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TL;DR
After earnings released following the U.S. market close on Oct. 28, 2026, Microsoft shares rose about 4% in after-hours trading while Alphabet’s fell about 10%. The source attributes the contrast chiefly to Microsoft’s positive free cash flow and earnings beat, versus Alphabet’s negative free cash flow, fresh borrowing and share issuance, and misses on revenue and profit.
Microsoft shares rose about 4% and Alphabet shares fell about 10% in after-hours trading on Wednesday, Oct. 28, after the companies reported quarterly results. The contrasting reaction came even though Google Cloud grew faster than Azure: investors also weighed free cash flow, earnings against forecasts, and the scale of spending on AI infrastructure.
Microsoft reported 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, according to CNBC. Azure revenue rose 48% to $33.2 billion, ahead of the 45% growth Microsoft had guided in July. The company reported $18.6 billion in free cash flow after investment, according to the supplied account of its results.
Alphabet’s Google Cloud revenue rose 103% to $30.7 billion, while capital spending increased 114%, according to the source’s calculations from company cash-flow statements. Alphabet reported negative free cash flow of $9.1 billion, its second consecutive negative quarter, and raised $28.7 billion through bond issuance and $12.4 billion by selling new shares. It did not buy back shares during the quarter. The source says Alphabet also fell short of analyst expectations for revenue, earnings per share and search advertising.
The spending figures require care. Microsoft reported $45.2 billion in capital spending when finance leases are included, and $39.4 billion in cash paid for property and equipment, up from $19.4 billion a year earlier. Its cash spending was below the $50.7 billion analysts expected, with Chief Financial Officer Amy Hood attributing the gap partly to delayed third-party capacity deliveries. Alphabet’s 2026 capital-spending plan remained $195 billion to $205 billion, while Microsoft’s plan was about $170 billion. Both indicated spending would rise further in 2027.
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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The results point to a distinction investors may be making between growth and the cost of supporting it. Cloud revenue expanded rapidly at both companies, but the source’s comparison shows spending on computing capacity is also running ahead of cloud growth on a cash basis. Microsoft generated cash after investment in the reported quarter; Alphabet spent more than it generated and relied on borrowing and new equity financing.
That difference can affect how investors judge the ability to fund further data-center and chip purchases without taking on more debt or diluting shareholders. It is not proof that one company’s AI strategy will succeed and the other’s will fail. The after-hours moves reflect the market’s response to this quarter’s results and risks, not a final verdict on their long-term prospects.
There is also a demand-versus-delivery issue. Both companies say demand for computing capacity exceeds supply. Microsoft’s delayed deliveries pushed some expected spending into later periods, while Alphabet has begun renting capacity from third parties, according to the source. That means current spending and cash-flow figures may not capture the full cost of fulfilling commitments.
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Cloud Growth Meets Capacity Constraints
The comparison concerns earnings released after the market closed on Oct. 28, 2026. Microsoft’s reported quarter was its first quarter of fiscal 2027; the company’s fiscal year begins in July. The source says Microsoft beat analyst forecasts on revenue, profit and its Azure outlook, while Alphabet missed expectations for revenue, earnings per share and search advertising. CNBC was cited for the characterization that this was Alphabet’s first combined revenue and profit miss in nearly four years.
Both cloud divisions have large contracted-revenue backlogs, but those commitments are not the same as cash already received. Microsoft’s commercial remaining performance obligation rose 73% to $677 billion; the source says about 30% is expected to be recognized as revenue within 12 months. Google Cloud’s reported customer commitments were $561 billion. The time needed to deliver services, and the investment required to do so, matter when interpreting those headline totals.
Microsoft also disclosed $10 billion in quarterly revenue from OpenAI, including revenue-sharing payments, according to its filing as described in the source. The source estimates that at roughly 11% of Microsoft’s total revenue. That customer concentration is one factor to watch, but the supplied material does not establish what share of future revenue it will represent.
Spending and Delivery Risks Remain
The share moves were reported as after-hours changes; the supplied material does not give the subsequent regular-session performance. It also does not provide enough detail to independently compare all analyst forecasts or establish exactly how much of each company’s share move was driven by cash flow rather than earnings, guidance or other market factors.
Microsoft’s spending may rise as delayed equipment arrives. Hood said capital spending should exceed $50 billion in the current quarter and accelerate in the first half of 2027, according to the source. The source also notes that roughly three-quarters of Microsoft’s reported capital spending went to short-lived assets such as GPUs and CPUs, alongside higher memory and storage costs. Alphabet’s negative free cash flow and financing activity raise questions about how its investment pace will be funded, but the material does not establish whether that cash-flow pattern will continue.
Both companies’ backlog figures represent contracted commitments rather than immediate revenue. The timing of delivery, customer usage, and conversion of those commitments into recognized sales remains uncertain. The source also reports that Microsoft’s Windows revenue from PC makers fell 27%, but does not quantify how that weakness might affect future results.
Watch Capacity, Cash and Guidance
The next evidence will come from each company’s coming quarterly results and guidance, particularly whether delayed equipment reaches Microsoft and whether its promised spending increase appears in cash outlays. Investors will also be able to compare that spending with Azure growth and the company’s stated aim of remaining free-cash-flow positive during fiscal 2027.
For Alphabet, the questions include whether Google Cloud can sustain its rapid growth, how much additional investment is needed to serve customers, and whether free cash flow improves after two negative quarters. Its subsequent results will also show whether search advertising returns to growth consistent with analyst expectations. The supplied material does not give dates for the companies’ next earnings reports.
Across both companies, the key test is whether promised cloud demand turns into delivered services and revenue without requiring spending or outside financing to rise faster than cash generation. That remains a developing story, rather than a conclusion established by one quarter’s share-price reaction.
Key Questions
Why did Microsoft shares rise while Alphabet shares fell?
The source points to Microsoft’s earnings beat and positive free cash flow, compared with Alphabet’s negative free cash flow, financing through bonds and new shares, and reported misses on revenue, profit and search advertising. Those factors offer an explanation for the reaction, but do not prove what drove every investor’s decision.
Did Google Cloud grow faster than Azure?
Yes. In the reported quarter, Google Cloud revenue rose 103% to $30.7 billion, while Azure revenue rose 48% to $33.2 billion, according to the source. Faster growth did not by itself settle investor concerns about spending and cash generation.
How much free cash flow did each company report?
The source reports $18.6 billion for Microsoft and negative $9.1 billion for Alphabet after investment. It describes Alphabet’s figure as its second consecutive negative quarter.
Are the companies short of AI computing capacity?
Both companies said demand exceeded available supply, according to the source. Microsoft cited delayed third-party deliveries, while Alphabet had started renting capacity from other providers.
Do the companies’ backlogs mean that revenue is already secured?
No. Backlog figures describe contracted commitments not yet recognized as revenue. Microsoft reported $677 billion in commercial remaining performance obligation, with about 30% expected to become revenue within 12 months, according to the source; delivery timing and customer usage remain relevant.
Source: ThorstenMeyerAI.com
