Cash is king as investors draw new battle lines in AI spending boom
QQQ•Investors rewarded Microsoft and Oracle for showing paths to fund AI spending, while Alphabet shares fell nearly 10% after its search revenue missed expectations and cash burn reached $9.07 billion. Microsoft generated $18.6 billion in free cash flow in its fiscal first quarter.
1. Investors focus on cash
Microsoft shares rose more than 3% in after-hours trading on Wednesday, while Alphabet shares fell nearly 10%, as investors drew a sharper distinction between companies generating cash and those struggling to contain AI costs. Oracle ended regular trading nearly 11% higher after saying it planned to cap external financing and expected positive cash flow in the second half of fiscal 2028.
2. Alphabet faces spending concerns
Google Search revenue grew 12% in the September quarter, below expectations for 14.7% growth, while Alphabet's cash burn reached $9.07 billion. Google Cloud revenue more than doubled to $30.71 billion, but Alphabet expects capital expenditure to increase significantly in 2027; up to $205 billion in spending is expected this year.
3. Microsoft reports strong cash flow
Microsoft generated $18.6 billion in free cash flow in its fiscal first quarter, nearly $10 billion more than Wall Street expected, while spending $45.2 billion on computing infrastructure. Azure revenue rose 48%, and Microsoft forecast faster-than-expected cloud growth for the current quarter.
