Microsoft, Alphabet Set to Report Q3 Earnings. Who’s Spending More on AI Buildout?
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Poin-poin penting:
- Microsoft, Alphabet report earnings
- Big spending to be main focus area
- Expectations are a high bar to meet
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.