> ## Content Index
> Fetch the complete content index at: https://www.sotkn.com/llms.txt
> Use this file to discover other available public pages before exploring further.

# What Is a Purchase Commitment? Why the Cheque Is Signed Before the Rack Is Live
- URL: https://www.sotkn.com/explained/purchase-commitment-explained/
- Published: 2026-11-06T01:13:06.000Z
- Updated: 2026-11-06T01:13:06.000Z
- Description: A purchase commitment is a contract to buy servers, power or buildings later. It stays off the balance sheet until the other side delivers, and the big buyers do not count it the same way.
- Author: Sean
- Tags: #desk-explained, Mechanism

EXPLAINED · Mechanism · Last reviewed: 6 Nov 2026 · Next review: after the 2026 Form 10-K purchase-commitment notes

A purchase commitment is a contract to buy something later — servers, network gear, a building, or a minimum amount of energy — for an amount the buyer has to show in a footnote. The cash has not all left, and the kit is not yet an asset on the balance sheet.

In short. A purchase commitment sits on the Hyperscalers layer. It is the buyer's promise, not the seller's backlog. Alphabet, Meta and Amazon each printed a figure as of 30 September 2026, and each figure uses a different ruler, so the three numbers do not add. Our read: the supplier is paid when the counterparty performs, depreciation starts only when the asset is ready for use, and the stuck step is that gap. Education only, not a recommendation to buy or sell any security.

## What is a purchase commitment?

Alphabet's Form 10-Q for the quarter ended 30 September 2026 states the rule: future cash commitments are not on the balance sheet, subject to counterparties performing. A signature does not create a server, a watt, or a depreciation charge. It creates a claim on future cash if the supplier, the power seller, or the landlord performs.

Alphabet's Note 10 counts commitments with remaining terms longer than one year: $802.1 billion at 30 September 2026, including $4.5 billion of standby letters of credit on long-term supply agreements. Those agreements lock production capacity for technical infrastructure and inventory components, run through 2032, and Alphabet expects the significant majority of the payments through 2031\. Where price or volume can move, the note uses the maximum contractual limits. Energy agreements in the note run three to 26 years, obligations through 2054, generally with take-or-pay minimums and substantive termination fees. Content licences run through 2031\. Power deals with no fixed or minimum commitment are excluded.

The MD&A widens this to $924.4 billion of material purchase commitments. The $802.1 billion is the multi-year piece. The rest is primarily open purchase orders. Our arithmetic: $924.4 billion minus $802.1 billion is $122.3 billion. Of the $924.4 billion, $213.4 billion is due within 12 months. Leases not yet commenced sit beside it, not inside it: $130.5 billion, mostly data centers and energy, commencing from 2026 to 2031 on terms of one to 26 years.

Meta's ruler is tighter. Non-cancelable contractual commitments were $454.52 billion, mostly third-party cloud, servers and network gear, data-center energy, and Reality Labs hardware. About $45.85 billion is due in the rest of 2026 and $121.41 billion in 2027\. Our arithmetic: $167.26 billion across those two years, 36.8 percent of the total, and $287.26 billion after 2027\. Outside that number: up to $14.72 billion of contingent cloud over five years, which shrinks if the provider sells the capacity elsewhere; variable deals, counted only at the minimum; and clean-energy contracts of nine to 25 years with no fixed volume, which Meta does not total. Leases not yet commenced are a separate $355.73 billion, through 2036, on terms up to 30 years.

Amazon excludes open orders for normal operations that are generally cancellable. Agreements to acquire property and equipment, off the balance sheet, are $159.640 billion: $13.955 billion in the quarter to 31 December 2026, $63.900 billion in 2027, then $25.220 billion, $25.400 billion, $28.941 billion and $2.224 billion. Variable prices are counted only at the minimum. A second line, $94.759 billion, is unconditional energy, digital content, and software. Where terms vary, or a regulator still has to approve, Amazon counts only the minimum. Leases not yet commenced are $164.922 billion, on their own line.

Microsoft's Form 10-Q for the quarter ended 30 September 2026, its fiscal first quarter of 2027, prints no purchase-commitment dollar total. The risk factors say scarce supplies may be obtainable only by signing a long-term purchase commitment. Same mechanism, no number to set beside Alphabet's.

## How is this different from capex?

Capex is cash already spent on property and equipment. A purchase commitment is cash contracted and not yet spent. They meet on two balance-sheet lines, and they are not substitutes.

Alphabet's capital expenditure was $51.4 billion in the quarter ended 30 September 2026 and $132.0 billion in the nine months, against $63.6 billion in the first nine months of 2025\. Depreciation was $22.0 billion in those nine months, against $15.1 billion a year earlier, and it starts when the asset is ready for its intended use. Assets not yet in service — still in construction or assembly, mostly technical infrastructure — were $145.270 billion, against $78.592 billion at 31 December 2025\. Our arithmetic: an increase of $66.678 billion. Alphabet says the path from purchase to placement in service runs from months to years.

Accrued purchases of property and equipment were $21.398 billion at 30 September 2026, against $8.877 billion at 31 December 2025\. Our arithmetic: the accrued line rose $12.521 billion. That is a supplier invoice in current liabilities while a much larger stock of assets is still not in service. A scale check only: $213.4 billion divided by the quarter's $51.4 billion of capex is 4.15, our arithmetic. The commitment is not four quarters of capex. It also holds energy, content, inventory, and open orders.

## Why do the three footnotes not add?

Adding Alphabet's $924.4 billion, Meta's $454.52 billion, and Amazon's $159.640 billion plus $94.759 billion produces a number none of the filings prints. The rulers point different ways.

| Buyer, 30 Sept 2026 | The line                                                               | What it counts                                                                           | What it leaves out                                                                                       |
| ------------------- | ---------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------- |
| Alphabet            | $802.1 billion in Note 10; $924.4 billion in the MD&A                  | Terms over one year, supply contracts at the maximum. The MD&A adds open purchase orders | Energy deals with no minimum. Leases not commenced, $130.5 billion                                       |
| Meta                | $454.52 billion                                                        | Non-cancelable commitments. Variable deals only at the minimum                           | Up to $14.72 billion of contingent cloud. No-minimum clean energy. Leases not commenced, $355.73 billion |
| Amazon              | $159.640 billion of equipment, plus $94.759 billion of other purchases | Unconditional agreements off the balance sheet. Variable deals at the minimum            | Cancellable open orders. Leases not commenced, $164.922 billion                                          |

A ceiling plus a floor is not a forecast. A lease not yet commenced is future rent at handover. A purchase commitment is the supplier's invoice when the supplier performs.

## Who gets paid — and where is the stuck step?

The supplier of servers and network gear is paid on delivery, which can come before the hall serves anyone. Alphabet's accrued purchases of $21.398 billion are that invoice. On certain Amazon technology-infrastructure orders with up to a year to pay, amounts for assets already received move to accounts payable. Receipt is the day the commitment becomes a bill.

The energy seller is on another clock. Alphabet's agreements generally take or pay a minimum, with termination fees, through 2054\. The minimum is then owed whether or not the servers draw it. Meta's non-cancelable energy sits inside the $454.52 billion. Its no-minimum clean-energy contracts do not. That contract form is [how hyperscalers buy power](https://www.sotkn.com/stack/hyperscalers/how-do-hyperscalers-buy-power/). The landlord is paid at lease commencement, the handover in [data center leases](https://www.sotkn.com/explained/data-center-lease-explained/). The hyperscaler is paid later, after the asset is in service. [Remaining performance obligation](https://www.sotkn.com/explained/remaining-performance-obligation-explained/) is the seller's undelivered revenue. This page is the buyer's undelivered spend. [Take-or-pay](https://www.sotkn.com/explained/take-or-pay-gpu-contracts-explained/) bills reserved GPU capacity after delivery, and [RPO versus take-or-pay](https://www.sotkn.com/explained/rpo-vs-take-or-pay/) keeps the two names apart.

Meta shows a moment between signature and payment. Escrow on certain infrastructure purchase agreements put $10.80 billion of money-market funds into restricted cash at 30 September 2026, to be released between 2028 and 2030 when the obligations are satisfied. That deposit is not delivery.

The stuck step is performance, then placement in service. The commitment stays off the balance sheet until the counterparty performs. Depreciation waits until the asset is ready for use. A server can be received, accrued, and still not in service while the building or the power phase is unfinished.

## Why does it bind?

It binds because volume is contracted before the hall is live, and because scarce parts push the buyer into the contract. Microsoft's quarterly report says that if replacement supplies are late, the buyer may have to sign a long-term purchase commitment, take a price commitment, or pay above the market. The bind is the component, the watt, or the handover. A letter of credit is only the bank standing behind that promise: Alphabet's $4.5 billion sits inside the $802.1 billion, and Meta had $1.53 billion of unused letters of credit, most of them tied to infrastructure purchase commitments.

Alphabet says the dollar amount can change with the expected timing of supplier fulfillment. A factory slip moves the footnote. It does not, by itself, put a watt in a rack. Of Amazon's $94.759 billion energy, content, and software line, $51.454 billion sits past 2030, against equipment commitments that pile into 2027.

## What would change the view?

A cut in Alphabet's maximum volumes or prices would cut Note 10 without a hall opening, because the disclosed supply amount is a ceiling and some contracts allow a partial reduction. Amazon's variable amount is a floor, so the cash can run above the footnote. Cancelling open orders would pull Alphabet's $924.4 billion toward the $802.1 billion. Amazon has already dropped generally cancellable operating orders.

An energy take-or-pay that starts before the hall can draw the power bills a minimum into an empty building. No-minimum contracts, which Alphabet and Meta leave out, would not show up in the total either. The placement check, next to capex, is assets not yet in service. Alphabet's nine-month rise of $66.678 billion on that line is the figure to set beside the next 10-K.

## Common misconceptions

**The footnote is this year's capex.** Capex is cash already spent. Alphabet's third-quarter capex and its off-balance-sheet purchase commitments are both in the same 10-Q because they measure different moments.

**The three buyers add up to one industry cheque.** Alphabet's supply figure is a ceiling, Amazon's variable figure is a floor, and Meta's figure is the non-cancelable piece. Each filing is a source. A blended total is a different claim.

**A purchase commitment is remaining performance obligation.** One is undelivered revenue on the seller's books. The other is undelivered spend on the buyer's books.

**The lease line is inside the purchase line.** Leases not yet commenced are printed beside the purchase lines, not inside them.

**Every renewable contract is in the number.** Deals with no fixed or minimum commitment are excluded. The binding energy is the take-or-pay minimum.

**Signed means the supplier has been paid.** Restricted cash and accounts payable mark the exceptions. Most of the footnote has not become a bill. Receipt is the payable. Use is later.

## FAQ

**What is a purchase commitment?**  
A purchase commitment is a contract to buy goods or services later, for a stated amount or a stated minimum. On these hyperscalers' books it is usually not an asset and not a debt until the other side delivers. Alphabet's 30 September 2026 10-Q calls the amounts future cash commitments that are not on the balance sheet, subject to counterparties performing.

**How big is Alphabet's purchase commitment?**  
Note 10 reports $802.1 billion of commitments with remaining terms longer than one year as of 30 September 2026, stated at maximum contractual limits where price or volume can vary, including $4.5 billion of standby letters of credit. The MD&A reports $924.4 billion of material purchase commitments, of which $802.1 billion is the multi-year piece. $213.4 billion of the $924.4 billion is due within 12 months.

**How big are Meta's and Amazon's?**  
Meta reports $454.52 billion of non-cancelable contractual commitments as of 30 September 2026, with about $45.85 billion due in the rest of 2026 and $121.41 billion due in 2027\. Amazon reports $159.640 billion of agreements to acquire property and equipment and $94.759 billion of other unconditional purchase obligations, and it excludes cancellable open orders.

**Is a purchase commitment the same as capex?**  
No. Capex is cash already spent on buildings and equipment. A purchase commitment is cash that is contracted and not yet an asset. Alphabet spent $51.4 billion of capital expenditure in the third quarter of 2026 and reported $145.270 billion of assets not yet in service at 30 September 2026.

**Is a purchase commitment the same as remaining performance obligation?**  
No. Remaining performance obligation is the seller's undelivered contracted revenue. A purchase commitment is the buyer's undelivered contracted spend. They can describe two ends of one contract, and they are not the same number.

**Where is the stuck step?**  
At delivery, and then at placement in service. Alphabet keeps the commitment off the balance sheet until counterparties perform, and starts depreciation only when the asset is ready for its intended use. The company says that wait can run from months to years.

## Related terms

- [Cash capex](https://www.sotkn.com/explained/cash-capex-explained/), [AI capex](https://www.sotkn.com/explained/ai-capex-explained/), and [free cash flow](https://www.sotkn.com/explained/free-cash-flow-explained/) — cash that has left, and what remains.
- [GPU depreciation](https://www.sotkn.com/explained/gpu-depreciation-explained/) — the annual slice, starting at placement in service.
- [Remaining performance obligation](https://www.sotkn.com/explained/remaining-performance-obligation-explained/) and [RPO versus take-or-pay](https://www.sotkn.com/explained/rpo-vs-take-or-pay/) — the seller's side of a booked contract.
- [Take-or-pay GPU contracts](https://www.sotkn.com/explained/take-or-pay-gpu-contracts-explained/) and [data center leases](https://www.sotkn.com/explained/data-center-lease-explained/) — bills that start after delivery or handover.
- [How hyperscalers buy power](https://www.sotkn.com/stack/hyperscalers/how-do-hyperscalers-buy-power/) — the energy contract beside this footnote.

## Markets and stack doors

The buyers are the hyperscalers. The layer door is [Hyperscalers](https://www.sotkn.com/stack/hyperscalers/). Company pages for the three filings: [Alphabet](https://www.sotkn.com/stack/hyperscalers/what-does-google-do/), [Meta](https://www.sotkn.com/stack/hyperscalers/what-does-meta-do/) and [Amazon](https://www.sotkn.com/stack/hyperscalers/what-does-amazon-do/).

When the cash does leave, it is a US buyer's cheque against foundry wafers and memory. Market doors: [US](https://www.sotkn.com/markets/us/), [Taiwan](https://www.sotkn.com/markets/taiwan/) and [Korea](https://www.sotkn.com/markets/korea/). The US print next to Meta's commitment is [Meta's third-quarter capex and free cash flow](https://www.sotkn.com/markets/us/us-meta-q3-capex-fcf-october-2026/).

## Sources

- [Alphabet Form 10-Q, quarter ended 30 September 2026, filed 29 October 2026](https://www.sec.gov/Archives/edgar/data/1652044/000165204426000084/goog-20260930.htm?ref=sotkn.com) — Note 10 and the MD&A commitment totals, leases not commenced, assets not yet in service, capex, and accrued purchases.
- [Meta Platforms Form 10-Q, quarter ended 30 September 2026, filed 22 October 2026](https://www.sec.gov/Archives/edgar/data/1326801/000162828026066773/meta-20260930.htm?ref=sotkn.com) — non-cancelable commitments, contingent cloud capacity, leases not commenced, and restricted cash.
- [Amazon Form 10-Q, quarter ended 30 September 2026, filed 30 October 2026](https://www.sec.gov/Archives/edgar/data/1018724/000101872426000040/amzn-20260930.htm?ref=sotkn.com) — property-and-equipment purchase obligations, other unconditional purchases, and leases not commenced.
- [Microsoft Form 10-Q, quarter ended 30 September 2026, filed 28 October 2026](https://www.sec.gov/Archives/edgar/data/789019/000119312526436133/msft-20260930.htm?ref=sotkn.com) — risk factor on long-term purchase commitments. No dollar total in this quarterly report.