Microsoft beats with Azure at $33.2 billion; Alphabet shares drop up to 10% on record AI spending

Two of the world's biggest AI spenders reported on Wednesday, and the market split them. Microsoft shares rose after its cloud business beat forecasts, while Alphabet, Google's parent, fell as much as 8% to 10% in after-hours trading as record AI spending pushed its cash flow deep into the red.

Microsoft: Azure revenue $33.2 billion

For the first time Microsoft gave Azure's revenue in dollars: $33.2 billion for July to September, up 48% from a year earlier, TechCrunch reported. That was about $850 million above the $32.3 billion analysts expected and faster than the 44% to 45% growth CFO Amy Hood had guided in July. Azure is now about 36% of Microsoft's total revenue of $92.3 billion for the quarter. A new segment called Agents and Infra, which combines Azure with Microsoft 365's cloud business, made $76.8 billion, up 25%.

The results came days after Microsoft announced thousands of job cuts.

Alphabet: cloud doubles, cash flow turns red

Alphabet's revenue rose 25% to $127.6 billion, 9to5Google reported, a touch below the $127.9 billion consensus cited by Fortune. Google Cloud more than doubled to $30.7 billion, and YouTube ads rose to $11.2 billion. CEO Sundar Pichai said the Gemini app has reached 1 billion users, "the fastest-growing product in Google's history", and that Search query growth was the highest in five years.

The problem was spending. Capital expenditure hit a record $51.4 billion in the quarter, against $24 billion a year earlier, and free cash flow was minus $9.1 billion, Fortune reported. Net income fell to $26.2 billion from $34.9 billion, with earnings per share of $2.12, hit partly by an $8.7 billion paper loss on equity investments.

Side by side

Why it matters in Pakistan

Azure and Google Cloud host much of what Pakistani startups, banks and freelancers run, and both companies are charging more as AI demand and a global memory shortage push hardware costs up. Pakistani freelancers paid in dollars by US tech clients can check what their earnings are worth with the currency converter and work out tax with the freelancer tax calculator.