🔍 Read the full analysis: How Investors Compared Microsoft’s And Alphabet’s AI Progress on ThorstenMeyerAI.com
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TL;DR
After both companies reported results on October 28, 2026, Microsoft shares rose about 4% in after-hours trading while Alphabet’s fell about 10%. Alphabet Cloud grew faster, but investors also faced its negative free cash flow, higher capital spending and revenue and profit misses; Microsoft reported positive free cash flow and beat analyst expectations. Both companies said AI capacity remains constrained.
Microsoft shares rose about 4% and Alphabet shares fell about 10% in after-hours trading on October 28, after the technology companies reported results that put their AI investment strategies side by side. Alphabet’s Google Cloud grew faster than Microsoft’s Azure, but investors also considered cash flow, spending and misses against analyst forecasts as they assessed how each company is financing its expansion.
Microsoft reported Azure revenue growth of 48% to $33.2 billion, while Google Cloud revenue grew 103% to $30.7 billion, according to the companies’ results. Microsoft also reported total revenue up 19% to $92.3 billion and adjusted earnings per share of $4.89, above the $4.73 expected by analysts polled by LSEG, CNBC reported. Its Azure growth exceeded the 45% forecast the company had given in July.
The companies’ cash positions differed. Microsoft reported $18.6 billion in free cash flow for the quarter; Alphabet reported negative free cash flow of $9.1 billion, its second consecutive negative quarter, according to the source’s calculations from company filings. Alphabet raised $28.7 billion through bonds and $12.4 billion through new stock in the quarter and made no share buybacks. Its revenue, earnings per share and search advertising revenue were below analyst forecasts, CNBC reported.
Both companies are spending heavily to build computing capacity. The source lists Microsoft’s 2026 capital-spending plan at about $170 billion, compared with Alphabet’s $195 billion to $205 billion plan. The source’s calculations show cloud growth was outpaced by capital-spending growth on a cash basis. Both firms said demand for AI computing exceeds available supply: Microsoft cited delayed GPU deliveries, while Google had begun renting capacity from third parties.
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 Shaped the AI Verdict
The market reaction shows that investors were not judging the companies on cloud growth alone. Google Cloud’s faster reported growth did not prevent Alphabet’s shares from falling, as its results also included negative free cash flow and weaker-than-expected revenue, earnings and search advertising. Microsoft’s reported positive free cash flow and results above analyst expectations offered a different picture of how its AI expansion was being funded.
That distinction matters because infrastructure spending is continuing while demand outstrips available computing capacity. Spending on data centers and processors can support future services, but the revenue from those investments may arrive over time. Large customer commitments are not the same as cash already received: Microsoft’s commercial remaining performance obligation reached $677 billion, but the source says only about 30% is expected to become revenue within 12 months. The equivalent Google Cloud commitment was $561 billion.
The share-price moves are a snapshot of investors’ response to one set of results, not proof of which company will ultimately earn more from AI. The figures highlight the trade-off investors are watching: growth and capacity expansion against the cost, timing and funding of that expansion.
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What the Earnings Reports Showed
The reports covered results released after the U.S. market closed on October 28, according to the source, which cites Microsoft and Alphabet releases and earnings calls. Microsoft’s quarter was the first of its fiscal 2027, which began in July. Its report showed Azure revenue for the first time in dollars, at $33.2 billion. The company also reported $45.2 billion of capital spending when finance leases are included, and $39.4 billion in cash paid for property and equipment. The latter was double the $19.4 billion recorded a year earlier, based on the source’s figures.
Microsoft Chief Financial Officer Amy Hood said some third-party capacity deliveries expected in the quarter had been delayed. The source reports that around three-quarters of Microsoft’s spending went to shorter-lived assets such as GPUs and CPUs. Hood said the company expected capital spending above $50 billion in the current quarter and an acceleration in the first half of 2027. Microsoft’s contracted commercial backlog rose 73% to $677 billion, with an average duration of 2.3 years, according to the source.
For Alphabet, the source lists a 2026 capital-spending plan of $195 billion to $205 billion, unchanged, with a large increase indicated for 2027. It also says Alphabet’s $561 billion of Google Cloud commitments and Microsoft’s $677 billion backlog represent contracted future revenue, not immediate cash. The companies’ spending and revenue timing are central to comparing their AI progress.
Capacity and Spending Remain in Flux
The reports do not establish how quickly the companies’ large customer commitments will turn into recognized revenue or cash. Microsoft’s backlog includes contracts expected to be fulfilled over time, and the source says about 30% is due to become revenue within 12 months. The timing and profitability of the remaining commitments are not detailed here.
Near-term spending may also differ from plans if equipment deliveries shift. Microsoft said some expected capacity arrived late and forecast higher spending in subsequent periods. The source says Google was renting capacity from third parties, but does not give the scale, cost or duration of those arrangements. Nor do the supplied figures settle whether either company’s planned AI infrastructure will generate returns sufficient to cover its costs.
The share moves are after-hours reactions, and the source does not provide a later trading update. Alphabet’s misses are attributed to CNBC, while the cash-flow comparison and some spending-growth calculations are the source author’s calculations from company filings. Those figures should be read with their stated definitions and periods.
Upcoming Spending Will Test the Plans
Investors will be watching whether Microsoft’s delayed deliveries arrive and whether its capital spending rises as Hood forecast. The company said spending would exceed $50 billion in the current quarter and accelerate in the first half of 2027. Future results should show whether that added capacity helps Azure meet demand and supports the company’s free-cash-flow outlook.
For Alphabet, the next reports will indicate whether Google Cloud can sustain its rapid growth while the company funds its infrastructure plans and restores positive free cash flow. Investors will also be able to assess the performance of search advertising, which fell short of analyst expectations in this report.
For both companies, the next earnings updates can clarify how much of their contracted cloud business becomes revenue, how quickly capacity constraints ease, and whether AI-related spending produces returns. The source does not specify dates for those milestones, so their timing remains dependent on future company disclosures and results.
Key Questions
Why did Microsoft shares rise while Alphabet shares fell?
Microsoft rose about 4% and Alphabet fell about 10% in after-hours trading after their October 28 results. The source points to Microsoft’s positive free cash flow and results above analyst expectations, compared with Alphabet’s negative free cash flow and misses on revenue, earnings per share and search advertising. The figures describe the market reaction, not a settled verdict on which company will lead in AI.
Which company had faster cloud growth?
Google Cloud grew faster in the reported quarter: revenue rose 103% to $30.7 billion, while Azure revenue rose 48% to $33.2 billion, according to the company results cited in the source.
How did their free cash flow compare?
Microsoft reported $18.6 billion in free cash flow; Alphabet reported negative free cash flow of $9.1 billion. These are figures for the quarter covered by the October 28 results, as presented in the source.
Are AI computing resources readily available?
No. Both companies said demand exceeded supply. Microsoft reported delayed GPU deliveries, while Google had started renting computing capacity from third parties, according to the source.
Do the companies’ cloud backlogs mean they have already received the money?
No. The source describes Microsoft’s $677 billion and Google Cloud’s $561 billion in commitments as contracted future revenue, not cash already collected. Microsoft said about 30% of its commercial commitments would become revenue within 12 months.
Source: ThorstenMeyerAI.com
