Microsoft shares rose about 2% after hours while Alphabet shares fell over 9% following the companies’ quarterly earnings announcements on 28 October, Yahoo Finance reported on 29 October. Both companies rent computing power to AI labs and hold stakes in them. In the reported quarter, Microsoft received substantial revenue from OpenAI, while Alphabet’s investments in other companies reduced its earnings.
Key points
- OpenAI paid Microsoft $10 billion in the quarter ending in September, while its unpaid bills to Microsoft rose to about $7 billion.
- Microsoft generated about $19 billion in free cash flow. The Motley Fool put the figure at $18.6 billion.
- Alphabet spent $51 billion on data centres and equipment. Fox Business put capital expenditure at approximately $51.4 billion.
- Alphabet recorded a loss on equity holdings and used about $9 billion in free cash flow during the quarter.
Microsoft’s $10 billion OpenAI quarter
Microsoft recorded $10 billion in quarterly revenue from OpenAI, as AI Affairs previously reported. OpenAI paid Microsoft that amount in the quarter ending in September, Yahoo Finance reported, citing Microsoft’s quarterly filing. The sum represented about 11% of Microsoft’s $92 billion in revenue. Over the preceding three months, OpenAI’s outstanding balance with Microsoft increased from $6 billion to about $7 billion.
Fox Business put Microsoft’s fiscal first-quarter revenue at $92.3 billion, up 19% from a year earlier. It reported 48% growth in Azure revenue and a 30% rise in Microsoft Cloud revenue to $63.9 billion. Microsoft’s commercial remaining performance obligation — contracted revenue it has yet to recognise — reached $677 billion, up 73%, according to Fox Business.
Microsoft generated about $19 billion in free cash flow and said it expects to remain positive on that measure for its fiscal year. The Motley Fool reported $18.6 billion in free cash flow. That is cash remaining after capital expenditure, rather than revenue from customers or the value of contracts signed for future delivery.
Microsoft’s backlog stood at about $677 billion, while orders for new business were 12% lower than a year earlier. Chief financial officer Amy Hood attributed the bookings comparison to large Azure commitments made in the preceding year. Microsoft owns about 24% of OpenAI, though Yahoo Finance reported little effect from that stake on the quarter’s profit.
Alphabet’s $51 billion infrastructure bill
Alphabet spent $51 billion on data centres and equipment, recorded a nearly $9 billion loss on its equity holdings and generated about $31 billion in Google Cloud revenue. Its infrastructure spending more than doubled from a year earlier. The loss on its holdings reduced earnings by $0.55 a share, leaving quarterly earnings of $2.12 a share.
Fox Business reported approximately $51.4 billion in Alphabet capital expenditure for the quarter. It also reported third-quarter revenue of $127.6 billion, up 25% from a year earlier. Alphabet projected capital expenditure of between $195 billion and $205 billion for 2026 and expects that spending to rise significantly in 2027, according to Fox Business.
The Motley Fool put Alphabet’s net loss on equity securities at $8.7 billion and its free cash flow at negative $9.1 billion, compared with negative $5.9 billion in the preceding quarter. Alphabet’s operating cash flow was $42.3 billion, according to the same publication. Alphabet chief financial officer Anat Ashkenazi attributed the equity loss primarily to SpaceX.
Alphabet bought back no shares during the quarter, sold about $29 billion in bonds and $12 billion in new shares, and raised its long-term debt to about $125 billion. The debt figure was nearly three times its level earlier in 2026. Alphabet also owns roughly 14% of Anthropic, another AI lab that buys computing capacity.
Google Cloud’s $561 billion backlog
Google Cloud’s backlog of signed contracts increased to $561 billion from $514 billion three months earlier. Fox Business put the division’s quarterly revenue at $30.7 billion, up 103% from a year earlier. The Motley Fool reported $11.1 billion in operating income for the division. Alphabet chief executive Sundar Pichai said the company was working to add computing capacity to meet demand.
Anthropic committed to buying at least $115 billion of computing services from Google, Yahoo Finance reported, describing the AI lab’s IPO filing. Those commitments sit alongside Alphabet’s spending to build capacity for its cloud customers. Ashkenazi warned that relying on third-party computing capacity to meet demand could put pressure on Google Cloud’s margins in the near term.
