Microsoft and Alphabet show how differently markets now judge the AI spending boom. The two US tech giants reported in the same week, and the market rewarded one and punished the other.
Why Did Alphabet Shares Plunge Nearly 10% While Microsoft Rose?
Microsoft shares jumped more than 3% in after-hours trading, while Alphabet plunged nearly 10%. Investors drew a sharper line between companies making money from AI and those struggling to contain its costs.
Melissa Otto, head of research at S&P Global Visible Alpha, said: “Microsoft’s quarter demonstrated very disciplined growth, whereas Google is burning cash and its core business came in below expectations.” She added that it may lead investors to question whether AI is taking some share from Google Search.
How Much Free Cash Flow Did Microsoft Generate?
Microsoft produced US$18.6 billion in free cash flow in its fiscal first quarter. That is nearly US$10 billion more than Wall Street expected, even as the company poured US$45.2 billion into computing infrastructure.
Azure revenue surged a better-than-expected 48%. Microsoft also forecast faster-than-expected cloud growth for the current quarter.
CEO Satya Nadella said “the shiny object stuff is waning” as businesses commit to long-term contracts. He added: “I want the breadth. We have large customers who want to buy from us.”
What Is Behind Alphabet’s US$9.07 Billion Cash Burn?
Alphabet’s cash burn hit US$9.07 billion, after it posted its first quarter of negative cash flow in the June period. Capital expenditure could reach as much as US$205 billion this year.
Google Cloud revenue more than doubled to US$30.71 billion, but spending overwhelmed that growth. Google’s search revenue grew 12% in the September quarter, short of expectations for a 14.7% increase.
CFO Anat Ashkenazi told analysts that capital expenditure will increase significantly in 2027. Jeremy Saltzberg of Check Capital, which owns Alphabet shares, defended the spending: “We think this is a sport of kings.”
Where Do Meta and Oracle Fit in the AI Cash Race?
Meta offered an early warning last week. Better-than-expected revenue growth and an upbeat outlook were eclipsed by its cash burn.
Oracle moved the other way. Its shares ended regular trading nearly 11% higher on Wednesday after the company said it plans to put a ceiling on external financing. It expects to turn its cash flow positive in the second half of fiscal 2028.
Is There a Bursa Malaysia Angle to the AI Cash Test?
None of the four companies is listed on Bursa Malaysia, so no local stock code applies. The read-across is the test itself: free cash flow against capital spending.
Bursa-listed tech and data-centre stocks can be screened using the same lens. Readers can start with our guide to AI Stock Analysis for Malaysians.
Disclaimer: This article is for information only and is not financial advice. Do your own research before making any investment decision.
Key Takeaways
- Microsoft generated US$18.6 billion in free cash flow, about US$10 billion above expectations, while spending US$45.2 billion on infrastructure.
- Alphabet burned US$9.07 billion in cash and its shares plunged nearly 10%.
- Google Search revenue grew 12% against expectations of 14.7%.
- Oracle rose nearly 11% after planning a ceiling on external financing.
- Investors now demand evidence that AI growth can fund the next round of spending.
Frequently Asked Questions
How much free cash flow did Microsoft generate in its fiscal first quarter?
Microsoft generated US$18.6 billion in free cash flow in its fiscal first quarter. That was nearly US$10 billion more than Wall Street expected, despite US$45.2 billion of spending on computing infrastructure.
Why did Alphabet shares fall nearly 10%?
Alphabet’s shares fell after the company burned US$9.07 billion in cash. Google Search revenue growth of 12% also fell short of expectations for a 14.7% increase.
How much did Google Cloud revenue grow?
Google Cloud revenue more than doubled to US$30.71 billion. Alphabet’s spending, however, overwhelmed that growth.
Why did Oracle shares rise nearly 11%?
Oracle shares rose after the company said it plans to put a ceiling on external financing. It expects to turn its cash flow positive in the second half of fiscal 2028.
Source: View Original Article — The content is based on the original publisher. Refer to the original content for accurate info. Contact us for any changes.
Related Articles & Resources
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always do your own research before making investment decisions.
Want to invest in Bursa Malaysia or US markets? Contact Dexter Chia, an AI Driven Remisier who has 2,200+ clients at Malacca Securities Sdn Bhd (M+ Global). M+ Global Invitation Code: UBZQ | WhatsApp: +60169059789 | Why Choose Dexter?
