When we reported that nine companies had signed about $3 trillion of AI-related commitments that sit off the balance sheet, the most common reaction was that something had been concealed. Nothing had. Every one of those numbers was printed in an audited public filing, in a note most readers have never opened.

That note is worth learning to read, because it is where a growing share of corporate obligation now lives.

What "off the balance sheet" actually means

A balance sheet records liabilities, and under US accounting rules a liability is generally recognized when the obligating event has happened: the goods arrived, the service was rendered, the money became owed. A contract to buy something over the next five years has not yet obligated anything. Nothing has been delivered, so nothing is owed, so nothing appears.

This is not a loophole. It is the accrual principle working as designed, and the alternative would be worse: a balance sheet that recognized every signed contract would show a liability for the office coffee order.

But the obligation is real, and accounting rules require it to be disclosed. It goes in the notes, under a heading that almost always reads "Commitments and Contingencies," with unconditional purchase obligations broken out. Auditors sign off on it. It is as public as revenue.

The phrase "off the balance sheet" therefore means "in the notes rather than on the face of the statements." It does not mean hidden, and a story that treats disclosure as concealment has misread the filing.

Where to look

A Form 10-K is a company's annual report to the SEC, and it contains audited financial statements followed by numbered notes. Three search terms will find what you need in almost any filing:

  • "Commitments and contingencies" finds the note itself.
  • "Purchase obligations" or "unconditional purchase obligations" finds the forward buying.
  • "Contractual obligations" finds the summary table, in filings that still have one.

That last point matters. For years the SEC required a tidy table in the management discussion section, laying out contractual obligations by maturity: under a year, one to three, three to five, beyond five. The commission dropped that requirement in its 2020 overhaul of MD&A disclosure, and many companies stopped publishing the table. The underlying obligations did not go anywhere, but reconstructing the maturity profile now often means reading the note rather than scanning a grid.

What to do with the number once you have it

A large purchase commitment is not automatically a problem. Ask four questions.

Over how many years? A $50 billion commitment spread across eight years is a $6 billion annual claim on cash. Headlines almost always quote the undiscounted total, which flatters the size of the number by ignoring both time and the time value of money.

Against what cash generation? Compare the annual figure with operating cash flow, not with net income and not with the cash balance. A company producing $80 billion a year of operating cash can absorb commitments that would sink a company producing $8 billion.

How cancelable? Read the wording. Some obligations are genuinely unconditional. Others carry termination rights, volume flexibility, or penalties well below the contract value. The note usually says which, in a sentence that is easy to skim past.

Owed to whom, and does that party also invest here? This is the question the AI contracts have made unavoidable. When a supplier of compute is also a shareholder or lender to its customer, the commitment and the funding are entangled, and the obligation should be read alongside the financing rather than separately from it.

Why this note got interesting

Two things changed at once. The first is scale: purchase commitments used to be a rounding item for most large technology companies, and in AI infrastructure they are now measured in hundreds of billions.

The second is that the other big off-balance-sheet item went away. Leases moved onto the balance sheet in 2019, when new rules required companies to recognize a right-of-use asset and a matching lease liability for operating leases. That reform closed the gap that had made lease accounting a standing complaint of analysts. Purchase obligations are what is left, and they are now carrying the weight.

The credit market has noticed, which is the part that reaches ordinary investors. Lenders read the commitments note even when equity holders do not, and the cost of borrowing against these obligations has been rising: we have covered both Amazon's $25 billion bond sale into a warier market and the widening spreads on AI-linked borrowing among otherwise safe issuers.

None of this is a view on whether the commitments are wise. It is a note on where to find them. The information is free, it is audited, and it is usually about forty pages past the point where most people stop reading.