AI Giants Could Be Downplaying $662B in Future Lease Risks
For all the cash that flows through big tech, the full story of what those dollars represent can be hard to see. In the booming business of AI infrastructure, billions sit just out of sight—with commitments but not yet recognized.
According to a new report from Moody's Ratings, the major hyperscalers that dominate cloud and artificial intelligence computing—Amazon, Meta, Alphabet, Oracle and Microsoft—have an estimated $662 billion in lease obligations contracted, but work has yet to begin. Because of this, they're kept off the balance sheet.
That complexity stems from how fast AI infrastructure is evolving. To keep pace, companies are opting for shorter-term data center leases, often five years rather than the traditional 10 to 15 years.
Landlords, facing steep upfront costs, typically require added protection in the form of residual value guarantees (RVGs)—pledges that compensate the landlord if a hyperscaler stops using a facility, preserving the data center's value.
"When the financial commitment made by the hyperscalers is in the form of an RVG that is part of a lease, the accounting can defer the reporting of the expected obligations," Moody's wrote.
Under Generally Accepted Accounting Principles, obligations don't show up as liabilities until services are rendered—meaning they often appear only in footnotes as part of future contractual commitments, rather than on the balance sheet itself.
"Uncertainty surrounding AI data centers affects accounting liabilities, disclosures may not show the full picture," Moody's added.
The issue extends beyond accounting mechanics. The Financial Times reported that Meta and Oracle are using special-purpose vehicles primarily funded by outside investors to construct data centers, a structure that can further distance those facilities from corporate balance sheets. While such leases might not count as reported debt under accounting rules, investors and credit rating agencies often view them that way.
In its analysis, Moody's arrived at the $662 billion figure after reviewing the hyperscalers' financial filings, identifying $969 billion in total future lease commitments—including data centers. Roughly two-thirds of that total, or $662 billion, represents leases that haven't yet taken effect for the 2025 reporting period.
The unstarted leases alone equal about 113% of the companies' combined adjusted debt. Once those leases commence, accounting standards will require that they be moved from footnotes to the financial statements.
Source: GlobeSt/ALM