Microsoft and Alphabet earnings: Azure up 48%, Cloud 103%

Microsoft and Alphabet both reported results on October 28, 2026, and both of their cloud businesses grew fast. Microsoft's Azure grew 48% and Google Cloud more than doubled. Investors still split on the two: Microsoft shares rose after hours, while Alphabet's fell as its AI spending pushed free cash flow below zero.

The quarter covers July through September 2026. For Microsoft that is the first quarter of its 2027 fiscal year; for Alphabet it is the third quarter of 2026.

Microsoft beats on cloud and profit

Microsoft's revenue rose 19% to $92.3 billion, according to Microsoft's earnings release. Net income rose 32% to $36.6 billion. Earnings per share came in at $4.92.

Leaving out the effects of its OpenAI investment, adjusted earnings were $4.89 a share. The Motley Fool put analyst estimates at roughly $4.72. "Results exceeded expectations across revenue, operating income, and earnings per share," said CFO Amy Hood.

Azure, Microsoft's cloud computing platform, brought in $33.2 billion. That is 48% more than a year earlier. The wider Microsoft Cloud business, which also includes products such as Microsoft 365, reached $63.9 billion, up 30%.

Microsoft item	Result	Change
Revenue	$92.3 billion	+19%
Azure revenue	$33.2 billion	+48%
Microsoft Cloud revenue	$63.9 billion	+30%
Agents and Infra segment	$76.8 billion	+25%
Devices and Consumer segment	$15.5 billion	-3%
Commercial remaining performance obligation	$677 billion	+73%

Microsoft reorganized its reporting in September into the two new segments in that table. The weak spots sat in Devices and Consumer. Windows OEM and devices revenue fell 22%, and Xbox content and services fell 2%.

The $677 billion figure is worth a second look. Remaining performance obligation is money customers have already committed to under contracts that Microsoft has not yet billed. A 73% jump suggests large, long cloud deals.

Alphabet's cloud doubles, but spending bites

Alphabet's revenue rose 25% to $127.6 billion, a little below estimates, according to The Motley Fool. Google Cloud was the bright spot. Its revenue grew 103% to $30.7 billion, with $11.1 billion of operating income.

The core ad business looked softer. The Motley Fool said Search and YouTube ad revenue underperformed. StrongMocha put Search growth at 12%, below forecasts.

Earnings per share fell to $2.12 from $2.87. That includes an $8.7 billion net loss on equity securities, worth $0.55 a share.

The bigger worry was cash. Alphabet spent $51.4 billion on capital expenditure in the quarter, up from $24.0 billion a year earlier. Capital expenditure, or capex, is money spent on long-lasting assets such as data centers and chips. Operating cash flow was $42.3 billion, so free cash flow came out at minus $9.1 billion.

Paying for the AI build-out

The two companies are funding their data center build-outs in very different ways.

Microsoft paid for its spending from cash flow. It generated $58.0 billion from operations and spent $39.4 billion on property and equipment. Counting finance leases, total capex was $45.2 billion. Free cash flow was $18.63 billion, down 27% from a year ago, and Microsoft still returned $10.2 billion to shareholders.

Alphabet borrowed. The Motley Fool reports that its long-term debt rose from $46.5 billion at the end of 2025 to $125.1 billion. StrongMocha says it raised $28.7 billion in bonds and $12.4 billion from share sales in the quarter, and made no buybacks.

Alphabet kept its 2026 capex plan at $195 billion to $205 billion. It said 2027 capex will "increase significantly."

What this means for developers

For teams that buy cloud capacity, these results say demand is high and the bills will keep reflecting it.

• Expect tight GPU capacity into 2027. Both companies are spending record sums on data centers, and both describe demand as greater than supply. Reserve capacity early for big training or inference jobs.
• Do not expect price cuts soon. Microsoft's free cash flow fell 27% and Alphabet's went negative. Providers spending this much have little reason to discount AI compute.
• Long contracts are the norm now. Microsoft's $677 billion of unbilled commitments shows how much of the market runs on multi-year deals. Read exit terms and commit levels closely before signing one.
• Google Cloud is a serious second option. Revenue growth of 103% means Google is winning new workloads. Teams with a single-cloud setup may get better terms by running a real comparison.
• Watch Alphabet's spending signals. If 2027 capex rises as promised, more capacity will come online. If investors force cuts, Google could ration it. Both outcomes affect what you pay.

The quarter showed both companies selling every bit of AI capacity they can build. The open question is who pays for the next round of building, and Alphabet's balance sheet now carries much of that bet.