Microsoft Spending Tops $50 Billion as AWS Posts 39.3% Growth Amid Return Concerns
Key Facts
Third-quarter results painted a mixed picture for tech giants: Amazon’s cloud computing services grew faster, while Alphabet’s search revenue slowed, and Microsoft announced expected capital spending of more than $50 billion in the second quarter of its fiscal 2027. Alphabet shares fell about 13% on Thursday, October 29, after earnings and revenue came in below expectations, with Fortune estimating that the company lost $500 billion in market value. The figures put spending on AI infrastructure up against the question of companies’ ability to turn demand into revenue and cash. AWS revenue grew faster, while Amazon’s investment weighed on its free cash flow. The strength of some of Alphabet’s cloud businesses also did not stop the market from focusing on slower search growth.
At Alphabet, Google Search revenue rose 12% to $63.4 billion in the third quarter, compared with growth of 17% in the second quarter and 19% in the first quarter. Analysts had expected growth of 15%, making the slowdown more pronounced in the market’s reading of the results. Company-wide revenue rose 25% to $127.58 billion, but fell short of the $127.97 billion average analyst estimate, according to AP. Net income fell to $26.17 billion from $34.98 billion in the same period a year earlier. After the results were announced, the stock fell more than 10% to $289.95 in extended trading, according to AP; Fortune estimated its decline at about 13% in Thursday trading.
By contrast, Microsoft’s Azure grew 48% in the first quarter of its fiscal 2027, above expectations despite delays in some third-party capacity, the company said. Microsoft’s total revenue rose 19% to $92.279 billion in the quarter. Commercial remaining performance obligations also increased 73% year over year to $677 billion, and the company said about 30% would be recognized as revenue over the following twelve months, an annual increase of 29%. Actual capital spending was $45.2 billion in the first quarter, after expected capacity deliveries from third parties were delayed. Chief Financial Officer Amy Hood said second-quarter spending would exceed $50 billion and calendar 2026 spending would reach about $170 billion, adding: "Demand continues to exceed supply."
At Amazon, AWS sales rose 39.3% to $46 billion in the quarter ended September 30, compared with growth of 37% in the previous quarter, the service’s fastest growth rate in about five years, according to AP. The company’s total sales reached $201.94 billion, up 12% from the same period a year earlier, but below analysts’ forecast of $202.2 billion. Net income fell to $20.69 billion, or $1.89 per share, from $21.19 billion and $1.95 per share a year earlier. CEO Andy Jassy said of demand for the company’s capabilities: "Customers are gobbling it up." But AWS’s strength came alongside a sharp reversal in free cash flow, from positive $14.8 billion a year earlier to negative $42.4 billion over the twelve months through the third quarter, as spending on AI infrastructure continued, according to Fortune.
Amazon’s outlook for the coming period also faced similar scrutiny: it forecast fourth-quarter sales of between $240 billion and $247 billion, up 12% to 16% year over year, compared with analyst expectations of $244.16 billion. The company said Prime Day’s shift to the second quarter in 2026 in most major countries, including the United States, affected the year-over-year comparison, after the event fell entirely in the third quarter in 2025. Amazon said third-quarter sales growth would have been about 4 percentage points higher without the shift. After the results were announced, its shares fell about 7% in extended trading, as investors focused on its core business and concerns about cash burn, according to AP. In closing data for October 29, Microsoft, Alphabet and Amazon shares stood at $530.14, $283.82 and $243.79, respectively, according to EL7 data.
Alphabet said its Gemini app had reached one billion users, describing it as the fastest-growing product in Google’s history, according to AP. Still, the company said it expects a significant increase in capital expenditures during 2027, with further details to be provided on its fourth-quarter earnings call. The announcement comes as demand signals diverge across expanding cloud services, slower search growth and higher spending that is weighing on Amazon’s cash. The results leave investors focused on the returns companies can generate from expanding AI capabilities. The next event cited in Fortune’s report is Apple’s results on Monday, November 2, 2026.