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TL;DR
Microsoft shares rose about 4% and Alphabet’s fell about 10% in after-hours trading on October 28, 2026, after both reported quarterly results. Alphabet’s Google Cloud grew faster, but Microsoft reported positive free cash flow while Alphabet posted a second consecutive negative quarter and raised money through bonds and stock sales. Both companies said demand for AI computing exceeds available capacity.
Microsoft shares rose about 4% and Alphabet shares fell about 10% in after-hours trading on October 28, after the companies reported quarterly results that highlighted a divide in how they are funding the AI buildout. Alphabet’s Google Cloud revenue grew faster than Microsoft Azure’s, but Microsoft generated $18.6 billion in free cash flow, while Alphabet recorded negative $9.1 billion, according to the companies’ reported figures.
Microsoft reported revenue of $92.3 billion, up 19% from a year earlier, 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. The company disclosed Azure’s quarterly revenue in dollars for the first time.
Alphabet’s Google Cloud revenue rose 103% to $30.7 billion, more than twice Azure’s growth rate. But Alphabet also missed analyst expectations for revenue, earnings per share and search advertising, CNBC reported. The source material describes this as the company’s first miss on both revenue and profit in nearly four years.
Infrastructure spending remained high at both companies. Microsoft reported $45.2 billion in capital spending when finance leases are included, and $39.4 billion of cash spending on property and equipment. Alphabet’s 2026 capital-spending forecast remained $195 billion to $205 billion. The supplied report says Alphabet’s capital spending was up 114% from a year earlier, based on its cash-flow statements.
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.
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Cash Flow Shapes the AI Bet
The market reaction suggests investors are weighing whether cloud and AI growth can support the cost of building computing capacity. The supplied figures show different near-term funding positions: Microsoft said it expects to remain free-cash-flow positive for its fiscal year, while Alphabet’s negative free cash flow coincided with bond issuance and new share sales.
That distinction does not establish which company will earn more from AI over time. It does affect how much each may need to rely on outside financing while spending remains elevated. Alphabet raised $28.7 billion through bonds and $12.4 billion by issuing shares during the quarter, according to the source material; it also reported no share buybacks. Microsoft had not issued new bonds in the period described.
Both companies have large contracted cloud commitments, but those are not the same as immediate revenue or cash. Microsoft’s commercial remaining performance obligations reached $677 billion, while Google Cloud’s customer commitments were reported at $561 billion. The report says only about 30% of Microsoft’s contracted amount is expected to be recognized as revenue within 12 months. The gap between commitments, delivery and payment remains relevant to assessing the return on AI infrastructure.
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Cloud Growth Meets Capacity Limits
The results came as major technology companies race to expand data centers and secure processors for AI services. Microsoft and Alphabet both said demand exceeds available supply. In Microsoft’s case, some third-party capacity deliveries expected during the quarter were delayed, pushing part of its planned spending into later periods. Microsoft finance chief Amy Hood said the company expects capital spending above $50 billion in the current quarter and an acceleration in the first half of 2027.
Microsoft’s spending figures depend on the measure used. Its $45.2 billion total includes finance leases, while $39.4 billion was cash spent on property and equipment. The source says roughly three-quarters of Microsoft’s capital spending went to short-lived assets, including GPUs and CPUs, with higher memory and storage costs also contributing. Its 2026 spending plan was about $170 billion, compared with an earlier estimate of about $175 billion.
Alphabet’s spending outlook was unchanged at $195 billion to $205 billion for 2026, with a substantial increase indicated for 2027. The supplied material also says Google has begun renting capacity from third parties. Both firms’ reported customer commitments indicate demand, but delivery constraints mean the companies cannot necessarily convert those orders into services on the customers’ preferred schedule.
Delivery Timing and Returns Remain Open
The figures do not settle whether Microsoft or Alphabet will earn a better long-term return on AI investment. Cloud growth and spending are not directly comparable measures: the companies report different business mixes and capital-spending details, and the supplied material does not provide a common measure of AI-specific revenue or returns.
The timing of additional computing capacity is also uncertain. Microsoft said delayed deliveries would shift into later periods, with acceleration expected in the first half of 2027, but the exact delivery schedule was not specified. The supplied account says Alphabet is renting third-party capacity but does not detail how much it has secured, at what cost, or for how long.
Contracted commitments may take years to become recognized revenue, and some may depend on customers receiving capacity as planned. The source material reports Microsoft’s $677 billion commitment figure and its expected recognition schedule, but does not give comparable timing details for Alphabet’s $561 billion. It is also unclear how much the companies’ capital-spending plans may change if supply constraints, demand or financing conditions shift.
Investors Await Spending and Supply Updates
Investors will look to upcoming earnings calls and filings for updates on capital spending, free cash flow and capacity delivery. Microsoft’s next near-term marker is Hood’s expectation that spending will exceed $50 billion in the current quarter, followed by faster investment in the first half of 2027. Actual spending and delivery updates will help show whether the quarter’s delays were temporary or part of a longer constraint.
Alphabet’s unchanged 2026 forecast and indicated increase in 2027 leave the company’s financing needs under scrutiny. Future results should show whether Google Cloud’s faster growth is accompanied by improved cash generation, and how much third-party capacity rental adds to costs. The companies have not established in the supplied material when supply will meet demand or how quickly their AI infrastructure investments will translate into returns.
Key Questions
Why did Microsoft shares rise while Alphabet shares fell?
The supplied report says Microsoft shares gained about 4% after hours while Alphabet’s fell about 10%. Investors appeared to favor Microsoft’s positive free cash flow and results above analyst expectations, while Alphabet missed forecasts and reported negative free cash flow. That interpretation describes the reported market response; it does not establish the sole cause of the share moves.
Did Alphabet’s cloud business grow faster than Azure?
Yes. Alphabet said Google Cloud revenue increased 103% to $30.7 billion, while Microsoft reported Azure revenue growth of 48% to $33.2 billion. The growth rates refer to each company’s reported cloud revenue for the quarter.
How did the companies’ free cash flow compare?
Microsoft reported $18.6 billion in free cash flow. Alphabet reported negative $9.1 billion, its second negative quarter in a row according to the supplied source. The figures indicate different cash positions for the quarter, not a complete measure of each company’s long-term financial health.
Are AI computing shortages still affecting both companies?
Both companies said demand exceeded available supply. Microsoft cited delayed third-party capacity deliveries, while Alphabet had begun renting capacity from third parties, according to the supplied report. The scale and duration of the constraints remain unclear.
Source: ThorstenMeyerAI.com
