AI in action · Markets
Same Night, Opposite Verdicts on Big Tech's AI Spending
Microsoft spent $45.2 billion on capacity last quarter and rose after hours; Alphabet spent $51.4 billion and fell about 9%. The difference was free cash flow: $18.6 billion at Microsoft, minus $9.1 billion at Alphabet.
Two of the largest buyers of AI chips reported within an hour of each other on Wednesday, October 28, and investors gave them opposite answers. Microsoft said its capital expenditure, including finance leases, was $45.2 billion in the September quarter, up about 30%; Alphabet said its purchases of property and equipment were $51.36 billion, more than double a year earlier. Microsoft's shares rose by roughly 3% to 5% after hours and Alphabet's fell by about 9% to 11%, according to SiliconANGLE, StockTitan and Crypto Briefing.
Spending was not the dividing line; cash was. Microsoft generated $18.63 billion of free cash flow even after its spending, down 27% but still large. Alphabet's free cash flow was minus $9.07 billion, its second negative quarter in a row, against a positive $24.46 billion a year earlier. S&P Global's Melissa Otto said Microsoft had shown discipline in how it managed its spending while Google's core business had fallen short, Crypto Briefing reported; Bloomberg's preview had already framed the evening as a test of the "AI cash flow drain".
Growth did not settle it either. Google Cloud's revenue rose 103% to $30.71 billion, faster than Azure's 48%, which Microsoft disclosed in dollars for the first time at $33.17 billion. But Google's Search revenue grew 12%, down from 17% a quarter earlier, while Microsoft raised its Azure growth forecast to 49% to 50%. Investors rewarded the company whose existing business is funding the build-out and marked down the one whose core growth is slowing while spending doubles.
Oracle completed the picture the same day. It has no cash surplus to point to, with free cash flow expected to turn positive only in the second half of fiscal 2028, but its shares rose 10.7% after it capped new outside funding at $20 billion through fiscal 2030. Meta, which reported on October 21, had already shown the other side: a first negative free-cash-flow quarter since 2012 and plans for non-voting shares to raise money.
The read-through reached Asia within hours. Korea's Kospi fell about 3% on Thursday morning as Samsung Electronics dropped despite a record profit, with analysts citing Alphabet's report among the reasons, because memory makers depend on exactly this spending. Amazon reports on Thursday evening, and its free cash flow, not just AWS growth, is now the figure most likely to move the market.
Sources: SiliconANGLE — Microsoft's stock rises on solid earnings and revenue beat, with Azure growing 48% (Oct 28, 2026); StockTitan — Alphabet Q3 2026 earnings: Google Cloud doubles, search slows; Crypto Briefing — Microsoft and Oracle rewarded for disciplined AI spending, Alphabet punished for cash burn; Bloomberg — Microsoft and Alphabet earnings put focus on AI cash flow drain (Oct 28, 2026); The Korea Times — Seoul stocks down 3% late Thursday morning after weaker-than-expected Samsung earnings (Oct 29, 2026)