Microsoft reports $364.6 billion in data-center leases not yet commenced

Key Facts

Microsoft disclosed an additional $364.6 billion in leases that had not yet commenced as of September 30, 2026, primarily for data-center facilities, according to its quarterly filing. The figure relates to the first quarter of fiscal 2027, the results of which the company announced on October 28. These leases are future arrangements that had not taken effect at quarter-end; they are not an amount the company paid in cash during the quarter or debt due immediately. The commitments show the scale of capacity the company has contracted for to support its future data-center operations. The disclosure comes as its cloud business accelerates, putting infrastructure expansion alongside rising demand for its services.

The leases are scheduled to commence between fiscal 2027 and fiscal 2034, with terms ranging from one year to 20 years, according to the 10-Q filing. Microsoft's fiscal year begins in July, so these dates span successive years of the company's operating plans. The filing said some arrangements remain subject to the satisfaction of contractual conditions. This means the $364.6 billion represents commitments associated with different dates and terms, not a single bill due on a specified date. Additional leases that had not yet commenced totaled $329.1 billion as of June 30, 2026, according to the previous quarterly filing. The reported balance therefore increased between the end of June and the end of September, with both figures relating to leases that had not yet commenced.

Quarterly results showed an acceleration in operating activity: revenue was $92.279 billion in the three months ended September 30, 2026, compared with $77.673 billion in the same period of 2025, according to the filing with the Securities and Exchange Commission. Microsoft said revenue rose 19% to $92.3 billion and Azure revenue increased 48% year over year. The comparison between the two periods shows revenue expanding as the company contracted for additional data-center capacity. Commercial remaining performance obligations also rose 73% to $677 billion, a figure representing future contracted revenue, not leases or debt owed by the company. These indicators place demand and revenue growth in the context of long-term infrastructure commitments.

But expanding capacity also raises costs. Microsoft said the cost of revenue in its Agents and Infra segment increased 35% in the quarter, driven by investments in data-center infrastructure to support growing demand across Azure and Microsoft 365 cloud services. Capital expenditure was $45.2 billion in the first quarter of fiscal 2027, according to Reuters' report on the results. The spending puts infrastructure investment at the center of investor scrutiny of the growth of the company's AI and cloud businesses. The company warned in its filing that the financial success of these investments depends on uncertain factors, including customer demand and its ability to price services and generate returns that cover their costs. It said, "The financial success of these investments depends on a number of uncertain factors, including customer demand for our cloud and AI products and services, and our ability to price those services and generate revenue from them at levels sufficient to recover our costs."

Quarterly results exceeded analysts' expectations, with revenue of $92.28 billion and adjusted earnings per share of $4.89, against forecasts of $90.63 billion and $4.73 per share. Microsoft shares closed at $531.01 on October 28, then rose by more than 2% in after-hours trading following the results, according to EL7 data and Reuters. The stock's response came alongside growth in Azure and quarterly results, while capital spending and lease commitments highlighted the cost of providing capacity. In this respect, the company's results balance current revenue growth against the scale of spending and commitments tied to meeting future demand. Leases that have not yet commenced do not represent cash spending for the quarter, but they set out future commitments spread over several years.

Microsoft forecast revenue of between $96 billion and $97.1 billion in the second quarter of fiscal 2027. In its quarterly filing, it said current resources and cash flows, as well as access to capital markets, are expected to be sufficient to fund its operations and investment commitments, including substantial capital expenditures, over the next twelve months and beyond. The company's assessment includes available cash and cash flows from operations, alongside financing in capital markets. Its ability to generate returns on investment remains tied, according to its warning, to customer demand and the pricing of cloud and AI services. The revenue range forecast for the next quarter sets the next marker for tracking Microsoft's business growth, while the announced leases are scheduled to commence through fiscal 2034.