Microsoft, Alphabet Set to Report Q3 Earnings. Who’s Spending More on AI Buildout?

Microsoft and Alphabet report after the Fed decision, putting cloud growth, capital spending and cash generation at the center of a pivotal session for technology stocks.

📅 Two earnings reports follow the Fed

• Microsoft and Alphabet report Wednesday, after the US close. Alphabet’s conference call begins at 4:30 p.m. ET, followed by Microsoft at 5:30 p.m.
• But before that, the Fed announces its decision at 2 p.m., giving traders successive updates on borrowing costs and the businesses financing the AI expansion.
• Microsoft’s fiscal first-quarter consensus stands near $90.6 billion in revenue and $4.71 in adjusted earnings per share. Those figures imply around 17% revenue growth and 14% earnings growth.
• Alphabet’s third-quarter expectations are $127.9 billion in revenue and $3.00 per-share earnings. That represents roughly 25% sales growth and 4.5% earnings growth from a year earlier. Search advertising, YouTube and Google Cloud provide three distinct demand streams.

☁️ Microsoft’s cloud growth meets the spending bill

• Azure’s benchmark is 45% growth at constant exchange rates, based on Microsoft’s previous guidance. Management said demand continued to exceed available capacity.
• Microsoft previously forecast more than $50 billion in quarterly capital expenditure, including the impact of lease accounting changes. The scale makes the outlook consequential for chipmakers and data-center suppliers.
• Copilot offers another measure of AI monetization. Microsoft reported more than 30 million paid Microsoft 365 Copilot seats in its June-quarter results. Updated adoption and customer-spending figures will help assess the software opportunity.

🔎 Alphabet must connect AI growth with cash returns

• Google Cloud enters the report after an exceptionally strong quarter: revenue rose 82% to $24.8 billion in the three months through June. Wednesday’s results will show whether that momentum continued.
• Search remains central to funding that expansion. Search and other advertising revenue grew 17% last quarter, while YouTube advertising increased 13%. Investors will examine whether AI features continue to increase engagement and advertising opportunities.
• Alphabet’s last annual capex forecast was $195 billion to $205 billion, raised in July. Its second-quarter operating cash flow of $39.1 billion was exceeded by $44.9 billion in capital expenditure, leaving negative free cash flow of approximately $5.9 billion.
• Reported profit also needs a closer reading. Alphabet’s June-quarter EPS reached $9.11, boosted by large unrealized investment gains; those valuation changes can make sequential comparisons misleading.