🔍 Read the full analysis: Why Microsoft’s News Lifted Sentiment While Alphabet’s Weighed On It on ThorstenMeyerAI.com
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TL;DR
Microsoft shares rose about 4% in after-hours trading on Oct. 28, 2026, after the company beat analyst expectations and reported positive free cash flow. Alphabet shares fell about 10% after it missed forecasts and reported negative free cash flow amid rapid AI investment. The contrast was not cloud growth alone: Alphabet Cloud grew faster, but its spending and financing needs weighed on investor sentiment.
Microsoft shares rose about 4% and Alphabet shares fell about 10% in after-hours trading on Oct. 28, after both companies reported results shaped by heavy AI investment. The split came despite faster cloud growth at Alphabet: Microsoft beat analyst forecasts and generated positive free cash flow, while Alphabet missed key expectations and reported another quarter of negative free cash flow.
Microsoft reported revenue of $92.3 billion, up 19% from a year earlier, and adjusted earnings per share of $4.89, compared with the $4.73 analysts polled by LSEG expected, according to CNBC. Azure revenue increased 48% to $33.2 billion, exceeding Microsoft’s July growth guidance of 45%. Microsoft reported $18.6 billion in free cash flow for the quarter.
Alphabet’s Google Cloud grew faster, with revenue up 103% to $30.7 billion. But Alphabet reported negative free cash flow of $9.1 billion, the second consecutive quarter in which that measure was below zero, according to the supplied source material. It also missed analyst expectations for revenue, earnings per share and search advertising. CNBC reported this was the company’s first revenue and profit miss in nearly four years.
The companies’ investment plans point to continuing pressure on cash and infrastructure. Microsoft’s 2026 capital-spending plan was about $170 billion, down from an earlier estimate of about $175 billion; Alphabet kept its 2026 plan at $195 billion to $205 billion. Both said demand for computing capacity exceeds supply. Microsoft cited delayed third-party capacity deliveries, while Alphabet has begun renting capacity from other providers.
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 Trade
The earnings reaction suggests investors are weighing the cost and funding of AI expansion alongside growth. A company can show fast cloud revenue growth while also spending heavily on the data centers, chips and related infrastructure needed to provide that service. In this quarter, Microsoft’s positive free cash flow contrasted with Alphabet’s cash outflow, making the two companies’ capacity plans look different from a financing perspective.
That distinction does not establish which company will earn more from AI over time. It does help explain why a faster-growing cloud business did not guarantee a more favorable market reaction. Investors also had to account for Alphabet’s missed forecasts and weaker search-advertising result, while Microsoft exceeded several expectations. The market response is an immediate assessment of results and perceived risk, not proof of a long-term winner.
Both companies have large contracted workloads, but those commitments are not the same as cash already received. Microsoft’s commercial remaining performance obligation rose 73% to $677 billion, while Google Cloud’s customer commitments were reported at $561 billion. Microsoft said only about 30% of its contracted amount is expected to become revenue within 12 months; the source material does not provide an equivalent timing breakdown for Google Cloud.
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Cloud Growth Meets Capacity Limits
The results were reported on the same evening after the U.S. market closed, allowing investors to compare two companies investing heavily in AI infrastructure. Microsoft’s quarter was the first of its fiscal 2027, which began in July. Its Azure growth and overall results exceeded the expectations cited in the source material; Alphabet combined rapid Google Cloud growth with misses in revenue, earnings per share and search advertising.
Spending figures require care because Microsoft reports investment on more than one basis. Capital spending including finance leases was $45.2 billion, while cash paid for property and equipment was $39.4 billion, twice the $19.4 billion recorded a year earlier. Microsoft’s cash spending came in below the $50.7 billion analysts expected, according to StreetAccount figures cited by CNBC. CFO Amy Hood attributed part of the difference to delayed deliveries from third-party providers.
Microsoft’s delayed capacity does not mean the planned spending has disappeared. Hood said the company expected capital spending above $50 billion in the current quarter and an acceleration in the first half of 2027. Alphabet’s 2026 investment plan was unchanged, with a larger increase signaled for 2027. The supplied material says both companies expect supply constraints to persist, though it does not give a shared timetable for when those constraints will ease.
Funding and Delivery Risks Remain
The quarter’s figures do not establish whether Alphabet’s negative free cash flow will continue, or how quickly its current investment will generate revenue and cash. The source material says Alphabet raised $28.7 billion in bonds and $12.4 billion through new share issuance during the quarter and did not buy back shares. It does not detail how much of those funds directly financed particular AI projects.
Microsoft’s positive free cash flow also needs to be read alongside its delayed deliveries. Some spending that had been expected in the quarter may occur later, and Hood anticipated higher spending in the current quarter. The timing and cost of future deliveries remain uncertain. The two companies’ backlog figures also represent contracted or committed business, not revenue already collected.
Market moves after hours can change as trading continues. The supplied information does not establish whether the initial share-price reactions will persist, nor does it quantify how much of either company’s results investors attributed specifically to AI rather than other business lines.
Investors Watch Spending and Supply
Investors will look to Microsoft’s next quarterly report for evidence that delayed capacity deliveries arrive and for confirmation of the spending acceleration Hood described. They will also watch whether Azure growth remains above the company’s guidance and whether free cash flow stays positive as capital investment rises.
For Alphabet, attention will turn to whether Google Cloud’s rapid growth can be sustained while the company funds its infrastructure plans, and whether revenue, earnings and search advertising return to analyst expectations. The supplied material does not give a date for when capacity constraints will ease or specify a later milestone for the companies’ 2027 investment plans.
For both companies, the next reports should clarify whether customer commitments convert into recognized revenue while AI computing remains constrained. Until then, the central comparison is the one reflected in this quarter: strong cloud demand at both firms, but different reported cash-flow positions and different results against forecasts.
Key Questions
Why did Microsoft shares rise while Alphabet shares fell?
Microsoft beat analyst expectations for revenue and adjusted earnings per share and reported $18.6 billion in free cash flow. Alphabet missed forecasts for revenue, earnings per share and search advertising, and reported negative free cash flow of $9.1 billion. Those differences accompanied the contrasting after-hours moves.
Did Alphabet’s cloud business grow faster than Azure?
Yes, for the reported quarter. Google Cloud revenue grew 103% to $30.7 billion, while Azure revenue grew 48% to $33.2 billion. Faster growth did not prevent Alphabet shares from falling after its broader results and cash-flow figures.
How much did Microsoft and Alphabet plan to spend in 2026?
The source material gives Microsoft’s plan as about $170 billion for 2026, down from an earlier estimate of about $175 billion. Alphabet’s plan remained at $195 billion to $205 billion. The figures refer to capital-spending plans, not the cash each company necessarily paid during this quarter.
Do the cloud backlog figures mean the companies already received that money?
No. Microsoft reported $677 billion in commercial remaining performance obligation, and the source material lists $561 billion in Google Cloud customer commitments. These figures refer to contracted or committed business, not cash already received. Microsoft said about 30% of its amount was expected to become revenue within 12 months.
Source: ThorstenMeyerAI.com
