Big tech earnings delivered a sharp contrast this week, with Microsoft showing financial discipline and accelerating cloud growth while Alphabet suffered its steepest one-day selloff as heavy AI infrastructure spending and slowing search growth rattled investors.
Microsoft reported fiscal first-quarter revenue of $92.28 billion, up 18.8% year over year and above the $90.62 billion FactSet consensus. Net income climbed to $36.63 billion from $27.75 billion, and diluted earnings per share reached $4.92. Azure revenue growth accelerated to 48%, beating the company’s 44% to 45% forecast, while Microsoft Cloud revenue rose 30% to $63.9 billion. CNBC host Jim Cramer said the combination of cloud momentum, positive free cash flow and growing adoption of the Copilot AI assistant put Microsoft in a stronger position. 'Copilot started slow, but it is becoming a screaming success,' Cramer said, adding that CEO Satya Nadella and CFO Amy Hood 'run it like a business, not a science project.'
Alphabet, by contrast, reported revenue of $127.6 billion, narrowly below the $128.2 billion estimate, with adjusted EPS of $2.67 missing the $3.02 consensus. GAAP EPS came in at $2.12 after an $8.7 billion loss on equity securities cut $0.55 from the figure. Search and other revenue grew 12% year over year, down from 17% in the prior quarter, while YouTube ad growth slowed to 9% from 13%. Google Cloud was a bright spot, with revenue more than doubling to $30.71 billion and growth of 103%, ahead of Azure at 48% and AWS at 37%. Alphabet also disclosed capital spending of $51.355 billion, negative free cash flow of $9.065 billion, and a $561 billion backlog, up 256%.
Alphabet shares fell 12.65% on Thursday, a one-day market value loss of about $560 billion, leaving the stock more than 30% below its May high of $404.47. Goldman Sachs cut its price target to $385 from $435 but kept a Buy rating, while Barron’s also maintained a Buy. Analyst views were split: Melius called the quarter evidence of secular decline, while KeyBanc described it as an 'air pocket' and said search headwinds are transitory. Cramer said he would wait for analysts to revise estimates before buying Alphabet, but concluded Microsoft 'is a buy right here.'
