The technology sector’s frantic race to build artificial intelligence infrastructure has created a massive, financial overhang. According to a recent sector in-depth report by Moody’s Ratings, the top five U.S. hyperscalers have accumulated $662 billion in future data center lease commitments not yet begun that, because of that fact, are not current liabilities and therefore currently sit entirely off their balance sheets. As those leases begin over the next several years, and as landlords’ obligations are fulfilled, that more than half a trillion dollars worth of data-center activity will be recorded on the balance sheet.
To put the scale of this hidden obligation into perspective, Moody’s accounting analysts David Gonzales and Alastair Drake calculated that the unrecorded $662 billion is equivalent to 113% of these five hyperscalers’ most recent adjusted debt.
David Gonzales told Fortune in a statement that it’s “not as if [these hyperscalers] have have avoided a liability through structuring,” characterizing the $662 billion at issue as “yet to be on the balance sheet,” rather than missing. “More accurately,” he added, “they have not yet received the services to trigger this liability as of this time, but they will.”
For instance, Alphabet disclosed in a footnote in the third quarter of 2025 that it had “entered into leases primarily related to data centers that have not yet commenced with future lease payments of $42.6 billion, including a purchase option considered reasonably certain to be exercised, that are not yet recorded on our Consolidated Balance Sheet. These leases will commence between 2025 and 2031 with non-cancelable lease terms between one and 25 years.”
From the second to the third quarter, future lease payments, an unrecorded future obligation, jumped from $23.9 billion to $42.6 billion.
Meta, Amazon and Microsoft declined to comment. Alphabet and Oracle did not respond to requests for comment.
The root of this accounting phenomenon lies in the unique nature of AI hardware and the rules governing corporate leases. Historically, U.S. data center leases spanned 10 to 15 years. But because the cutting-edge semiconductor and technology equipment required for AI typically has a useful life of just four to six years, hyperscalers are demanding shorter initial lease terms with options to renew. And “to make the investment case for landlords,” the note explains, “these structures are often backstopped by a significant off-balance-sheet guarantee from the lessee.”
But landlords still require financial security to construct these specialized, multi-billion-dollar facilities. To bridge this gap, hyperscalers are utilizing significant off-balance-sheet guarantees, most notably “Residual Value Guarantees” (RVGs). An RVG acts as a backstop; if a tech company cancels or does not renew a lease, it must pay the landlord the difference if the data center’s market value falls below a pre-agreed threshold.
Crucially, US GAAP allows companies to defer reporting these expected RVG obligations. Unless it is deemed “probable” that the lease will end without renewal, the contingent liability of the RVG does not need to be recorded on the balance sheet. Moody’s notes that “if a company concludes a lease renewal is likely to be exercised, but not reasonably certain, it can avoid classifying both the lease renewal periods and the residual value guarantee as liabilities”.
Moody’s warned that these opaque accounting practices mask the true economic risk facing the tech industry. While leasing reduces upfront capital investments, carrying such massive future commitments severely limits a company’s financial and operating flexibility, especially if AI industry conditions change rapidly. Because these liabilities are hidden, Moody’s concluded, in its own jargony, ratings agencyish way, that it is considering new ways to look at this issue.
“The accounting liability is unlikely to reflect certain plausible future scenarios … With this in mind, we will continue to assess cash exposures and debt-like adjustments as time progresses and the dates of new leases draw nearer. We may make a non-standard adjustment to Moody’s adjusted debt based on our expectation of likely cash outflows.”
