Alphabet filing shows $98.5B in contingent AI commitments

Alphabet ↘ 1.45% has about $98.5 billion in contingent commitments it could be forced to pay under certain conditions, according to its quarterly filing released Thursday, October 29. That figure is up roughly $23 billion from one quarter earlier, and it comes on top of the more than $1 trillion in purchase commitments, future leases and other obligations that Chief Financial Officer Anat Ashkenazi described on Wednesday's earnings call, Bloomberg reported via Moneycontrol. The disclosures arrived as the cost of insuring against losses on Alphabet's debt rose and its shares fell sharply. Bloomberg said disappointing results had intensified fears that the company's debt-funded AI spending may not pay off.moneycontrol.com+1

Backlog tied to a related party

The 10-Q filing puts Alphabet's revenue backlog at $567.7 billion as of September 30, with $560.8 billion of it from Google Cloud. The filing says $16.8 billion of the backlog comes from a multiyear agreement with Crux AI, "an unconsolidated equity method joint venture and a related party." Cloud backlog stood at $513.9 billion three months earlier, so Crux accounts for more than a third of the quarter's growth. Alphabet formed the venture with Blackstone ↘ 1.73%, owns a minority stake and has pledged up to $10 billion in data center and energy backstops to support it, according to the report.stocktitan.net+1

The contingent commitments include guarantees on data center leases and backing for partners' purchases of power equipment. Those energy guarantees more than doubled to $16.2 billion and now run through January 2049. Alphabet could also have to buy back as much as $6.6 billion of TPU chip systems from customers at preset discounted prices, though the company says customers have no incentive to return them. The filing also notes slowing growth in Search paid clicks, which rose 8% in the third quarter compared with 13% in the second, Moneycontrol reported. Alphabet declined to comment.moneycontrol.com

Cash burn rattles investors

Third-quarter earnings of $2.12 per share fell well short of the $3.02 analysts expected, and free cash flow was negative $9.07 billion, CNBC reported. Capital spending more than doubled from a year earlier to $51.4 billion. Alphabet kept its 2026 capex forecast at $195 billion to $205 billion, and Ashkenazi said spending would "increase significantly in 2027". According to AFP, the company raised $28.7 billion through bond sales and $12.4 billion by issuing new shares during the quarter.cnbc.com+2

On Thursday the stock fell more than 13%, wiping out over $500 billion in market value. Bloomberg called it the company's largest market-value drop ever, after search and advertising sales missed forecasts and added to concerns that AI is eating into Google's core business. Google Cloud revenue still grew 103% to $30.7 billion. That leaves investors weighing fast cloud growth against Alphabet's expanding off-balance-sheet guarantees and its continued cash burn.bloomberg.com