Two technology giants reported booming cloud businesses on Wednesday, and investors sent their shares in opposite directions. Microsoft rose, while Alphabet slid by around a tenth of its value in after-hours trading.
The split shows how the market’s question has changed. Strong cloud growth is no longer enough. Investors now want to see what it costs.
Microsoft beats on every line
Microsoft reported revenue of $92.3 billion for its fiscal first quarter, up 19% from a year earlier and above analyst forecasts of about $90.7 billion. Adjusted earnings came to $4.89 a share, ahead of the roughly $4.72 expected.
Azure, the company’s cloud platform, grew 48% to $33.17 billion. That beat the 45% growth the company had forecast in July and the 44% analysts expected. It was also the first time Microsoft disclosed Azure’s quarterly revenue in dollars. Total Microsoft Cloud revenue reached $63.9 billion, up 30%.
Management expects Azure growth to speed up to between 49% and 50% next quarter. Spending was heavy, with capital expenditure of $45.2 billion including finance leases, but free cash flow stayed positive at $18.63 billion, down 27% from a year earlier. Microsoft shares rose around 3% to 4% after the close.
Alphabet’s cloud booms, but the cash runs out
Google Cloud grew faster than Azure. Its revenue rose 103% to $30.7 billion, well above the roughly 90% growth analysts had expected, and the unit earned $11.1 billion in operating income. Alphabet said sales of its own chip systems were a meaningful contributor to that growth.
The rest of the report was weaker. Total revenue of $127.6 billion came in slightly below the $128.2 billion analysts expected. Earnings per share and search advertising revenue also fell short of forecasts.
Then there was the spending. Capital expenditure jumped to $51.4 billion, more than double the $24.0 billion of a year ago. That pushed free cash flow to negative $9.1 billion, a second straight quarterly burn. Alphabet held its 2026 capex guidance at $195 billion to $205 billion but warned that spending in 2027 will increase significantly.
Shares had closed at $321.89 before the report, up 1.6% on the day. They fell as far as roughly $292 in extended trading, a drop of around 9% to 10%.
Why the verdicts differed
The contrast is partly one of scale and timing. Google Cloud’s faster growth comes from a smaller revenue base, and the growth rates alone say nothing about profitability or how quickly the investment pays back. Microsoft showed a larger cloud business converting spending into revenue without draining cash. Alphabet showed faster growth but a weaker advertising business and mounting funding needs.
Analysts also noted that investors had already been jittery about Alphabet. Its shares had fallen about 5% over the previous month and earnings estimates had slipped, making a miss on search advertising harder to forgive.
The reaction follows Meta Platforms’ announcement earlier this week of a plan to raise up to $95 billion in new equity to fund its own spending. Together, the moves show that even the richest companies are leaning on outside capital as the computing build-out accelerates.
What comes next
Amazon reports today after the US market close, completing the picture for the three largest cloud providers. Investors will look at whether Amazon Web Services can match its rivals’ growth and how much the company plans to spend. Intel also reports.
For the wider market, the stakes are high. Technology stocks account for a large share of major US indexes, and a reassessment of how much investors will pay for spending-heavy growth could weigh on them. Nasdaq-100 futures fell about 1.5% in Asian trading on the Alphabet news.
The message from Wednesday’s results is that cloud demand remains strong. The question is whether the profits eventually justify the bills.
This article is for information and does not constitute investment advice.
