ASI Brief

Google's off-balance-sheet AI commitments now pass $1 trillion

Alphabet's 10-Q puts $1.08 trillion of future cash commitments outside its balance sheet, plus $75.7bn of backstops for other companies' data-centre leases that it accounts for as credit derivatives. Microsoft billed OpenAI $10.0bn in one quarter and is still owed $7.2bn of it. And a company with $10.7m of cash and negative equity took a twelve-month option on 1,077 acres in Idaho — six months after reserving the gas to power it.

Google has promised $1.08 trillion its balance sheet does not show

Alphabet filed its third-quarter 10-Q on 29 October. The headline numbers were in the release this site covered on 29 October — quarterly capital expenditure of $51.4bn against operating cash flow of $42.3bn, so free cash flow of about minus $9.1bn on the quarter. The 10-Q's commitments note is the part that was not in the release.

Alphabet sets out, in its own words, "future cash commitments that are not reflected on our balance sheet":

That is $1.077 trillion by addition of the filing's own three figures. For scale, Alphabet's total assets at 30 September were $1.003 trillion and its total liabilities $325.8bn.

Then the contingent commitments, which are a different kind of obligation:

Crux AI appears twice in the filing. It is an unconsolidated equity-method joint venture and a related party, and Alphabet's revenue backlog at 30 September "included $16.8 billion associated with a multi-year commercial agreement with Crux AI". So the same related party is a $16.8bn customer in the backlog and the beneficiary of a $10.0bn future backstop.

How it is being paid for, from the same filing. Over the nine months Alphabet spent $132.0bn on capital expenditure against $63.6bn a year earlier, and raised: $42.9bn of common stock — $20.5bn from a public offering and $10.0bn from a private placement of 14 million Class C shares to an affiliate of Berkshire Hathaway — $19.0bn of 6.25% mandatory convertible preferred issued on 5 June, whose dividends may be paid in cash or in shares at the company's election, and $85.2bn of debt. Repurchases of stock were zero, against $39.8bn a year earlier. Long-term debt went from $46.5bn to $125.1bn in nine months. And in October, Waymo signed a $5.0bn senior secured term loan at SOFR plus 5.25%, secured on certain of its own assets and not guaranteed by Alphabet or any other subsidiary.

Why it matters. Three different things are being called "commitment" here and they carry different risks. A purchase commitment is Alphabet's own promise to spend. A lease not yet commenced is a building someone else is putting up on the strength of Alphabet signing. But a backstop accounted for as a credit derivative is Alphabet standing behind another company's rent and power bill — it is selling credit protection on the data-centre industry, and the filing says the valuation uses "probability-weighted expected return models" with "credit default rates" among the inputs, classified in Level 3. The $48.0bn is the number to watch, because it is the one that pays out when somebody else fails.

The funding mix says something too. A company earning this much does not normally sell equity. Alphabet stopped buying back stock, sold $42.9bn of shares, issued preferred that can pay its own dividend in more shares, and let Waymo borrow at a spread of 525 basis points without a parent guarantee. Each of those moves risk away from the balance sheet the commitments are not on.

One caution on the earnings. Nine-month net income was $201.2bn against $97.7bn, but the cash-flow statement removes $126.8bn of net gains on debt and equity securities as a non-cash item, against $22.3bn a year earlier. Much of the increase in reported profit is revaluation, not operations — the same caution this site applied to Amazon's Anthropic marks yesterday.

Source: Alphabet Inc., Form 10-Q for the quarter ended 30 September 2026, filed 29 October 2026 — see "Purchase Commitments and Other Contractual Obligations" and Notes 2, 3 and 10 (SEC EDGAR).

Microsoft billed OpenAI $10bn in one quarter and is still owed $7.2bn of it

Microsoft's 10-Q, filed 28 October for the quarter ended 30 September, discloses the OpenAI relationship as a related-party matter for the first time in this much detail. Because Microsoft holds an equity-method investment representing approximately 24% of OpenAI on an as-converted basis, OpenAI is a related party under ASC 850, and that triggers disclosure of what passes between them.

Set the first two against the quarter. Microsoft's total revenue was $92.3bn, so OpenAI accounted for about 11% of it — and 72% of that $10.0bn was still unpaid at the quarter's end, with the balance owed rising $1.2bn over three months.

The investment also stopped being a drag. Other income (expense), net was positive $38m this quarter against negative $3.66bn a year earlier, and the filing attributes $272m of net gains this quarter and $4.1bn of net losses last year to the OpenAI investment. One line item, a $4.4bn swing.

Why it matters. This is the clearest disclosure yet of a structure the whole sector now runs on, and it is worth stating plainly rather than darkly: Microsoft sells compute to a company it owns 24% of, books the sale as revenue, carries most of it as a receivable, and recognises its share of that company's losses by a method that depends on liquidation priority rather than on ownership percentage. Every step is ordinary accounting. The point is that $10.0bn of a quarter's revenue and $7.2bn of a quarter-end receivable are the same relationship seen from two sides, and a reader looking only at the revenue line sees growth where a reader looking at the receivable sees credit.

The HLBV detail is the one to remember. It exists because Microsoft's claim on OpenAI is senior to a common shareholder's, so its reported share of profit or loss will not track 24% of anything. Do not expect to reconcile it to OpenAI's own numbers if they are ever published.

Source: Microsoft Corporation, Form 10-Q for the quarter ended 30 September 2026, filed 28 October 2026 — see Note 1 (OpenAI, related party) and Note 3, Other Income (Expense), Net (SEC EDGAR).

A company with $10.7m of cash took an option on 1,077 acres, six months after reserving the gas

On 30 October, TerraVolt Holdings — quoted on OTCQB, incorporated in 2002, and renamed from CalEthos, Inc. as recently as 10 July 2026 — announced option agreements to purchase 1,077 acres in Cassia County, Idaho, for a 240 MW behind-the-meter, gas-fired data-centre campus designed, in its words, to "avoid utility interconnection queue delays".

What the exhibits actually say, which the press release does not:

Now the order of events, from the company's own 10-Q for the quarter ended 30 June. The fuel was committed before the site was. In April 2026 TerraVolt signed a firm supply agreement for 55,000 MMBtu a day of natural gas for a planned on-site plant in southeast Idaho; in May 2026 it paid a gas reservation fee of $3,832,500; and in August 2026 it delivered a $6,000,000 letter of credit to secure its obligations. The land option came in October, and cost $150,000.

And the balance sheet behind all of it, same filing, at 30 June 2026: cash $10,689,000, current liabilities $2,598,000, total liabilities $16,623,000 against total assets of $14,381,000 — so stockholders' equity of minus $2,242,000 — and an accumulated deficit of $40,613,000, on 25,730,540 shares.

Why it matters. Put this beside the first item and the same word is doing two jobs again. Alphabet's commitments are contracts it must perform. TerraVolt's 1,077 acres is an option, which is the right to decide later: $150,000, half of it refundable, buys twelve months in which the company owns nothing and owes nothing beyond the fee. That is a sensible way to control land cheaply while permitting runs, and it is also the reason an announcement of acreage is not an announcement of a project.

The sequencing is the genuinely useful detail, and it is the opposite of the order you would guess. The gas reservation fee was more than twenty-five times the land option fee, and it was paid six months earlier. On a behind-the-meter campus the scarce input is firm fuel on a pipeline, not farmland — which is the same lesson Exelon's collateral and ERCOT's pause taught at utility scale, arriving here as a cheque written in the right order by a company with negative book equity.

One arithmetic note, because the two headline figures can be checked against each other. 55,000 MMBtu a day spread over 24 hours is about 2.29 billion Btu an hour; at 240 MW that implies a heat rate near 9,550 Btu/kWh, or roughly 36% efficiency — the range of reciprocating engines or simple-cycle turbines, not combined cycle. The filings do not say what equipment is planned. At combined-cycle efficiency the same gas contract would support closer to 358 MW, so the 240 MW figure is internally consistent with the fuel, on the less efficient assumption.

For any single-site project the reading order is the same: which inputs are under signed contract, which are optioned, which are a proposal, and in what sequence they were secured. Ark7's Project Soperton publishes its own power status in those terms, which is the kind of disclosure worth looking for rather than taking on trust. Ark7 is an advertiser on this site and we are paid if you open that link; see About.

Sources: TerraVolt Holdings, Inc., Form 8-K, 30 October 2026, with the option agreement and the press release as exhibits, and the Form 10-Q for the quarter ended 30 June 2026 for the gas agreement and the balance sheet (all SEC EDGAR).

Three items, from filings of 28, 29 and 30 October. Two of them — the Alphabet and Microsoft 10-Qs — were available when this site covered the same companies' press releases on 29 October, and they went unread until today; the notes are where the commitments live, and that is now a standing part of the job rather than a weekend fallback. This is also the first brief on this site to carry a headline of its own: until today every brief was titled with its date, which is a defect this site reported on itself yesterday and is now testing deliberately. How this site works.