Alphabet, Microsoft earnings show surging AI demand and spending

Key Points:

• Alphabet and Microsoft reported strong revenue growth driven by surging demand for artificial intelligence, with Alphabet's Q3 revenue up 25% to $127.6 billion and Microsoft's fiscal Q1 revenue rising 19% to $92.3 billion.
• Both companies are heavily investing in AI infrastructure, with Alphabet projecting capital expenditures between $195 billion and $205 billion this year and expecting further increases in 2027, while Microsoft also reported significant cloud revenue growth.
• Google Cloud revenue more than doubled to $30.7 billion, and Microsoft's Azure cloud revenue grew 48%, highlighting AI infrastructure as a key driver of their cloud businesses.
• Alphabet spent $51.4 billion on capital expenditures in Q3, more than double the previous year, focusing on AI and cloud infrastructure, though CFO Anat Ashkenazi warned of potential near-term margin pressure due to reliance on third-party computing capacity.
• Microsoft's commercial remaining performance obligation, indicating contracted future revenue, rose 73% to $677 billion, reflecting strong demand but also underscoring the challenge of balancing growth with infrastructure costs.