.
Where Microsoft sits inside the $662 billion Moody's figure
In February 2026, Fortune reported a Moody's Ratings analysis that found $662 billion of uncommenced lease commitments across Amazon, Meta, Alphabet, Microsoft and Oracle. It used year-end 2025 disclosures. That number is now the standard citation for this topic.
For Microsoft, it is already out of date. Microsoft's own figure at 31 December 2025 was $155.1 billion. Six months later it was $329.1 billion, an increase of 2.1 times. On its own, Microsoft's current balance is about half the five-company total Moody's published eight months ago.
The aggregate also hides a difference in direction. A sector figure can rise because one company signs heavily while others hold still. Following one company's filings, as this post does, is the only way to see who is actually adding to the queue. It is the same logic as reading the cloud backlog figures company by company rather than as one sector total.
Where this argument is weakest
The case above treats the footnote as a hard commitment comparable to capex. There are three good reasons to be careful with that framing.
Some of the $329.1 billion is conditional
The fiscal 2026 note adds a phrase that earlier filings lacked: "some arrangements subject to certain contractual conditions being met". Microsoft does not say how much, or what the conditions are. Power delivery, construction milestones and permits are plausible candidates, but that is inference. A conditional lease is a weaker obligation than a signed cheque, and the filing gives you no way to size the conditional part.
The undiscounted and multi-year nature of the figure cuts the same way. $329.1 billion spread across terms of up to 20 years, starting at various points between fiscal 2027 and fiscal 2033, is a far smaller annual bill than the headline suggests. The present value estimate above, about $244 billion, is a fairer size for the obligation, and even that ignores when it starts.
Leasing may be the cheaper way to buy demand
The second objection is that the leases follow demand. Microsoft's investor relations head called the June jump a signal of demand strength, and the company had already shown in 2025 that it would walk away from capacity it did not want. That suggests the signings are not reflexive. A company that paused leasing for a year and then resumed at scale is arguably responding to orders, not getting ahead of them.
There is also a reasonable case that leasing is the prudent choice. A lease shifts construction risk to a developer and preserves cash for chips, which the company replaces far more often than buildings. If that is the logic, a large uncommenced balance reflects capital discipline rather than exposure. We do not find that fully convincing, because rent is owed whether or not the demand holds, but it is a fair reading of the same numbers. The related piece on how GPU depreciation choices shape AI earnings covers the shorter-lived side of that trade.
What to check in Microsoft's next 10-Q
The September 2026 quarter 10-Q had not been filed when this post was written. When it appears, four lines in it will tell you whether the June quarter was a one-off or a new run rate.
| Line | Where | What a meaningful move looks like |
|---|---|---|
| Leases not yet commenced | Lease note, final paragraph | Another quarterly increase near $130B would mean the June step was a new pace |
| Commencement window end date | Same sentence | A move beyond fiscal 2033 means signing is reaching further out |
| Operating lease right-of-use additions | Supplemental lease table | A rise relative to finance lease additions confirms the reclassification is working through |
| Capex including finance leases | Earnings call prepared remarks | Hood guided to growth in fiscal 2027 capex, so a flat figure would be a change in plan |
The second row is the one we would watch most closely. A lease balance can rise because Microsoft is buying more of the same. A window that keeps lengthening means it is committing further into the future, which is a different and larger bet on how long AI demand lasts.
If you track funding risk across the sector, compare these lines against the debt side of the build, covered in the analysis of AI debt and private credit exposure. Leases and bonds are two routes to the same capacity, and a company can shift between them faster than its headline capex will show.
Frequently asked questions
What are Microsoft's leases not yet commenced?
They are leases Microsoft has signed, primarily for datacenters, where it has not yet received the right to use the property. Under US lease accounting they stay off the balance sheet until commencement. At 30 June 2026 the total was $329.1 billion, commencing between fiscal 2027 and fiscal 2033 with terms of 1 to 20 years, according to Note 13 of the fiscal 2026 10-K.
How much did Microsoft's uncommenced leases grow in fiscal 2026?
The balance rose from $92.7 billion at 30 June 2025 to $329.1 billion at 30 June 2026, an increase of $236.4 billion or about 3.5 times. The quarterly balances were $106.2 billion in September, $155.1 billion in December and $196.6 billion in March. The final quarter alone added $132.5 billion.
Are Microsoft's datacenter leases included in capex?
Only partly. Microsoft counts cash spent on property and equipment plus finance leases once they commence. Operating leases are never included, and leases not yet commenced are not included in either form. From fiscal 2027 more datacenter leases are expected to classify as operating leases, so reported capex will capture a smaller share of the total build.
What is Microsoft's total AI datacenter commitment including leases?
No single disclosed figure exists. Adding fiscal 2026 cash capex of $115.9 billion, $24.6 billion of new finance lease assets and $329.1 billion of uncommenced leases gives about $469.7 billion. That total mixes one year of spending with many years of undiscounted rent, so treat it as a measure of committed scale rather than an annual cost.
Why did Microsoft cut its capex guidance to $175 billion?
Microsoft said the reduction from its earlier calendar 2026 expectation was an accounting effect, not a spending cut. Extending datacenter useful lives from 15 to 25 years means more future leases classify as operating leases, which are excluded from capex. Chief financial officer Amy Hood said underlying calendar 2026 investment expectations were otherwise unchanged.
Is $329 billion of uncommenced leases a risk for Microsoft?
It is a large obligation, not a solvency problem. The balance equals 1.8 times fiscal 2026 operating cash flow of $182.9 billion, and it is payable over terms of up to 20 years. The real risk is that rent is owed whether or not AI demand holds, and some of the arrangements are conditional in ways Microsoft has not quantified.
Where to start
Pick the next 10-Q from any company you depend on for cloud capacity and find the sentence containing "not yet commenced". It takes about ten minutes, and it is usually the last paragraph of the lease note.
Write the figure next to that quarter's reported capex in a two-column sheet, and repeat every quarter. After three entries you will know whether your supplier's committed build is growing faster than the number its executives discuss on the call. If it is, the capex headline is no longer telling you how much has been promised.
References
- Microsoft, Form 10-K for fiscal 2026, Note 13 Leases, filed July 2026. Source for the $329.1 billion balance, maturity table, lease liabilities and right-of-use additions.
- Microsoft, Form 10-K for fiscal 2026, cash flow statement, filed July 2026. Source for additions to property and equipment.
- Microsoft, Forms 10-Q for the quarters ended 30 September 2025, 31 December 2025 and 31 March 2026, lease notes. Source for the quarterly balances.
- Microsoft, Forms 10-K for fiscal 2025 and fiscal 2024, lease notes. Source for the $92.7 billion and $117.0 billion balances.
- Microsoft, FY2026 Q4 earnings call and press release, 29 July 2026. Source for Amy Hood's capex, finance lease and useful life remarks, and operating cash flow.
- Bloomberg (via Bloomberg Government), Microsoft reports over $130 billion in new data center leases, 2026. Source for the Jonathan Neilson quote.
- Bisnow, Microsoft canceling data center leases, walking away from deals, analysts say, 27 March 2025. Source for the TD Cowen 2 gigawatt claim.
- Fortune, Moody's flags $662 billion risk at the heart of the data center build-out, 25 February 2026. Source for the five-company Moody's total.
Weakest point in the source base: Microsoft no longer splits uncommenced leases into operating and finance, and does not quantify the conditional arrangements. So the present value and capex proxy figures here are Zan Digital estimates. The TD Cowen claim is analyst channel checks reported secondhand. All figures last verified 25 October 2026, before the September 2026 quarter 10-Q.
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