Same Night, Same AI Bet, Totally Different Reactions for Microsoft and Google
Wednesday evening perfectly illustrates how picky Wall Street has gotten about AI spending. Microsoft and Alphabet both reported after-the-bell earnings; both showed strong cloud growth, yet one stock jumped about 4% while the other fell roughly 8–10%.
Start with Microsoft. Revenue came in at $92.3 billion, up 19%, ahead of the roughly $90.7 billion analysts expected. Adjusted earnings were $4.89 a share versus the $4.73 forecast. Azure grew more than 48%, and for the first time Microsoft shared the actual dollar figure: $33.2 billion. It also guided next quarter's Azure growth to 49–50%, well above expectations. Spending was $45.2 billion, but that was below what some analysts feared, and CFO Amy Hood said demand still exceeds supply. Free cash flow fell 27%, but it's still positive.
Alphabet's story was messier. Revenue rose 25% to $127.6 billion, slightly below estimates, and Google Cloud more than doubled to $30.7 billion. Sundar Pichai said annual revenue crossed $400 billion for the first time, and the Gemini app now has a billion users. But search and YouTube ad revenue both came in light, an $8.7 billion paper loss on investments dragged earnings to $2.12 a share, and capital spending hit a record $51.4 billion. That left free cash flow at -$9.1 billion, far worse than the -$2.7 billion analysts expected.
That's the key difference. Investors don't mind huge AI bills as long as the cash keeps flowing. Microsoft showed it can pay for the buildout. For now, Alphabet is burning cash to do it, and CNBC says the stock was on track for its biggest post-earnings drop ever.
