Off-Balance-Sheet Financing is an Infrastructure Staple

The AI infrastructure boom has changed the nature of hyperscaler financial commitments. Traditionally, investors focused on on-balance-sheet debt (bonds, bank loans and finance leases). Today, a growing issue is contractual obligations that are legally binding but are not yet recognized as liabilities under U.S. generally accepted accounting practices.

These commitments include:

• Multi-decade data center leases

• Colocation agreements

• GPU purchase commitments

• Power purchase agreements (PPAs)

• Network infrastructure contracts

• Joint venture funding commitments

• Capacity reservation agreements

The accounting treatment, while legitimate, represents future fixed cash commitments not reflected on balance sheets. 

According to Moody's Ratings, at year-end 2025, about $1.9 trillion in such future commitments were incumbent on a few hyperscale high-performance-computing suppliers::

Item	Amount
Total undiscounted future data center lease commitments	$969 billion
Not yet commenced (therefore largely off balance sheet)	$662 billion
Portion already commenced	about $307 billion

According to Moody's, $662 billion of uncommenced lease obligations exceeded the group's adjusted reported debt by roughly 113 percent. 

Company	Major off-balance-sheet commitments	Approximate current scale (2026)	Likely growth through 2028
Alphabet	AI data center leases, TPU infrastructure, power contracts	roughly $120B-$170B	$200B+ possible
Amazon	Data center leases, AWS capacity, equipment commitments	roughly $180B-$250B	$300B-$400B possible
Microsoft	Azure leases, OpenAI infrastructure, private investment funds	roughly $150B-$220B	$250B-$350B possible
Meta Platforms	AI campuses, Hyperion leases, networking	about $279B disclosed lease commitments after Q2; additional July commitments announced	$350B-$450B possible
Oracle	OCI data centers, GPU commitOfments, leased facilities	roughly $50B-$100B	$100B-$150B possible

Meta provides one of the clearest examples:

• future AI lease obligations appr;;;;;;\\q12aaching $279 billion

• another approximately $68 billion of new leases signed after quarter-end

• lease terms extending as long as 30 years

• commitments tied to multiple multi-gigawatt AI campuses.

Many obligations never appear as debt but nevertheless commit future cash flow:

Commitment type	Typical accounting treatment	Economic effect
Long-term data center leases	Recognized when lease commences	Future fixed payments
GPU purchase contracts	Usually not recognized until delivery	Locked capital spending
Power purchase agreements	Often disclosed as commitments	Long-term electricity costs
Network capacity reservations	Footnote disclosure	Fixed operating expense
Joint venture funding	Often partially off balance sheet	Future capital contributions
Colocation agreements	Lease recognition delayed until commencement	Multi-year cash obligations

Such practices are common in other capital intensive industries, or parts of industry infrastructure, including airline transportation providers, because doing so:

• preserves reported leverage ratios

• matches accounting recognition to asset availability

• allows capacity to be secured years before facilities open

• enables landlords and infrastructure funds to finance construction

• reduces the need to issue corporate debt immediately. 

If AI capital spending continues near today's pace, a reasonable scenario for Alphabet, Amazon, Microsoft, Meta and Oracle is:

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Year	Estimated aggregate off-balance-sheet commitments (five hyperscalers)
2025	~$662B (Moody's estimate of uncommenced leases)
2026	~$800B-$1.0T
2027	~$1.1T-$1.4T
2028	~$1.3T-$1.7T

The issue for some observers is whether such future commitments are a problem, or not. Even if not considered “debt” in a GAAP sense:

• They require future cash payments.

• They reduce future financial flexibility.

• Many cannot easily be canceled without substantial penalties.

• Credit analysts increasingly incorporate them into leverage analysis.

The issue is impact on firm leverage. 

But that seemingly often is an issue with the financing of infrastructure. Railroads, electric utilities, pipelines, airports, seaports, cellular networks, and fiber networks all required enormous up-front investment years before meaningful revenues arrived. 

Each wave developed financing techniques that shifted risk away from the sponsoring company while securing long-term capital.

Infrastructure era	Typical financing	Off-balance-sheet elements	Primary revenue support	Similarity to AI infrastructure
Railroads (1800s)	Corporate bonds, land grants	Limited	Freight and passenger traffic	Moderate
Electric utilities (1900s-present)	Utility debt, project finance	Power purchase agreements, independent power producers	Regulated utility revenues	Very high
Seaports	Public authorities, revenue bonds	Long-term terminal concessions	Shipping fees	High
Airports	Municipal bonds, PPPs	Airline gate leases	Passenger and airline fees	High
Toll roads	Project finance, PPPs	SPVs, concession agreements	Toll revenues	Very high
Mobile networks	Corporate debt, tower leasing	Tower REIT leases	Wireless subscriptions	Very high
Fiber networks	Project finance, infrastructure funds	Long-term IRUs, dark fiber leases	Wholesale and retail access	Extremely high
AI data centers	Corporate debt, project finance, lease finance	Long-term data center leases, PPAs, equipment commitments	Cloud and AI services	Highest

Electricity infrastructure evolved from vertically integrated utilities financing everything on their own balance sheets to today's mixture of:

• utility-owned assets,

• independent power producers,

• project-financed generation,

• long-term power purchase agreements (PPAs), and

• infrastructure funds.

The important innovation was separating ownership from usage. A utility could commit to buying electricity for 20–30 years without necessarily owning the generating plant. That resembles today's hyperscalers signing 15- to 30-year leases for AI campuses built by third-party developers.

Modern project finance emerged because infrastructure became too expensive for sponsors to fund entirely on their own balance sheets.

Instead:

• a special-purpose vehicle (SPV) owns the project,

• lenders are repaid primarily from project cash flow,

• the sponsor's liability is limited,

• long-term customer contracts reduce lender risk.

This structure became common for:

• toll roads,

• airports,

• ports,

• power plants,

• pipelines.

AI data centers resemble these projects.

Wireless carriers originally owned virtually everything:

• towers,

• land,

• buildings,

• backup power.

Beginning around 2000 they sold towers to companies such as American Tower, Crown Castle, and SBA Communications.

Instead of ownership they signed:

• 10- to 20-year leases,

• automatic renewals,

• inflation escalators.

From an economic perspective, tower lease obligations became debt-like commitments while freeing carriers' balance sheets for spectrum purchases and network equipment. Hyperscalers appear to be following almost exactly the same path.