How Microsoft Rents AI Capacity: 3 Neocloud Deals, $70.9B

Microsoft gets AI computing capacity in three ways: it builds it with its own capital spending, it leases data centers, and it rents GPU capacity from neoclouds. Three of those neoclouds put a value on their Microsoft contracts in SEC filings: up to about $43.8 billion at Nscale, up to about $17.4 billion at Nebius and about $9.7 billion at IREN, up to $70.9 billion together, by our arithmetic.

The three routes reach Microsoft’s accounts at different times. On its 28 October earnings call, chief financial officer Amy Hood said: “we recognize the full principal value of finance leases in capex at the time of lease commencement”. Microsoft’s Form 10-Q lists $364.6 billion of leases, primarily for datacenters, that had not yet commenced on 30 September 2026, 3.4 times the $106.2 billion a year earlier, by our arithmetic.

Business Pill · Take-or-Pay

An evergreen Business Engineer explainer on take-or-pay contracts. It teaches the general idea only and does not discuss Microsoft, Nscale, Nebius, IREN or any contract named here.

Route One: Building It

Microsoft’s 10-Q for the July-September quarter shows additions to property and equipment of $39,367 million, about twice the $19,394 million a year earlier, by our arithmetic. That line is the cash Microsoft spent on assets it buys outright.

Hood gave a wider figure on the call: “Capital expenditures were $45.2 billion, as some third-party capacity deliveries we expected in Q1 were delayed.” She added: “This quarter, finance leases were $7.4 billion.” For the calendar year, she said, “spend should be approximately $170 billion due to the 3P capacity delays noted earlier”.

Route Two: Leasing It

A finance lease enters Microsoft’s capital expenditure when it starts, under the accounting Hood described. She called some of the third-party capacity “3P GPU lease deliveries”, and said Microsoft expects spending in the second half of its fiscal year to accelerate partly from “the 3P capacity deliveries that shifted to H2”. As we read her remarks, a site that is delivered late moves the capital spending it carries into a later quarter.

The 10-Q says: “As of September 30, 2026, we had additional leases, primarily for datacenters, that had not yet commenced of $364.6 billion, with some arrangements subject to certain contractual conditions being met.” It says these leases will commence between fiscal year 2027 and fiscal year 2034, with terms of 1 year to 20 years.

The same line read $106.2 billion on 30 September 2025, $196.6 billion on 31 March 2026 and $329.1 billion on 30 June 2026, according to Microsoft’s earlier 10-Qs and its 10-K. The quarter’s new lease assets, $6.5 billion of operating leases and $5.2 billion of finance leases, are in Microsoft’s New Operating Leases Up 4.6x as Capex Fell Short.

Route Three: Renting GPUs From Neoclouds

Nscale’s Form S-1, filed on 18 September 2026, says: “Between September 2025 and April 2026, we entered into statements of work with Microsoft that provide for payments to us of up to approximately $43.8 billion through December 2033, not including the optional extensions, and which are subject to the satisfaction of delivery and availability of service requirements.” It says the GPU service terms run five to six years from acceptance of each tranche.

Nebius’s Form 20-F, filed on 30 April 2026, says it provides Microsoft with dedicated GPU capacity at its data center in Vineland, New Jersey, over a five-year term, deployed in nine tranches during 2025 and 2026. It says Microsoft committed to pay fees estimated at up to $17,392.9 million, “irrespective of actual utilization of the GPU capacity”, including upfront payments of about $6,958.1 million, which is 40% of the total, by our arithmetic.

IREN’s Form 10-K, filed on 27 August 2026, says it will provide Microsoft with dedicated GPU services in four tranches at its Horizon facilities in Childress, Texas, and that “The total contract value is approximately $9.7 billion through 2031”. It says 20% of each tranche’s value is paid before its delivery date, and that Horizon 1 was delivered to and accepted by Microsoft in August 2026.

Added together, the three filings put up to $70.9 billion on Microsoft contracts, by our arithmetic, and Nscale’s statements of work are about 62% of that. The total counts only the three contracts whose values we read in filings; each value is a maximum or an estimate, subject to delivery.

The Other Side of the Ledger

Microsoft also sells capacity. Anthropic’s amended Form S-1, filed on 2 November, says it committed to spend “an aggregate of at least $44.9 billion between November 2026 and June 2033, regardless of actual usage” under its agreement with Microsoft. It says that commitment is “non-cancelable except in the event of Microsoft’s uncured material breach or, on a per-tranche basis, for undelivered tranches”.

As we read the filings, the same tranche logic runs on both sides of Microsoft. Nebius’s 20-F gives Microsoft the right to terminate individual tranches for specified delivery delays, and Anthropic’s S-1/A lets Anthropic cancel its commitment for undelivered tranches.

Three Risks, With Examples

Late delivery. Business Insider reported on 4 November that satellite analysis by Aterio points to possible delays at the IREN site in Texas and the Nebius site in New Jersey, as we reported in Satellite Images Flag Delay Risk in $27.1B Microsoft Deals. IREN’s 10-K says Horizon 2-4 is targeted for calendar Q4 2026, “with grace periods under the Microsoft Agreement for delivery extending from mid-Q4 of calendar 2026 to the beginning of Q2 of calendar 2027”.

The Information then reported that Microsoft spent about $5 billion less on capital expenditures than planned, naming IREN, as covered in Microsoft’s $5B Capex Shortfall Tied in Part to IREN Delays.

Options not taken. The FT reported on 5 November that Microsoft rejected an option to expand its Texas contract with Nscale; MoneyDJ, relaying that report, wrote that Nscale clarified the option covers about 500MW of additional capacity on a site Nscale owns, as we reported in Microsoft Said to Reject Option to Expand Nscale Texas Deal. Options also run the other way: Nscale’s S-1 says “many of our contracts feature a right of first refusal that grants our customers the priority right to secure additional compute capacity”.

Commitments not yet started. The $364.6 billion of leases in the 10-Q have not commenced, and Microsoft says some of them are subject to certain contractual conditions being met. Until a lease commences, under the accounting Hood described, it does not appear in capital expenditure.

The Business Lever

The lever is Azure capacity. Hood said Azure revenue grew 48% “even with the 3P capacity delays noted earlier”, and that its outlook relies on efficiency gains “helping to offset some 3P GPU as a service contracts that have been delayed to H2”. The neocloud side of the trade, from debt backed by Microsoft rent to the risks in those contracts, is in How Neoclouds Work: 6% Debt on Microsoft Rent, and 4 Risks.

What to Watch

Each route reports through a different filing. Microsoft’s 10-Qs give the leases not yet commenced and the new lease assets each quarter. IREN’s filings report whether Horizon 2-4 are accepted inside the grace periods, Nebius’s filings report its Vineland tranche deliveries, and amendments to Nscale’s S-1 carry any change to its Microsoft statements of work.

Connecting the Coverage

This analysis draws on one news chain:

• Satellite Images Flag Delay Risk in $27.1B Microsoft Deals: the IREN and Nebius sites.
• Microsoft’s $5B Capex Shortfall Tied in Part to IREN Delays: The Information’s report.
• Microsoft Said to Reject Option to Expand Nscale Texas Deal: the Nscale option.
• Microsoft’s New Operating Leases Up 4.6x as Capex Fell Short: the lease additions.
• How Neoclouds Work: 6% Debt on Microsoft Rent, and 4 Risks: the neocloud side.

The Structural Read

As we read the three filings, each contract ties Microsoft’s payments to delivery: Nscale’s statements of work are subject to delivery and availability requirements, Nebius’s tranches can be terminated for specified delivery delays, and IREN’s grace periods run to the beginning of Q2 2027.

As we read Hood’s remarks, the timing of third-party deliveries moves Microsoft’s reported capital expenditure: she tied the quarter’s $45.2 billion to delayed third-party deliveries and said the 3P capacity deliveries shifted to H2.

As we read Anthropic’s S-1/A next to Nebius’s 20-F, Microsoft sits between two sets of tranche contracts: it can terminate Nebius tranches for delivery delays, and Anthropic can cancel its commitment for undelivered tranches.

Three Implications

FOR MICROSOFT Its 10-Q lists $364.6 billion of leases not yet commenced, 3.4 times the $106.2 billion a year earlier, by our arithmetic.

FOR THE NEOCLOUDS Nebius’s 20-F puts upfront payments of about $6,958.1 million on its Microsoft contract, 40% of the total by our arithmetic, and IREN’s 10-K says 20% of each tranche’s value is paid before delivery.

FOR MICROSOFT’S CUSTOMERS Anthropic’s S-1/A commits it to spend at least $44.9 billion with Microsoft between November 2026 and June 2033, regardless of actual usage.

The Business Engineer Lens

This story maps onto the Business Engineer framework The Nine Layers of AI.

The framework says: “It is a layered industrial stack — and at any given moment, the binding constraint sits at a different layer than it did six months ago.”

As we read it, Microsoft’s three routes show where that constraint sits for one buyer this quarter: Hood tied the capex figure to third-party capacity deliveries rather than to money. The framework does not discuss Microsoft’s leases or any neocloud contract.

What Is Not Established

The three contract values are maximums or estimates that depend on delivery, and the filings we read do not say how Microsoft accounts for each contract, as a lease or as a service. Hood’s $7.4 billion of finance leases and the 10-Q’s $5.2 billion of new finance-lease assets are different measures, and the filing does not reconcile them.

The Nscale option details come from MoneyDJ’s account of the FT report; we have not read the FT article in full. The satellite findings are Aterio’s as Business Insider described them. We make no forecast on Microsoft, any neocloud or any contract.

The Bottom Line

Microsoft adds AI capacity by building, leasing and renting it. Three neoclouds’ filings put up to $70.9 billion on their Microsoft contracts, by our arithmetic, and Microsoft’s 10-Q lists $364.6 billion of leases not yet commenced. Hood said finance leases enter capital expenditure when they commence, and she tied the quarter’s capex to third-party deliveries that shifted to H2.