Buying, Building, Renting, Guaranteeing: How Alphabet Pays to Obtain Compute Capacity at Speed
Alphabet's second-quarter 10-Q, filed July 23, describes a company that cannot get data-center capacity fast enough. This note reads the filing's demand side against its supply side, and prices the instrument doing the most unusual work: the payment backstops Alphabet writes around other companies' data centers. Figures are from the filing unless attributed; the quantities are maintained, filing by filing, on the AI commitments monitor.
01 The demand side
Customers have signed $519.5 billion of non-cancelable contracts Alphabet has not yet delivered — essentially all of it Google Cloud. Alphabet expects just over half to convert to revenue within 24 months: a contracted pace of roughly $130 billion a year against a current run-rate near $99 billion — Alphabet has sold more compute than today's infrastructure can deliver on schedule. For years the backlog held at about two years of Cloud revenue at the then-current pace. It now equals about five — against revenue that itself grew 82% year over year.
Chart notes & definitions
Backlog is remaining performance obligations at period end — signed, non-cancelable contracts not yet delivered or recognized — essentially all Google Cloud; pre-2026 figures exclude contracts of one year or less (definition widened in Q1 2026, ~$7.3B). Revenue is the calendar year's Cloud segment revenue; 2026 is the second quarter annualized. Multiples are backlog over annualized revenue.
02 The supply response
The same filing shows four channels running at once:
Building. A record ~$45 billion of capital expenditure in the quarter; full-year guidance raised to $195–205 billion.
Buying. Intersect, a renewable-energy developer, acquired outright for $5.9 billion — buying the power pipeline rather than waiting in the interconnection queue.
Renting. A single lease signed in June: non-cancelable, approximately $5.8 billion, with a term of 12 months or less — roughly $480 million a month for temporary capacity, a structure consistent with renting bulk compute rather than property. Management described expanded use of third-party capacity as a "bridge" on the earnings call. The counterparty is not identified.
Guaranteeing power. $7.6 billion of financial guarantees so energy counterparties can order long-lead equipment — turbines, grid gear — on Alphabet's credit, for power that will later serve its data centers.
Guaranteeing payments. $43.8 billion of payment backstops on other companies' data centers, accounted for as credit derivatives: if the developers cannot pay, Alphabet covers it.
03 The backstops
What the buildout is short of is not money, land, or chips — it is grid power. The backstops show it. The reported arrangements include developers who already hold the one input capital cannot fast-track: TeraWulf and Cipher, former bitcoin miners whose defining asset is an existing grid connection. The disclosed book is several times the sum of the individually reported arrangements; the named deals are the visible portion.
The structure, per the filing: these developers cannot finance a build on their own credit, so Alphabet backstops their payment obligations — and with that promise, lenders fund the projects. In return, Alphabet's obligations "may be partially offset by equity or cash receipts from counterparties" — the reported deals carried equity stakes in the developers — and upon a default, Alphabet retains the right to assume the underlying data-center leases for its own use or to sublease. Terms run as long as 15 years.
Chart notes
Notional = maximum potential future payments under the backstops in specified default scenarios, as disclosed. The pending bar is Alphabet's estimate of further backstops agreed with data-center providers, subject to finalization of terms.
04 The price
The booked fair value of the obligations — Alphabet's own estimate of what the promises may cost — went from $69 million in December to $815 million in June: from about 41 cents to $1.86 per $100 of exposure in six months.
Chart notes
Fair value of credit-derivative liabilities divided by notional: $69M / $16.9B and $815M / $43.8B. Level 3, probability-weighted models; inputs disclosed include counterparty risk and credit default rates.
The composition of the move is disclosed. Only about $77 million ran through the income statement as losses on the existing book; the remainder arrived with newly written backstops. Holding the original book near its December mark, the arithmetic places the 2026 vintage near seven times the per-dollar rate of the first — consistent with reportedly smaller counterparties and a data-center credit market that has repriced wider since December. The seven-times figure is arithmetic under a stated assumption, not a disclosure.
05 Read against the credit record
On the compute-credit record, standalone data-center and GPU-backed borrowers fund at spreads of several hundred basis points, and the observed gap between anchor-supported and unsupported paper has run near 225 basis points. Alphabet's booked $1.86 per $100 across terms as long as 15 years is a small fraction of what the same credit costs unsupported. The difference is what the guarantee is worth — and the lease-assumption right is why Alphabet can carry it at marks no lender could: its recovery on a default is the capacity itself.
Writing more of these promises at a rising booked cost is what it looks like when waiting for powered capacity costs more than paying to skip the wait. The fair value per dollar of exposure is, to our knowledge, the only quarterly, filed price on hyperscaler-adjacent data-center credit. CCIR will publish this figure with each Alphabet 10-Q as part of the AI commitments monitor.
Sources — Alphabet Form 10-Q for the quarter ended June 30, 2026 (acc. 0001652044-26-000071), with prior-period figures from Alphabet's 10-K FY2025 (0001652044-26-000018) and earlier filings; quotations are verbatim from the filings. Press-reported deal facts as attributed in-text: CoinDesk (Sep 2025) on the TeraWulf arrangement and Fortune (Sep 2025) on the Cipher arrangement. The backlog-vs-revenue series and the five-issuer context are maintained on the AI commitments monitor. Nothing here is a solvency opinion, a forecast, or investment advice; CCIR publishes reference data and records.