Alphabet and Microsoft diverge as AI spending hits cash flow

Alphabet shares fell 10% while Microsoft rose 4% in extended trading on October 28, as investors rewarded Microsoft's earnings beat and penalized Alphabet's revenue miss and negative free cash flow. Alphabet reported Q3 revenue of $127.58 billion, up 25% but below the $128.22 billion forecast, with adjusted earnings per share of $2.67 versus $3.02 expected. Google Cloud revenue more than doubled to $30.71 billion, but ad revenue fell $1.4 billion short of expectations, and free cash flow turned negative at $9.07 billion. Microsoft's fiscal first-quarter revenue rose 19% to $92.28 billion, beating estimates, with Azure revenue up 48% to $33.17 billion. Capital expenditure of $45.2 billion came in below projections, and free cash flow remained positive at $18.63 billion, aided by cost-cutting measures.