Cash is king as investors draw new battle lines in AI spending boom
QQQ•Investors rewarded Microsoft and Oracle for demonstrating paths to fund AI spending, while Alphabet and Amazon faced pressure over cash burn. Microsoft generated $18.6 billion in free cash flow in its fiscal first quarter; Amazon reported a $42.4 billion cash burn over the 12 months through September 30.
1. Investors focus on cash
Investors increasingly scrutinized whether major technology companies can fund their AI investments with cash flow. Alphabet shares fell more than 12% on Thursday, while Amazon slipped more than 6% after hours following its results; Microsoft shares ended the session almost flat. Oracle rose nearly 11% on Wednesday after saying it expected positive cash flow in the second half of fiscal 2028.
2. Amazon and Alphabet spending
Amazon burned $42.4 billion in the 12 months through September 30 and reported third-quarter capital spending of $77.26 billion. CEO Andy Jassy said the company would spend “meaningfully more” in 2027, after a planned $220 billion bill this year. Alphabet spent 121.4% of its operating cash flow on capital spending in the September quarter, while Google Search revenue grew 12%, below expectations for 14.7%.
3. Microsoft generates cash
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 to expand computing infrastructure. Azure revenue rose 48%, and Microsoft forecast faster-than-expected cloud growth for the current quarter.
