Microsoft and Alphabet both posted strong quarters while spending heavily on AI, but Microsoft's balance sheet is seen as far more resilient if AI capital spending slows. Microsoft reported fiscal Q4 revenue of $90.01 billion, up 17.75% year over year, with Azure crossing $100 billion in annual revenue at 41% growth and 30 million paid Microsoft 365 Copilot seats. Alphabet reported Q2 revenue of $119.80 billion, up 24.23%, with Google Cloud up 82% to $24.77 billion, but capital expenditures hit $44.92 billion in the quarter, pushing free cash flow to negative $5.86 billion. Alphabet nearly doubled long-term debt to $98.2 billion and suspended buybacks, while Microsoft funded its buildout from operations, grew operating cash flow 34.4%, and returned $22.27 billion to shareholders. Microsoft's contracted backlog of $678 billion in remaining performance obligations and throttleable spending on short-lived assets are cited as key advantages, while Alphabet's proprietary TPU silicon offers lower unit costs if GPU prices spike.
Alphabet Inc Class CAlphabet's heavy AI capex led to negative free cash flow, doubled long-term debt, and suspended buybacks, making its balance sheet less resilient.
Microsoft CorporationMicrosoft funded AI buildout from operations, grew operating cash flow 34.4%, and returned $22.27 billion to shareholders, showing stronger balance sheet resilience.
