AI Off-Balance Sheet Liabilities Surge Nearly $1 Trillion in 90 Days, Surpassing $4.1 Trillion

Author: Zhang Yaqi, Wall Street Insights

Amid the frenzy of AI infrastructure development, an unprecedented storm of off-balance sheet liabilities is quietly gathering in Silicon Valley.

According to the latest quarterly report data, the total off-balance sheet commitments disclosed by major cloud computing companies such as Alphabet, Meta, Microsoft, Amazon, as well as Nvidia, Broadcom, and SpaceX, has reached $4.11 trillion, an increase of nearly $992 billion compared to Morgan Stanley's August-end statistic of $3.12 trillion—an addition of nearly $1 trillion in just about 90 days. If we also include the off-balance sheet commitments based on news reports rather than formal financial disclosures that Morgan Stanley previously accounted for, the total would reach $4.29 trillion.

Meanwhile, the actual debts and lease liabilities on the books of these companies amount to about $1 trillion, meaning that for every $1 of on-balance sheet liabilities, there are over $4 in commitments not reflected on the balance sheet.

This figure has not yet peaked. Nvidia is set to release its quarterly report in late November, while Oracle and Broadcom will disclose theirs in December. All three companies have yet to update their latest quarterly data. The current $4.1 trillion is merely a lower limit. Amanda Lynam, Chief Credit Strategist at Goldman Sachs, also pointed out that investor attention to these off-balance sheet exposures is increasing, warning that there is no unified approach among major rating agencies—S&P adjusts for off-balance sheet leases while Moody's and Fitch have not made similar adjustments, making potential changes in rating methodologies worth continuous monitoring.

$57.7 Billion Added in a Single Quarter, Growth Shows No Signs of Slowing

To accurately present the changes in the third quarter, we can compare the five companies that have submitted their Q3 reports with their Q2 data. The combined off-balance sheet commitments of these five companies increased from $2.48 trillion to $3.05 trillion, an increase of $577 billion in a single quarter, representing a 23% growth.

The specific situations of each company are as follows:

Meta added $195 billion, a 29% increase. Irrevocable purchase commitments soared from $349 billion to $455 billion, mainly involving third-party cloud computing capacity for 2027 and beyond (the counterparties are not disclosed). The unused signed leases increased from $279 billion to $356 billion, including a $68 billion lease signed in July; the remaining value guarantees for its joint ventures in the Hyperion data center in Louisiana and the El Paso data center in Texas total $41.5 billion. Notably, Meta, which has $97 billion in operating cash flow and a credit rating of Aa3/AA-, saw its credit default swaps (CDS) hit a historical high after the earnings report, subsequently announcing a maximum $95 billion equity financing plan, of which $37.5 billion has been completed, with about $60 billion in an ATM project pending execution.

Amazon added $131 billion, a 41% increase, the largest percentage increase among the major cloud companies. Unconditional purchase obligations nearly doubled, from $130 billion to $254 billion, with a new item of $159.6 billion for "property and equipment"; unused leases increased from $137 billion to $165 billion. The only offset was the $21.3 billion owed to OpenAI, which was recorded in Q3 and moved to the balance sheet. Following unexpected capital expenditure impacts, Amazon's stock price plummeted last Friday.

Alphabet added $164 billion, an 18% increase. Purchase commitments rose by $95 billion, and unused leases increased from $85 billion to $131 billion, while energy equipment guarantees (extended to 2049) doubled from $7.6 billion to $16.2 billion, along with a new $6.6 billion TPU hardware buyback guarantee. Against the backdrop of having previously raised $80 billion in the equity market and ongoing negative free cash flow, Alphabet's off-balance sheet commitments have surpassed $1 trillion, making it the first single company to exceed $1 trillion in off-balance sheet commitments, reaching $1.059 trillion.

Microsoft added $35 billion, a 6% increase, being the most "restrained" in terms of off-balance sheet commitment expansion. In Q3, new data center lease agreements amounted to about $53 billion, of which $17 billion has been activated and moved to the balance sheet, while unused leases increased from $329 billion to $365 billion. It is worth noting that Microsoft's procurement and construction commitments are only disclosed once a year in the 10-K, and the current $229 billion figure remains as of the end of June, with the actual number likely to be significantly revised upward at that time. Even so, the "cleanest" major cloud company recently needs to issue $25 billion in bonds for financing.

SpaceX added $51 billion, a 174% increase, showing the most aggressive growth. Its off-balance sheet commitments rose from $29 billion at the end of Q2 to $40 billion at the end of Q3, and after the disclosure of a $40 billion Apollo GPU main financing lease agreement (set to commence in the first half of 2027) through an 8-K filing on October 26, the total scale surged to $80 billion.

Rating Agencies Have Different Approaches, Market Begins to Price In

Amanda Lynam from Goldman Sachs noted that if we combine the off-balance sheet leases and purchase commitments of the five major cloud companies, the relevant scale has increased eightfold since 2023. However, this risk exposure has not received uniform treatment in the rating system: S&P adjusts for off-balance sheet leases when calculating leverage, while Moody's and Fitch have not made similar adjustments, making potential changes in rating methodologies a risk point worth closely tracking.

This lack of transparency in accounting treatment has begun to provoke direct reactions from the market. Analysis firm Needham pointed out that once off-balance sheet liabilities are included in the calculations, Meta's enterprise value would increase by 35%. After the earnings report, Meta's CDS hit a historical high, leading to a large-scale equity financing announcement. Lynam also emphasized that some companies have explicitly stated the need to lock in capital before the market becomes saturated, a statement considered a direct annotation for Meta's equity financing and may not be the last case.

Three Main Components of Off-Balance Sheet Commitment Expansion

Breaking down the $4.1 trillion structurally reveals three main lines:

First, unused signed leases, totaling $1.39 trillion, have expanded further from $1.12 trillion in August. These assets typically consist of data center shells funded by special purpose vehicles (SPVs), which only transfer to the company's balance sheet once officially powered on.

Second, purchase commitments, amounting to $2.25 trillion, have significantly increased from $1.73 trillion at the end of August. This category includes the third-party cloud computing capacity that Meta has invested heavily in, as well as Amazon's new property and equipment purchase obligations.

Third, guarantees and backstop commitments have risen from $158 billion to $273 billion, including Alphabet's energy equipment guarantees and TPU hardware buyback guarantees, as well as Meta's remaining value guarantees in two data center joint venture projects.

Expansion of Off-Balance Sheet Debt, Market Value Simultaneously Evaporates

Morgan Stanley warned in August that these commitments have "strategic value" during periods of constrained computing supply, but "if supply and demand normalize sooner than expected, companies will have to pay for excess capacity or attempt to renegotiate contract terms."

The market has begun to provide answers. Alphabet's stock price experienced a record single-day drop this month, Amazon continues to decline, and the total market value of Nasdaq 100 constituents has evaporated by over $1.2 trillion this month.

In other words, within a single quarter, large tech companies added about $1 trillion in off-balance sheet liabilities; within a month, these companies' market values have also shrunk by more than $1 trillion. Off-balance sheet commitments do not disappear due to fluctuations in stock prices and must be honored upon maturity. The current core suspense is whether AI commercialization revenue can catch up before the next wave of commitments arrives—while the next 10-Q quarterly report season is not far off.

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