Microsoft beat market forecasts in its first quarter of fiscal 2027, while Alphabet missed earnings expectations on the same evening. Microsoft reported revenue of $92.3 billion for the quarter ended 30 September 2026, up 19 percent on a year earlier, with operating income of $45.9 billion and net income of $36.6 billion on a GAAP basis. Adjusted earnings per share came in at $4.89, ahead of a consensus estimate of about $4.72, and total Microsoft Cloud revenue rose 30 percent to $63.9 billion. Azure, its cloud computing unit, grew revenue by 48 percent to $33.2 billion.

Alphabet misses despite cloud doubling

Alphabet's third quarter told a different story. Revenue rose 25 percent year on year to $127.6 billion, slightly below the roughly $128.2 billion analysts had expected, and its cloud unit more than doubled sales to $30.7 billion. But earnings per share fell to $2.12, well short of a consensus near $3.01, after an $8.7 billion loss on equity securities swung other income negative. Google Search revenue of $63.4 billion and YouTube advertising revenue of $11.2 billion both missed estimates, and free cash flow turned negative at about $9.1 billion after heavy capital spending in the quarter.

Market split on AI spending

Investors rewarded one report and punished the other. Microsoft shares rose about 4 to 5 percent in after-hours trading, while Alphabet shares fell roughly 6 to 7 percent. The contrast captures the question hanging over the AI investment boom: whether huge infrastructure spending converts into profit. Microsoft's finance chief, Amy Hood, said results exceeded expectations across revenue, operating income and earnings per share. Alphabet, despite the fastest Search query growth in five years and a cloud business doubling in size, could not clear the higher bar its own spending has set.

Sources: Microsoft, Reuters Breakingviews.