Microsoft earnings beat Wall Street forecasts on 28 October 2026, while Alphabet missed estimates on the same night and fell in after-hours trading. The split gave investors a direct comparison of two companies spending heavily on artificial intelligence. Microsoft shares rose about 5% after the close, according to market reports on the session, while Alphabet shares fell between 7% and 9%.
Alphabet reported revenue of $127.6 billion, up 25% from a year earlier, but slightly below the $128.2 billion analysts had expected. Adjusted earnings per share were $2.67, against an expected $3.02. On a GAAP basis, earnings per share fell to $2.12 from $2.87 a year earlier. Search and YouTube advertising also came in below expectations, CNBC reported. The miss was described in coverage as Alphabet’s first miss on both revenue and profit in nearly four years.
The Microsoft earnings release put revenue at $92.3 billion for its fiscal first quarter, up 19% from a year earlier. Adjusted earnings per share came in at $4.89, above the $4.73 analysts had expected, CNBC reported. Azure, the company’s cloud platform, grew 48% to $33.17 billion in revenue. Microsoft disclosed Azure revenue in dollar terms for the first time; the unit had previously been reported only as a growth rate.
Microsoft earnings and the Azure result
Microsoft earnings drew strength from the cloud business. Azure revenue of $33.17 billion beat the $32.32 billion analysts had expected, and total Microsoft Cloud revenue rose 30% to $63.9 billion. Finance chief Amy Hood guided Azure to growth of 49% to 50% at constant currency in the current quarter. She also said about 75% of capital spending is now tied to short-lived assets such as chips, up from about two-thirds in the prior three quarters.
Free cash flow fell 27% to $18.63 billion, yet that figure was well above the $8.54 billion analysts had expected. Capital spending reached $45.2 billion including finance leases, up 30% from a year earlier but below the $50.67 billion analysts had projected.
In the Microsoft earnings call, executives said demand for AI computing exceeds available capacity, a point Alphabet also made. Both companies are building data centers as fast as suppliers and power supplies allow, and both face the same question from investors: when will that spending turn into profit at a rate that justifies its size. Microsoft’s answer in this quarter was a cloud business growing fast enough, and spending controlled enough, to leave $18.6 billion in free cash flow.
Microsoft earnings compared with Alphabet
Microsoft earnings looked different from Alphabet’s result mainly on cash. Alphabet’s Google Cloud revenue rose 103% to $30.7 billion, more than twice Azure’s growth rate, and the unit earned $11.1 billion in operating income. That growth did not prevent a negative market reaction, because Alphabet spent $51.36 billion on capital expenditure in the quarter, up 114% from a year earlier. Free cash flow fell to negative $9.07 billion, its second consecutive negative quarter, according to reports on the results.
Alphabet also told investors it will spend close to $200 billion on infrastructure, a figure that sharpened attention on how the company funds its buildout. Its long-term debt climbed to $125.1 billion from $21.6 billion a year earlier, according to a summary of the reported figures. Alphabet raised money through bonds and stock sales during the quarter, a contrast with Microsoft, which generated positive free cash flow in the same period.
The next Microsoft earnings release will test whether Azure can hold growth near 50% in the current quarter, as Hood guided, and whether Alphabet’s cloud growth can stay above 100% while its spending stays near current levels. For Alphabet, the next reports will show whether search advertising recovers and whether free cash flow returns to positive territory. For Microsoft, the question is whether capital spending rises toward earlier projections as capacity comes online.
Both companies said AI demand exceeds supply, which means order books are not the immediate problem. The problem both face is cost: chips, power and data center construction all require cash up front, while revenue from AI services arrives over time. Microsoft’s quarter showed that gap can still leave room for strong free cash flow. Alphabet’s quarter showed the gap can also swallow it, even when cloud revenue more than doubles.
The Federal Reserve had earlier left interest rates unchanged at 3.75% to 4.00% in a 10-2 vote, with two officials favoring a rate increase. During the regular session, the S&P 500 rose 0.28% and the Nasdaq Composite added 0.27%. After the close, Nasdaq futures fell more than 1% as traders weighed the Alphabet miss against the Microsoft beat. The next Microsoft earnings report arrives in early 2027, and Alphabet will report its fourth quarter results in the same period.
Web story: Microsoft Earnings Beat as Alphabet Misses on AI Costs