Alphabet and Microsoft report today as investors test whether AI spending pays off

what happened

Alphabet, the parent of Google, and Microsoft release results this afternoon, a test of whether their heavy AI infrastructure spending is starting to pay off. The Wall Street Journal, citing analysts polled by FactSet, expects Alphabet at $127.9 billion versus $119.8 billion a year earlier, and Microsoft at $90.6 billion against $69.6 billion.

The WSJ points to three areas. The first is cloud growth: both companies supply computing power to OpenAI and Anthropic, so cloud revenue offers a clear gauge of how the tech giants profit from the AI boom. Microsoft's cloud target is 44% to 45%, while analysts think Google's smaller cloud unit could grow close to 90%.

The second is capital spending. Microsoft has projected $175 billion this year. Google lifted its range to $195–205 billion last quarter, and its finance chief, Anat Ashkenazi, said the company plans to push that projection higher. The third is cash flow: Google posted negative cash flow of $5.8 billion last quarter, its first such result since going public, and Meta reported its first negative figure last week. Microsoft has not done so yet, but its capex is nearly equal to expected operating cash flow.

why it matters

Markets care whether huge AI outlays are turning into profit, not just how fast revenue is growing. If capital spending keeps outpacing cash generation, investors could demand more discipline from the whole sector, and these two reports will set the tone for US tech stocks.

market impact

US tech stocks: the results will show whether AI spending is paying off, and the reaction could go either way

• ↔US tech stocks mixed — strong cloud growth and heavy AI spending could pull share prices in opposite directions

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