Microsoft’s Form 10-Q for the quarter to 30 September 2026, filed on 28 October, says purchases of property and equipment remaining in accounts payable were $26.5 billion at 30 September, against $26.7 billion at 30 June 2026. Its 10-Q for the same quarter a year earlier put the figure at $18.6 billion on 30 September 2025 and $6.9 billion on 30 June 2025.
By our arithmetic, the $26.5 billion equals about 67% of the $39.4 billion Microsoft paid in cash for property and equipment in the quarter, about 62% of its $42.6 billion of total accounts payable, and about 1.4 times the quarter’s $18.6 billion of free cash flow. It is about 3.8 times the June 2025 level.
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Business Pill · Free Cash Flow
An evergreen Business Engineer explainer on free cash flow. It explains the general idea only and does not discuss Microsoft or these results.
The key insight: By our arithmetic, the $26.5 billion of property and equipment purchases still in Microsoft’s accounts payable at 30 September 2026 is about 1.4 times the quarter’s $18.6 billion of free cash flow and about two-thirds of the $39.4 billion it paid in cash for property and equipment.
Microsoft gives the figure in the property and equipment note of each quarterly report. The 10-Qs list purchases still in accounts payable of $18.6 billion at 30 September 2025, $23.1 billion at 31 December 2025 and $22.6 billion at 31 March 2026, each against $6.9 billion at 30 June 2025. The latest report gives $26.7 billion for 30 June 2026 and $26.5 billion for 30 September 2026.
The balance sheet in the latest report shows total accounts payable of $42,625 million at 30 September 2026, against $42,416 million at 30 June. The cash flow statement shows additions to property and equipment of $39,367 million in the quarter, against $19,394 million a year earlier.
Microsoft purchases of property and equipment still in accounts payable at each quarter-end against cash paid for property and equipment in each quarter, US$ billions. Sources: Microsoft Forms 10-Q and 10-K; June-quarter cash figures and the 67% share are our arithmetic.
Cash Paid Against Spending
Finance chief Amy Hood said in her prepared remarks on 28 October that “Capital expenditures were $45.2 billion, as some third-party capacity deliveries we expected in Q1 were delayed”. She said finance leases were $7.4 billion, and “cash paid for P, P, and E was $39.4 billion”.
Hood gave cash flow from operations of $58 billion and said “free cash flow was $18.6 billion reflecting higher capital expenditures”. By our arithmetic, $58.0 billion of operating cash minus $39.4 billion of cash paid for property and equipment is $18.6 billion; equipment bought but still in accounts payable at quarter-end is not part of the cash paid in that line.
By our arithmetic from the four reports, Microsoft paid $19.4 billion, $29.9 billion, $30.9 billion and about $35.8 billion in cash for property and equipment in the four quarters of the fiscal year to June 2026, $115.9 billion in all according to its annual report. The June-quarter figure is the fiscal-year total minus the first nine months.
Over the same fiscal year, purchases still in accounts payable rose from $6.9 billion to $26.7 billion, an increase of $19.8 billion, or about 17% of the year’s cash paid, by our arithmetic. In the latest quarter the balance was $0.2 billion lower than at 30 June.
The annual report gives an estimated useful life of two to six years for servers and network equipment. Quarterly depreciation expense was $11.1 billion, against $7.1 billion a year earlier; the depreciation trend is in our piece on Microsoft’s $11.1 billion depreciation bill.
As we read the filings, the balance rose from $6.9 billion at 30 June 2025 to $26.7 billion at 30 June 2026 and was $26.5 billion at 30 September 2026.
By our arithmetic, $58.0 billion of operating cash minus $39.4 billion of cash paid for property and equipment gives the $18.6 billion of free cash flow Hood reported; purchases still in accounts payable at quarter-end are outside that cash line.
As we read the prepared remarks, Hood gave capital expenditures of $45.2 billion, finance leases of $7.4 billion and cash paid for property and equipment of $39.4 billion for the same quarter.
Amy Hood, Microsoft CFO, in her prepared remarks on 28 October 2026
FOR INVESTORS By our arithmetic, the rise in purchases still in accounts payable over fiscal 2026, $19.8 billion, equals about 17% of the $115.9 billion Microsoft paid in cash for property and equipment that year.
FOR ANALYSTS Hood said she expected capital expenditure in the December quarter to be over $50 billion and calendar-year spend of approximately $170 billion.
FOR SUPPLIERS The 10-Q gives total accounts payable of $42,625 million at 30 September 2026; by our arithmetic, purchases of property and equipment are about 62% of it.
The framework says of itself: “This piece is about the financing.” It sets out to trace how the money flows, where it cracks, what it buys and who can absorb it.
Purchases still in Microsoft’s accounts payable sit inside that question of how the build is paid for. The framework was published before these results and does not discuss them.
What Is Not Established
The notes we read give the total of purchases still in accounts payable but not the suppliers, the payment terms or the split by type of equipment. The 10-Qs report balances at quarter-ends; how much of the $26.5 billion has since been paid is not in the documents.
No statement we read links the flat balance in the latest quarter to the delayed third-party deliveries Hood described. The ratios to cash paid, total payables and free cash flow are our arithmetic, not figures Microsoft reports.
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Microsoft’s quarterly report shows $26.5 billion of property and equipment purchases still in accounts payable at 30 September 2026, up from $6.9 billion at 30 June 2025. By our arithmetic that is about two-thirds of the $39.4 billion it paid in cash for property and equipment in the quarter and about 1.4 times its $18.6 billion of free cash flow.
A note on sourcing. Figures come from Microsoft’s Forms 10-Q for the quarters ended 30 September 2025, 31 December 2025, 31 March 2026 and 30 September 2026, its Form 10-K for fiscal 2026 (all on SEC EDGAR) and the official prepared remarks of its 28 October 2026 earnings call. The June-quarter cash figure and every ratio are our arithmetic; linked earlier pieces carry their own sources.
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
