Microsoft vs Alphabet: AI Spending Splits Investor Sentiment

Microsoft and Alphabet both reported strong revenue, but investors reacted differently: Microsoft shares rose about 3% after hours while Alphabet fell nearly 10%, driven by differences in earnings performance and AI spending plans. Microsoft beat revenue and earnings expectations, with Azure growing 43%, and its AI investments are estimated to generate a 30% return on invested capital. Alphabet narrowly beat revenue but missed earnings per share badly, and its rising capital expenditure and negative free cash flow in 2026 raised concerns. Alphabet’s stock broke below its 200-day moving average before results, and the after-hours drop could push it toward $270. Both companies depend on AI infrastructure paying off, with returns expected to become clearer in 2027, but Microsoft currently has the stronger near-term setup.