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Alphabet shares fell about 10% in after-hours trading after the Google parent’s quarterly earnings missed Wall Street forecasts, while Microsoft shares rose after beating expectations on strong growth in its Azure cloud business, giving investors two very different verdicts on the artificial intelligence spending boom on the same evening.
The split reaction dragged technology-heavy market indexes lower on Thursday, October 29, 2026, according to market reports, as traders weighed whether huge AI infrastructure spending is turning into profit quickly enough. The Federal Reserve had held interest rates steady the day before, leaving earnings as the main driver of the session.
Why Alphabet Shares Fell After Its Earnings Report
Alphabet reported quarterly results after Wednesday’s close that disappointed investors, according to TheStreet and the Associated Press. Shares of the search giant fell about 10% in after-hours trading, and Channel News Asia reported the drop wiped nearly $400 billion off its market value, pushing Nasdaq futures about 1% lower.
The disappointment centred on the core business and on cash. Alphabet missed Wall Street’s revenue and profit expectations, reported a sharp slowdown in core search advertising growth, and posted negative free cash flow of $9.07 billion, against the $2.70 billion analysts had expected, according to market coverage of the results. Free cash flow is the cash a company has left after paying for its operations and capital spending, so a negative figure tells investors the business spent more than it generated in the period.
That spending is the heart of the debate. Alphabet’s cloud business more than doubled, with Google Cloud revenue reaching $30.7 billion, according to FinanceFeeds’ coverage of the results, yet the market still punished the stock. The reason, analysts said, is that Alphabet is spending tens of billions of dollars a quarter on data centres and chips to power AI, and investors want evidence that the spending is producing sales and cash at a matching pace.
One analyst quoted by Channel News Asia put it plainly: Alphabet’s traditional advertising revenue has been affected by the very AI boom it is investing in, as AI-generated answers change how people search. That leaves Alphabet funding an expensive AI build-out while its older revenue engine grows more slowly.
Why Microsoft Shares Rose on the Same Evening
Microsoft told the opposite story. The software giant beat quarterly earnings forecasts, and its shares gained nearly 3% in after-hours trading, according to the Associated Press, with some market coverage putting the early gain higher.
Microsoft reported revenue of $92.3 billion, up 19% from a year earlier, according to FinanceFeeds and market coverage. The standout was Azure, its cloud-computing business, where revenue surged 48% to $33.2 billion. Azure sells computing power and AI services to other companies, and its growth showed investors that Microsoft’s AI bets are already producing paying customers at scale.
Microsoft also delivered the cleaner cash picture that Alphabet lacked. Market coverage reported a cash-flow beat alongside the revenue beat, which is why traders rewarded Microsoft even though it, too, is spending heavily on AI infrastructure. As one market summary put it, the two reports delivered competing narratives about the profitability of AI investment, leaving markets unsure which story to trust.
What the Split Verdict Means for the AI Spending Race
The contrast matters because Alphabet and Microsoft are two of the largest spenders in the AI race, and their results are read as a report card for the whole sector. When both companies report on the same evening and move in opposite directions, it signals that investors are no longer willing to reward AI ambition on trust alone. They want to see spending turn into cash, and they are grading each company on its own numbers.
That grading spread quickly beyond the two stocks. Asian shares gave up earlier gains on Thursday as the mixed earnings responses raised the stakes for Amazon and Intel, whose results were due later in the day, Channel News Asia reported. Samsung Electronics also reported a record quarterly operating profit on strong demand for AI chips, yet its shares still slid more than 4%, a reminder that even strong AI demand does not guarantee a rising share price when expectations are already high.
The wider market backdrop added to the caution. The Federal Reserve left its key interest rate unchanged at 3.75% to 4.00% on Wednesday, as widely expected, according to TheStreet, but offered little clarity on the path ahead. With rates still high, investors are more sensitive to companies that burn cash, because borrowing to fund expansion costs more than it did when rates were near zero.
What Investors Watch Next
Amazon was due to report its third-quarter results after Thursday’s closing bell, with analysts expecting revenue of about $202 billion and close attention on Amazon Web Services, its cloud division, according to Investopedia. Intel was also due to report the same evening. Those results will show whether Microsoft’s cloud strength or Alphabet’s cash strain is the better guide to the sector.
For Alphabet, the next test is its fourth-quarter report, when the company is expected to update its infrastructure spending guidance, which market coverage puts at close to $200 billion. If search advertising stabilises and cloud growth continues, the current sell-off may look like an overreaction. If cash flow stays negative while spending climbs, the market’s verdict may harden.
For Microsoft, the question is whether Azure can keep growing near 48% as AI demand spreads, and whether its own capital spending stays disciplined enough to keep cash flowing. Thursday’s reaction suggests investors currently see Microsoft as the cleaner way to own the AI build-out, but a single quarter rarely settles that argument for long.
Frequently Asked Questions
Why did Alphabet shares fall after its earnings report?
Alphabet shares fell about 10% in after-hours trading because the company missed Wall Street’s revenue and profit expectations, reported slower growth in core search advertising, and posted negative free cash flow of $9.07 billion, according to market coverage of the results.
Why did Microsoft shares rise on the same evening?
Microsoft shares rose after the company beat earnings forecasts, reporting revenue of $92.3 billion, up 19%, with Azure cloud revenue surging 48% to $33.2 billion, according to market coverage.
What does the split reaction say about AI spending?
It shows investors are grading AI spending company by company rather than rewarding the whole sector. Microsoft was rewarded for turning AI investment into cloud sales and cash, while Alphabet was punished because its heavy infrastructure spending coincided with negative free cash flow.
What should investors watch next in Big Tech earnings?
Amazon’s third-quarter results, due after Thursday’s close, with attention on Amazon Web Services, and Intel’s results the same evening, followed by Alphabet’s fourth-quarter update on its infrastructure spending guidance.
