Investors reward Microsoft and Oracle cash flow, punish Alphabet over AI spending

Centre · 1Wall Street rewarded Microsoft and Oracle on Wednesday 28 October for showing they could fund large AI ambitions without continually tapping investors, and punished Alphabet for burning cash. 1 Centre · 2In extended trading, Alphabet shares fell about 10 percent while Microsoft rose about 4 percent (CNA put the Microsoft gain at more than 3 per cent). 2 1 Centre · 1Oracle ended regular trading nearly 11 per cent higher after saying it planned to cap external financing and expected to turn cash flow positive in the second half of fiscal 2028. 1

Centre · 1Alphabet's third-quarter revenue was $127.58 billion, up 25 percent but below the $128.22 billion expected; adjusted earnings per share of $2.67 missed a $3.02 forecast, which Gulf News called the first simultaneous miss on both measures in nearly four years and attributed partly to an $8.66 billion loss on equity investments. 2 Centre · 1Google search revenue grew 12 percent, short of the roughly 14.7 per cent expected, even though CEO Sundar Pichai said queries were growing at their fastest pace in five years; the shortfall raised concern that AI chatbots and agents are taking share from the business that funds Alphabet's AI expansion. 1 Centre · 2Google Cloud revenue more than doubled to $30.71 billion (up 103 percent, against $28.7 billion expected), but capital expenditure rose 114 percent to $51.36 billion and free cash flow was negative $9.07 billion, the second straight quarterly deficit after the June quarter. 2 1

Centre · 2Alphabet held its 2026 capital spending guidance at $195 billion to $205 billion, and CFO Anat Ashkenazi said spending would rise significantly in 2027. 2 1 Centre · 1Microsoft's fiscal first-quarter revenue rose 19 percent to $92.28 billion, above the $90.69 billion consensus, with adjusted EPS of $4.89 against $4.73 expected. 2 Centre · 1Azure revenue, disclosed in dollar terms for the first time, was $33.17 billion, up 48 percent, and CFO Amy Hood guided to 49–50 percent constant-currency growth this quarter. 2

Centre · 2Microsoft spent $45.2 billion on infrastructure and generated $18.6 billion in free cash flow; CNA said that was nearly $10 billion more than Wall Street expected, while Gulf News noted it was 27 percent lower than a year earlier but stayed positive, and that capex came in below the $50.67 billion analysts projected. 1 2 Centre · 1CEO Satya Nadella said "the shiny object stuff is waning" as more businesses commit to long-term AI contracts, and that Microsoft wants breadth beyond a few large customers such as OpenAI. 1 Centre · 1Analysts were split on Alphabet: Melissa Otto of S&P Global Visible Alpha said Alphabet and Microsoft were "night and day", while Jeremy Saltzberg of Check Capital, which owns Alphabet shares, defended the spending as necessary to compete with OpenAI and Anthropic. 1

Centre · 2Both outlets conclude that investors now want evidence that AI growth can be financed sustainably, and CNA notes Meta had received a similar reaction the week before when its cash burn eclipsed better-than-expected revenue. 2 1