Microsoft took on $6.5 billion of new operating-lease assets in the July-September quarter, according to its Form 10-Q, up from $1.4 billion a year earlier. That is 4.6 times the year-earlier figure and about 43% more than in the whole of fiscal 2026, by our arithmetic.
New finance-lease assets were $5.2 billion, down 43% from $9.1 billion a year earlier. It was the same quarter in which, The Information reported, Microsoft spent about $5 billion less on capital expenditures than planned because rented data center capacity was not ready on time.
Short explainer · Leases are the new capex
A Business Pill Short that uses this story as its worked example. Figures come from Microsoft’s Form 10-Q, as reported in this piece.
Business Pill · Free Cash Flow
An evergreen Business Engineer explainer on free cash flow, the cash a company has left after capital expenditures. It explains the general idea only and does not discuss Microsoft’s leases.
The key insight: By our arithmetic on Microsoft’s Form 10-Q, new operating-lease assets of $6.5 billion in the July-September quarter were 4.6 times a year earlier and about 43% more than in all of fiscal 2026, while new finance-lease assets fell 43% to $5.2 billion in the quarter The Information reported capex came in about $5 billion short.
The figures come from the supplemental cash flow table in the leases note of the 10-Q filed on 28 October. It lists “Right-of-use assets obtained in exchange for lease obligations”: $6,523 million for operating leases and $5,192 million for finance leases in the three months to 30 September, against $1,417 million and $9,147 million a year earlier.
Quarter by quarter, operating-lease additions were $1,417 million, $1,477 million, $792 million and $869 million across fiscal 2026, by our arithmetic from the 10-Qs and the 10-K. The September quarter’s $6,523 million is 7.5 times the June quarter’s.
Finance-lease additions ran $9,147 million, $6,330 million, $4,009 million and $5,122 million over the same four quarters. The September quarter’s $5,192 million is about 1.4% above the June quarter, so the 43% drop is measured against the largest of the five quarters.
Taken together, new lease assets were $11.7 billion, up 10.9% on the year. Operating leases made up 56% of them, against 13% a year earlier, by our arithmetic.
Right-of-use assets Microsoft obtained in exchange for new operating and finance lease obligations, by quarter, from its Forms 10-Q and 10-K. The April-June 2026 figures (fiscal 2026 total minus nine months) and the 4.6x are our arithmetic.
Where the $5 Billion Fits
On the 28 October call, chief financial officer Amy Hood said capital expenditures of $45.2 billion came in as some third-party capacity deliveries expected in the quarter were delayed, according to our machine transcript of the webcast. She said finance leases were $7.4 billion of capital expenditures, and that Microsoft records the full principal value of a finance lease in capex when the lease commences.
The Information’s summary of its 4 November report says Microsoft “spent about $5 billion less on capital expenditures in the third quarter than it had previously projected because data center capacity it was planning to rent wasn’t ready on time.” It names IREN as one of the providers behind the delays.
Hood’s $7.4 billion and the 10-Q’s $5.2 billion of new finance-lease assets are different measures, and the filing does not reconcile them. Neither source says how much of the delayed capacity would have been booked as finance leases rather than operating leases.
The Leases Still to Start
The same 10-Q says Microsoft 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.” That is up $35.5 billion from $329.1 billion in June and 3.4 times the $106.2 billion of a year earlier, by our arithmetic.
The filing says these leases “will commence between fiscal year 2027 and fiscal year 2034 with lease terms of 1 year to 20 years.” Against that pipeline, the roughly $5 billion shortfall The Information reported is about 1.4%, by our arithmetic.
Hood said Microsoft expects capex of over $50 billion in its second fiscal quarter, and about $170 billion for the calendar year because of the third-party capacity delays, according to our machine transcript. She said the third-party deliveries that slipped shifted into the second half of the fiscal year.
Go deeper, 5 Nov, 09:11Z: our evergreen analysis, How Microsoft Rents AI Capacity: 3 Neocloud Deals, $70.9B, sets out the three ways Microsoft gets AI capacity: building it, leasing it and renting GPUs from neoclouds. Nscale’s, Nebius’s and IREN’s 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.
Connecting the Coverage
Our related pieces on Microsoft’s rented capacity:
As we read the filing, the mix of Microsoft’s new lease assets turned in one quarter: operating leases went from 13% of the total a year earlier to 56%.
As we read Hood’s description, a finance lease reaches capex only when it commences, so capacity that is late to start is also late to show up in capex.
As we read the scale, the roughly $5 billion shortfall is about 1.4% of the $364.6 billion of leases Microsoft says are signed but not yet started.
Microsoft Form 10-Q, quarter to 30 September 2026, leases note
“These leases will commence between fiscal year 2027 and fiscal year 2034 with lease terms of 1 year to 20 years.”
Three Implications
FOR MICROSOFT’S CAPEX LINE Hood said capex should be over $50 billion in the December quarter and about $170 billion for the calendar year because of third-party capacity delays, according to our machine transcript.
FOR LESSORS SUCH AS IREN The Information named IREN as one of the providers behind the delay; the 10-Q names no lessors and does not break down the $364.6 billion.
FOR READING THE FILINGS New operating leases ($6.5 billion) and new finance leases ($5.2 billion) together were $11.7 billion in the quarter, up 10.9% on the year, by our arithmetic.
The framework says: “It is a sovereign-scale financing problem dressed in tech-company clothing — and the financial architecture is starting to invert.”
As we read it, the lease lines in Microsoft’s 10-Q are one place that financial architecture shows up: $364.6 billion of leases signed but not yet started, and a quarter in which new operating leases outran new finance leases. The framework does not discuss this filing or IREN.
What Is Not Established
The 10-Q does not name the lessors behind the $6.5 billion of new operating leases or the $5.2 billion of finance leases, and it does not say whether any of them are neocloud GPU contracts such as IREN’s. It does not tie the jump in operating leases to the delays Hood described.
We read only The Information’s published summary, not the full article, so we do not know how much of the $5 billion it attributes to IREN. Hood’s remarks are from our machine transcript of the webcast audio, not an official transcript.
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In the quarter Microsoft said third-party capacity arrived late, its filing shows new operating-lease assets of $6.5 billion, 4.6 times a year earlier, and new finance-lease assets of $5.2 billion, down 43%. Another $364.6 billion of leases, primarily for data centers, had been signed but not yet started.
A note on sourcing. The lease figures are from Microsoft’s Forms 10-Q and 10-K; the quarterly April-June 2026 figures, the ratios and percentages are our arithmetic. Amy Hood’s remarks are from our machine transcript of the 28 October webcast. We read only The Information’s published summary of its 4 November report.
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.
