Microsoft slips after earnings beat as Alphabet tumbles

Microsoft ↘ 0.99% shares lost an early post-earnings rally and ended Thursday, October 29, slightly lower. Investors set the company's better-than-expected quarter against its heavy AI spending and a new $25 billion bond sale. Alphabet's ↗ 0.78% record one-day drop also weighed on the rest of the tech sector. Microsoft closed down about 0.2% even though its cloud sales were strong, Barchart reported via Yahoo Finance. CNN described the shares as ending the day flat.finance.yahoo.com+1

From an early rally to a small loss

Microsoft rose about 4% in after-hours trading after it reported on Wednesday, then gave those gains back, according to Investing.com. For its fiscal first quarter, the company earned $4.89 per share against estimates of $4.72, on revenue of $92.28 billion compared with an expected $90.61 billion. Charles Schwab said Azure revenue grew 49% and Microsoft's overall cloud revenue rose 30%, both ahead of forecasts. Schwab added that the stock "felt pressure from overall tech weakness after initially jumping 4%".schwab.com+1

Spending was the main focus. According to CNBC, capital expenditures and finance leases came to $45.2 billion, up 30% from a year earlier but below analysts' forecast of $50.67 billion. Free cash flow fell 27% to $18.63 billion. Investing.com noted that the shares had gained about 34% in the three months before the report. It also pointed out that they fell after beating estimates in both January and April, which suggests capex now matters more to investors than the headline results.uk.investing.com+1

A $25 billion bond sale

On Thursday, Microsoft priced $25 billion of senior unsecured notes in tranches maturing from 2028 to 2066. The company said the money may go toward capital expenditures, share buybacks and other general corporate purposes, and the deal is expected to close on November 4. According to CNBC, management is aiming for $170 billion in 2026 capital spending to meet demand from customers such as OpenAI and Anthropic. Orders for the bonds reached $115 billion, which eased worries that investors were losing interest in AI-related debt.news.microsoft.com+2

Alphabet's record drop

Alphabet's Class A shares fell 12.6%, their worst day since the stock began trading more than 20 years ago. The selloff pulled the S&P 500 ↗ 0.31% to its first loss in four days. The Google parent posted negative free cash flow of $9.07 billion after spending $51.36 billion on capital projects, and its search revenue fell short of forecasts. The Nasdaq Composite led the major indexes lower.fortune.com+2

Analysts drew a contrast between the two companies. Ben Barringer of Quilter Cheviot said, "Microsoft is building out its architecture in a measured way and as such contains fewer surprises".cnbc.com