Microsoft’s quarterly report filed on 28 October 2026 shows its property and equipment at cost rose $144.3 billion in a year, to $474.1 billion. By our arithmetic, about 67% of that rise was servers, network equipment and software.
Alphabet’s finance chief Anat Ashkenazi said on the company’s Q3 2026 earnings call the same day that approximately 65% of its technical infrastructure investment in the quarter went to servers and networking equipment, and the remaining 35% to data centers.
Business Pill · Capex and Depreciation
An evergreen Business Engineer explainer on capital expenditure and depreciation. It explains the general idea only and does not discuss Microsoft’s or Alphabet’s results.
The key insight: By our arithmetic from its Forms 10-Q, servers, network equipment and software made up about 67% of the $144.3 billion rise in Microsoft’s property at cost over the year; Alphabet’s finance chief put servers and networking at approximately 65% of the quarter’s technical infrastructure investment.
Microsoft’s property note compares 30 September 2026 with a year earlier. Servers, network equipment and software rose from $147.7 billion to $244.8 billion at cost. Buildings and improvements rose from $152.4 billion to $194.6 billion.
Leasehold improvements rose from $13.6 billion to $17.6 billion, and land from $9.5 billion to $10.7 billion. By our arithmetic, servers and network gear rose 66% and buildings 28%, and that class is now 52% of the company’s property at cost, up from 45%.
In the latest quarter alone, from 30 June to 30 September 2026, property at cost rose $42.3 billion, of which $29.0 billion was servers, network equipment and software. That is 68.5% of the quarter’s rise, by our arithmetic.
The same report shows cash additions to property and equipment of $39.4 billion in the quarter and $5.2 billion of assets obtained under finance leases, against $9.1 billion a year earlier. CNBC reported that around 75% of Microsoft’s capital expenditures are now tied to short-lived assets such as chips and GPUs.
Share of each measure going to servers and network gear versus data center buildings, land and improvements. Microsoft shares are our arithmetic from the change in property and equipment at cost in its Forms 10-Q (furniture excluded); Alphabet’s split is its CFO’s, for technical infrastructure investment in Q3 2026. The bases differ.
Alphabet: Servers, Then Buildings
Ashkenazi said capex was $51.4 billion in the quarter, “with the vast majority of the spend in technical infrastructure to support our investments in AI”. She said the server and networking share “generally have useful lives of six years” and data centers “have useful lives of seven to forty years”.
By our arithmetic, 65% of the full $51.4 billion would be about $33 billion and 35% about $18 billion. Both are upper bounds, because Alphabet applies the split to technical infrastructure, not to all capex.
Alphabet’s quarterly report for June 2026 puts technical infrastructure in service at $247.2 billion, against $184.1 billion in September 2025, with approximately 60% of those assets servers and network equipment. Assets not yet in service, which Alphabet says include data center buildings and servers under construction or assembly, rose from $69.9 billion to $122.8 billion.
Power Sits Mostly Outside the Capex Line
Ashkenazi said Alphabet has entered into “multi-year agreements to secure capacity for technical infrastructure and inventory, as well as leases and energy”. She put future purchase commitments at $924 billion and pre-commencement leases and other obligations at $152 billion, describing both as maximum contractual obligations.
Alphabet’s 2025 annual report says its commitments, then $149.1 billion, were primarily related to energy take-or-pay contracts, licenses and technical infrastructure and inventory orders. It says power purchase agreements without a minimum dollar commitment are left out, because the amounts “are not readily determinable”.
The annual report also discloses a power purchase agreement executed in January 2026, expected to be accounted for as a lease, with future payments of $9.9 billion between 2027 and 2047. Backstop guarantees supporting counterparties’ procurement of long-lead time equipment for future power agreements rose from $5.7 billion at the end of 2025 to $7.6 billion at 30 June 2026.
For Microsoft, utility NiSource’s quarterly report says its NIPSCO unit agreed in October 2026 to supply a Microsoft data center under a capacity commitment beginning in 2028 and rising to 788 MW from 2031. Microsoft’s own report says “Our datacenters depend on the availability of permitted and buildable land, predictable energy, networking supplies, and servers”.
Leases Not Yet on the Books
Microsoft’s report lists $364.6 billion of leases, primarily for datacenters, that had not yet commenced at 30 September 2026. Those sit outside the property figures above until they start.
Alphabet’s $152 billion of pre-commencement leases and other obligations, as Ashkenazi described them, likewise sit outside its quarterly capex.
The Capex Line Came In Light
The Financial Times reported that Microsoft’s capital expenditure of $45.2 billion came in below expectations, and that the company previously told investors it planned to invest roughly $175 billion in the current calendar year.
CNBC quoted finance chief Amy Hood on the call: “Some third-party capacity deliveries we expected in Q1 were delayed”.
Update, 28 Oct: Microsoft’s capex outlook, from the call. A machine transcript of Microsoft’s earnings webcast (Microsoft’s official transcript was not yet available) has Amy Hood saying: “In Q2, we expect capex spend will be over $50 billion. Therefore, for the calendar year, spend should be approximately $170 billion due to the 3P capacity delays noted earlier. In the second half of the fiscal year, we currently expect capex spend to accelerate primarily from CPUs, inclusive of higher memory and storage costs, and GPUs, as well as the 3P capacity deliveries that shifted to H2.” The Financial Times had reported a prior plan of roughly $175 billion for the calendar year.
As we read the filings, the bulk of new spending at both companies is going to equipment rather than buildings: the server class is now 52% of Microsoft’s property at cost, against 45% a year earlier, by our arithmetic.
Power enters mostly through contracts rather than the capex line: Alphabet’s annual report says its commitments were primarily related to energy take-or-pay contracts, licenses and technical infrastructure and inventory orders, and NiSource’s report describes a Microsoft capacity commitment rising to 788 MW from 2031.
Leases signed but not started, $364.6 billion at Microsoft according to its report and $152 billion of pre-commencement leases and other obligations at Alphabet according to its finance chief, also sit outside the capex figures.
“multi-year agreements to secure capacity for technical infrastructure and inventory, as well as leases and energy”
Three Implications
FOR CHIP AND SERVER SUPPLIERS Microsoft’s server, network equipment and software class rose $97.1 billion at cost in a year, according to its Forms 10-Q.
FOR UTILITIES NiSource’s report describes a capacity commitment for a Microsoft data center beginning in 2028 and rising to 788 MW from 2031.
FOR WHAT IS NOT DISCLOSED Neither company reports total energy spending, and Alphabet’s commitments figure excludes power agreements without a minimum dollar commitment, according to its annual report.
The framework argues: “The thesis: the capex race is no longer a corporate spending cycle.”
The filings show where that spending lands: mostly servers and network gear on the balance sheet, with power and many sites committed through contracts and leases. The framework was published in May 2026 and does not discuss these figures.
What Is Not Established
The two companies measure differently. Microsoft’s shares are our arithmetic from the change in property at cost, which includes assets under finance leases ($89.8 billion at cost at 30 September 2026); Alphabet’s 65% is its finance chief’s split of one quarter’s technical infrastructure investment. Alphabet’s quarterly report for September 2026 had not been filed when this was written.
Neither company reports total energy spending, and Alphabet excludes power agreements without a minimum dollar commitment from its commitments figure.
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Microsoft’s filings show servers, network equipment and software made up about 67% of the $144.3 billion rise in its property at cost over the year, by our arithmetic. Alphabet’s finance chief put servers and networking at approximately 65% of its technical infrastructure investment in the quarter, with power and leases committed largely outside the capex line.
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A note on sourcing. Microsoft’s property, lease and cash figures come from its Forms 10-Q; Alphabet’s split and commitments from its CFO’s remarks on the Q3 2026 earnings call (caption transcript) and its Forms 10-Q and 2025 Form 10-K; the NIPSCO contract from NiSource’s Form 10-Q; the capex comparison with expectations from the Financial Times and CNBC. Shares and dollar splits are our arithmetic.
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.
