🔍 Read the full analysis: How Microsoft Earned Investor Praise While Alphabet Drew Criticism on ThorstenMeyerAI.com
Get hardware and tech essentials delivered free with Prime
- Fast, free delivery on millions of items
- Prime Video, Amazon Music and more included
- Member-only deals all year
TL;DR
Microsoft shares rose about 4% in after-hours trading after its October 28 results, while Alphabet shares fell about 10%. Both companies reported strong cloud growth and heavy AI investment, but Microsoft produced $18.6 billion in free cash flow while Alphabet reported negative $9.1 billion and missed analyst forecasts for revenue, earnings per share and search advertising.
Microsoft shares rose about 4% in after-hours trading and Alphabet shares fell about 10% after the companies reported earnings on October 28, despite Google Cloud growing faster than Microsoft’s Azure. The contrast reflected more than cloud growth: Microsoft reported $18.6 billion in free cash flow and beat analyst forecasts, while Alphabet reported negative free cash flow and missed forecasts for revenue, earnings per share and search advertising, according to the supplied results and CNBC’s account.
Microsoft reported fiscal first-quarter revenue of $92.3 billion, up 19%, and adjusted earnings per share of $4.89, above the $4.73 expected by analysts polled by LSEG, CNBC reported. Azure revenue increased 48% to $33.2 billion, exceeding the 45% growth rate Microsoft had guided to in July. It was the first time Microsoft disclosed Azure quarterly revenue in dollars, according to the source material.
Alphabet’s Google Cloud revenue climbed 103% to $30.7 billion. But the company’s broader results came in below analyst expectations for revenue, earnings per share and search advertising, according to CNBC. Alphabet recorded negative $9.1 billion in free cash flow, its second consecutive negative quarter, while Microsoft generated $18.6 billion. Those cash-flow figures are a central distinction in the reported investor response; they do not by themselves establish how either company’s longer-term AI investments will perform.
Both companies are spending heavily to add computing capacity. Microsoft reported capital spending of $45.2 billion including finance leases, or $39.4 billion in cash payments for property and equipment. Alphabet’s 2026 capital-spending outlook remained at $195 billion to $205 billion, while Microsoft’s was about $170 billion, down from a July estimate of about $175 billion. The source says Alphabet raised $28.7 billion in bonds and $12.4 billion by issuing shares during the quarter, and made no share buybacks.
Infographic 01 · The scorecard
Same night, opposite verdicts.
The four numbers from my 28 October preview, scored with both companies’ own reports for July to September 2026.
The four numbers I said to watch, scored
Status chips: ok = healthy, hold = watch, urgent = warning sign. My assessment.
| Metric | Microsoft | Alphabet |
|---|---|---|
| 1 · Capex guidance | Microsoft hold About $170B for calendar 2026 (July: about $175B), lower only because deliveries slipped. More than $50B next quarter. | Alphabet hold $195–205B for 2026, unchanged. 2027 to “increase significantly”; no number yet. |
| 2 · Cloud growth vs. capex | Microsoft hold Azure +48%. Capex incl. finance leases +30%; cash capex about 2×. | Alphabet hold Google Cloud +103%. Capex +114% to $51.4B. |
| 3 · Free cash flow + funding | Microsoft ok +$18.6B (−27%). No new bonds. $10.2B returned to shareholders. | Alphabet urgent −$9.1B. $28.7B bonds and $12.4B new shares in the quarter. No buybacks. |
| 4 · Capacity | Microsoft hold “Demand continues to exceed available supply.” Delayed GPU capacity moves to the first half of 2027. | Alphabet hold “Supply constrained.” Renting third-party capacity; margin pressure ahead. |
Microsoft
≈ +4%After-hours, 28 Oct (CNBC; Reuters: more than 5%)
- Beat on revenue ($92.3B, +19%) and earnings per share ($4.89 adjusted vs. $4.73 expected)
- Azure guide 49–50% for the current quarter
- Self-funded build-out
Alphabet
≈ −10%After-hours, 28 Oct (CNBC, Reuters)
- Missed on revenue ($127.6B vs. $128.2B expected) and earnings ($2.67 adjusted vs. $3.02)
- Search +12%, below forecasts; AI Mode earns less per query so far
- Build-out now partly financed with bonds and new shares
Sources: Microsoft FY27 Q1 release and call, 28 Oct 2026; Alphabet Q3 2026 release (8-K), 28 Oct 2026; Alphabet Q3 call, third-party transcript; CNBC on Microsoft, 28 Oct; CNBC on Alphabet, 28 Oct; Reuters, 28 Oct. Analyst expectations as reported by CNBC and Reuters (LSEG, StreetAccount). Capex growth for Alphabet and Microsoft’s cash capex: my arithmetic from the cash flow statements. Status chips: Thorsten Meyer.
Powered by Thorsten Meyer AI
Cash Flow Separates Two AI Bets
The earnings put investor attention on whether AI expansion can be funded alongside companies’ other operations. Microsoft’s positive free cash flow showed that it had cash remaining after investment during the quarter. Alphabet’s negative free cash flow, alongside its bond and share issuance, pointed to greater reliance on outside financing during this period. That difference may help explain the opposing share moves, although after-hours trading is not proof of a single cause.
Cloud growth alone did not settle the market’s judgment. Google Cloud’s reported growth rate was more than twice Azure’s, but investors also had to weigh Alphabet’s misses against forecasts and the cash demands of expansion. For readers, the comparison shows why earnings reactions can depend on profitability, funding and the outlook for spending—not just a headline growth percentage. Both companies remain exposed to the cost and availability of the computing equipment needed to serve AI workloads.
Products Worth Considering
Logitech MX Mechanical Full-Size Wireless Mechanical Keyboard, Tactile Quiet Switches, Backlit Keys, Bluetooth, USB-C, Multi-Device, Graphit
Apple MacBook Pro 2021 16‑inch with M1 Max, 32 GB RAM, 2 TB SSD, Space Gray (QWERTY English)
LG UltraGear 27-Inch QHD OLED Gaming Monitor, 240Hz, 0.03ms, G-SYNC Compatible, FreeSync Premium Pro, HDMI 2.1
As an affiliate, we earn on qualifying purchases.
Cloud Growth Meets Capacity Limits
The companies’ results describe businesses scaling cloud services while facing a shortage of computing capacity. Both said demand exceeded supply. Microsoft finance chief Amy Hood said some third-party capacity deliveries expected in the quarter were delayed, pushing planned spending into later periods. She forecast capital spending above $50 billion in the current quarter, with an acceleration in the first half of 2027. The source says Google has begun renting capacity from third parties.
Each company also reported large customer commitments that have not yet become recognized revenue. Microsoft’s commercial remaining performance obligations rose 73% to $677 billion; about 30% is expected to be recognized as revenue within 12 months, according to the supplied account. Google Cloud commitments were reported at $561 billion. These backlogs indicate contracted demand, but they are not cash already collected, and the source cautions that both companies have substantial future spending commitments of their own.
The comparisons have limits. Microsoft’s fiscal year begins in July, making the reported quarter its first quarter of fiscal 2027. Its capital-spending figure also changes depending on whether finance leases are included. The figures should not be treated as perfectly interchangeable measures without accounting for those reporting differences.
Future Spending and Returns Remain Unclear
The results do not establish whether either company will earn an adequate return on its AI investment. Demand commitments and backlogs may support future revenue, but they are not equivalent to recognized sales or cash, and the timing of conversion varies. The source says only about 30% of Microsoft’s $677 billion in commercial remaining performance obligations is expected to become revenue within 12 months.
Capacity constraints also make quarterly spending harder to interpret. Microsoft’s cash investment was below analyst expectations partly because deliveries were delayed, while Hood said spending would rise in coming periods. The extent and timing of Alphabet’s reliance on rented capacity, as well as the effect of new borrowing and share issuance on future results, are not detailed in the supplied material. The after-hours share moves are reported figures; the source does not establish that cash flow alone caused them.
Spending Plans Face New Tests
Investors will have to compare upcoming quarters with the spending expectations both companies have set. Microsoft’s next quarter is expected to include capital spending above $50 billion, according to Hood, with investment accelerating in the first half of 2027. The company also expects delayed capacity deliveries to arrive later, though the supplied material does not give a complete schedule.
Alphabet kept its 2026 capital-spending range at $195 billion to $205 billion and indicated a substantial increase in 2027, according to the source. Future results should show whether additional spending eases capacity limits and supports cloud and AI revenue, and whether free cash flow improves. The available reporting does not specify when either company will fully meet demand or when the investments may generate returns.
Key Questions
Why did Microsoft shares rise while Alphabet shares fell?
The supplied account reports that Microsoft beat analyst forecasts for revenue and earnings per share, while Alphabet missed forecasts for revenue, earnings per share and search advertising. Microsoft also reported $18.6 billion in free cash flow, compared with Alphabet’s negative $9.1 billion. These are relevant differences, but the available information does not prove they were the sole causes of the share moves.
Did Google Cloud grow faster than Azure?
Yes. Google Cloud revenue grew 103% to $30.7 billion, while Azure revenue grew 48% to $33.2 billion, according to the supplied results. The growth rates refer to each company’s reported cloud business and do not, on their own, show which investment will produce stronger returns.
What did the companies report about free cash flow?
Microsoft reported $18.6 billion in positive free cash flow; Alphabet reported negative $9.1 billion, its second consecutive negative quarter, according to the source material. Free cash flow describes cash remaining after investment and other outflows under a company’s reporting measure; it does not predict future performance.
Are the large cloud backlogs the same as revenue?
No. Microsoft reported $677 billion in commercial remaining performance obligations and Google Cloud commitments were reported at $561 billion. These figures represent contracted revenue not yet recognized, rather than cash already received or revenue already recorded.
What remains uncertain about the AI spending plans?
The timing of new computing capacity, the pace at which customer commitments become revenue, and whether the spending generates returns remain unclear from the supplied reporting. Both companies said demand exceeded capacity, while Microsoft said some deliveries were delayed.
Source: ThorstenMeyerAI.com
