🔍 Read the full analysis: Microsoft’s Momentum Met Investor Approval; Alphabet’s Faced Scrutiny on ThorstenMeyerAI.com
TL;DR
Microsoft shares rose about 4% in after-hours trading after its October 28 results, while Alphabet shares fell about 10%. Both reported rapid cloud growth and constrained AI capacity, but Microsoft generated $18.6 billion in free cash flow while Alphabet reported negative $9.1 billion and raised money through bonds and new shares.
Microsoft shares rose about 4% and Alphabet shares fell about 10% in after-hours trading after the companies reported results on October 28, 2026. Both described strong demand for cloud and artificial-intelligence computing, but investors weighed that growth against cash generation: Microsoft reported $18.6 billion in free cash flow, while Alphabet reported a $9.1 billion outflow.
Cloud revenue grew at different rates: Microsoft Azure rose 48% to $33.2 billion, while Google Cloud increased 103% to $30.7 billion, according to the companies’ results. Microsoft also beat analyst expectations for revenue and profit, and Azure growth exceeded the company’s July guidance. Alphabet’s revenue, earnings per share and search advertising revenue fell short of analyst forecasts, according to CNBC’s account of the results.
Spending remained high at both companies. Microsoft reported $45.2 billion in capital spending when finance leases are included, and $39.4 billion in cash purchases of property and equipment. Alphabet’s capital expenditures rose 114% from a year earlier, according to the source’s calculations from company cash-flow statements. Alphabet’s quarter included $28.7 billion raised in bonds and $12.4 billion from new shares; it did not repurchase shares during the period.
The companies also reported limits on available computing capacity. Microsoft said some expected third-party deliveries were delayed, pushing part of its planned spending into later periods. Alphabet has begun renting capacity from third parties, according to the source. Both companies said demand exceeded supply, while their contracted cloud obligations totaled $677 billion at Microsoft and $561 billion at Google Cloud. Those backlogs represent contracted future revenue, not cash already received.
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 Spending Test
The market’s contrasting response indicates that investors were looking beyond cloud growth rates to the cost and funding of AI expansion. Google Cloud’s reported growth was faster, but Alphabet’s negative free cash flow and reliance on bonds and share issuance drew attention to how it is financing its build-out. Microsoft’s positive free cash flow gave investors a different picture of its ability to fund investment from current operations.
That is a measure of perceived financial risk, not a verdict on which company will win the AI market. Both are committing large sums to data centers and computing equipment, and both say supply is tight. A backlog may point to future demand, but it does not establish when that demand will become recognized revenue or cash. Investors will be watching whether new capacity arrives on schedule and whether revenue ultimately justifies the spending.
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Microsoft’s reported quarter was its first quarter of fiscal 2027; its fiscal year begins in July. Revenue rose 19% to $92.3 billion, and adjusted earnings per share were $4.89, above the $4.73 expected by analysts polled by LSEG, according to CNBC. Azure’s 48% growth was also above the 45% rate Microsoft had forecast in July.
Microsoft’s capital-spending figures use two measures: $45.2 billion including finance leases, and $39.4 billion in cash paid for property and equipment, compared with $19.4 billion a year earlier. CFO Amy Hood said delayed third-party capacity deliveries reduced spending in the quarter. She expected capital expenditures above $50 billion in the current quarter, with an acceleration in the first half of 2027. The source also reports Microsoft’s 2026 capital plan at about $170 billion, down from an earlier estimate of about $175 billion.
Alphabet, by contrast, kept its reported 2026 capital-spending outlook at $195 billion to $205 billion, with a further increase indicated for 2027. Microsoft’s commercial remaining performance obligation rose 73% to $677 billion; about 30% is expected to become revenue within 12 months, according to the source. Alphabet’s Google Cloud backlog was reported at $561 billion. These obligations differ from completed sales and should be read as commitments for future services.
Delivery Timing and Returns Remain Open
The reported results do not establish when all planned data-center and equipment capacity will become operational, or how quickly the companies can convert contracted demand into revenue and cash. Microsoft’s delayed deliveries are expected to push some spending into later quarters, but the source does not give a full schedule for those deliveries. Alphabet’s use of rented capacity likewise does not specify how long the arrangement will last or its full cost.
It is also too early to determine whether the spending levels will produce returns that satisfy investors. The companies’ backlogs are commitments for future service, not guaranteed near-term cash receipts. Alphabet’s shortfall against analyst forecasts and its financing activity are confirmed in the source material, but the after-hours share moves alone do not show how investors will value the companies after regular trading resumes.
Upcoming Spending and Capacity Updates
Investors will look to Microsoft’s next results for evidence that delayed equipment arrives and for confirmation of Hood’s expectation that capital spending will exceed $50 billion in the current quarter. The company has also said spending should accelerate in the first half of 2027, making delivery timing and cash flow key points to track.
For Alphabet, subsequent results should show whether cloud growth can continue alongside its high investment, and whether free cash flow improves after two negative quarters. Both companies’ ability to add computing capacity and turn customer commitments into recognized revenue will remain central to assessing the financial consequences of the AI build-out.
Key Questions
After the companies reported results on October 28, Microsoft shares rose about 4% and Alphabet shares fell about 10% in after-hours trading. The source points to Microsoft’s earnings and Azure performance above expectations, along with positive free cash flow, while Alphabet missed analyst forecasts and reported negative free cash flow. The share moves are market reactions, not proof of longer-term outcomes.
Did Google Cloud grow faster than Azure?
Yes. The reported figures show Google Cloud revenue rose 103% to $30.7 billion, while Azure revenue rose 48% to $33.2 billion. Faster growth did not by itself determine the share-price response; investors also considered spending, cash flow and results against expectations.
How did the companies’ free cash flow compare?
Microsoft reported $18.6 billion in free cash flow for the quarter, while Alphabet reported negative $9.1 billion. The figures describe the reported quarter and do not establish what either company will generate in future periods.
What do the cloud backlogs show?
Microsoft reported $677 billion in commercial remaining performance obligations, and Google Cloud reported $561 billion in customer commitments, according to the source. These are contracted amounts for future services, not cash already collected; timing of conversion to revenue varies.
Are AI computing shortages over?
No. Both companies said demand exceeded supply. Microsoft reported delayed third-party deliveries, while Alphabet had begun renting capacity from other providers. The source does not provide a date when constraints will ease.
Source: ThorstenMeyerAI.com
