Microsoft and Alphabet both grew their cloud businesses fast, but their stocks split

Microsoft: Azure revenue disclosed in dollars for the first time

On Oct. 28, Microsoft reported results for the first quarter of fiscal 2027, which ended Sept. 30. Revenue rose 19% from a year earlier to $92.3 billion, against an LSEG analyst consensus of $90.69 billion. Operating income grew 21% to $45.9 billion, a 50% operating margin. Net income rose 32% to $36.6 billion, or $4.92 a share. The company reorganized its segments in September and now reports two: Agents and Infra, and Devices and Consumer. Agents and Infra revenue rose 25% to $76.8 billion.

This quarter, Microsoft disclosed Azure revenue in dollars for the first time: $33.2 billion, up 48% from a year earlier. Its guidance a quarter ago had been 44% to 45%. Under the new, narrower definition, Azure grew 40%, 39%, 40%, 42% and 48% over the last five quarters. Microsoft Cloud revenue, which covers Azure, Microsoft 365 commercial cloud and industry cloud products, rose 30% to $63.9 billion, and commercial remaining performance obligation rose 73% to $677 billion. For next quarter, the company expects revenue of $96 billion to $97.1 billion and Azure growth of 49% to 50% in constant currency.

OpenAI, Copilot and capital spending

Microsoft’s results included a $207 million net gain from its OpenAI investment this quarter, compared with a $3.1 billion loss a year earlier. According to TechCrunch, citing the company’s 10-Q filing, Microsoft recorded about $10 billion in revenue from OpenAI this quarter, roughly 11% of the total.

The company didn’t update its paid Copilot seat count this quarter, as CFO Amy Hood noted on the call. Instead, it said Copilot daily users grew nearly 50% from the previous quarter. CEO Satya Nadella said agent-generated pull requests on GitHub have increased sixfold over the past six months and that agents now open more than a third of all pull requests on the platform.

Capital expenditures including finance leases rose 30% to $45.2 billion, with about three-quarters going to short-lived assets such as GPUs and CPUs. Microsoft said spending will top $50 billion next quarter and that it now expects about $170 billion for calendar 2026, down from about $175 billion in July, because of delays in third-party capacity deliveries. Hood said customer demand continues to exceed available supply.

Alphabet: Google Cloud doubled

Alphabet’s third-quarter revenue rose 25% to $127.6 billion, and operating income grew 30% to $40.6 billion, a 31.8% margin. Google Cloud revenue grew 103% to $30.7 billion, up from 82% growth the previous quarter. Cloud operating income rose from $3.6 billion to $11.1 billion, lifting its margin from 23.7% to 36.2%. According to the earnings release, TPU system sales were a meaningful contributor, and inventories rose from $2.4 billion at the start of the year to $13.3 billion.

CEO Sundar Pichai said Gemini 4 Argon and Carbon are now leading at the frontier and that the company’s first-party model APIs process nearly 32 billion tokens per minute, more than four times as many as a year ago. He said the Gemini app has reached one billion users, making it the fastest-growing product in Google’s history. The release doesn’t say whether that figure counts monthly active users; last quarter, the company reported 950 million monthly active users.

Spending, cash and the market reaction

Alphabet’s capital expenditures hit $51.4 billion in a single quarter, up from $24 billion a year earlier, and free cash flow fell to minus $9.1 billion. The company kept its 2026 spending guidance of $195 billion to $205 billion and said spending will rise significantly in 2027, with details to come next quarter. Growth in Google Search and other revenue slowed from 17% the previous quarter to 12%. An $8.7 billion loss on equity securities also cut earnings per share by $0.55, to $2.12.

The market priced the two companies very differently on the same night. Microsoft’s stock rose about 4% in after-hours trading, while Alphabet’s fell roughly 9% to 11%, depending on the source.