Cloud demand looked strong at both companies on October 28, 2026. The difference was cash, and the TPU story must now prove itself in 2027 revenue.
PetaTech24 Technology Desk | October 29, 2026
Microsoft Alphabet earnings on October 28, 2026, told one story in two voices. Microsoft reported revenue of $92.3 billion in US dollars (USD), up 19%, with Azure revenue up 48%. Alphabet reported revenue of $127.6 billion (USD), up 25%, with Google Cloud revenue up 103% to $30.7 billion, for the quarter ended September 30, 2026.
This article follows up the PetaTech24 report on Google TPU Oracle partners. That report covered Oracle offering Google Tensor Processing Units, or TPUs, through Oracle Cloud Infrastructure, and warned most TPU revenue was expected in 2027. Microsoft Alphabet earnings add two facts: Google Cloud called TPU system sales a meaningful contributor, and Alphabet said TPU inventory building would pressure free cash flow.
The split was not over demand: both reported backlogs in the hundreds of billions, and both cited demand exceeding capacity. The split was over cost, funding and the core business beside cloud. Is cloud demand real, and is the buildout affordable?
In Brief
- Microsoft Alphabet earnings covered the same calendar quarter: Microsoft fiscal Q1 2027 and Alphabet calendar Q3 2026.
- Microsoft beat revenue and adjusted earnings expectations; Alphabet missed both, per LSEG estimates via CNBC and Reuters.
- Azure grew 48% and Google Cloud grew 103%, on different bases, so the rates alone are not a ranking.
- Alphabet free cash flow was negative $9.07 billion (USD); Microsoft free cash flow was $18.6 billion (USD), down 27%.
- Alphabet expects 2027 capital expenditure to rise significantly, with no number given.
Microsoft Alphabet Earnings: What Microsoft Reported
Microsoft Alphabet earnings began with the clearer beat. In its fiscal Q1 2027 earnings release, Microsoft said revenue reached $92.279 billion, operating income $45.915 billion, and GAAP earnings per share $4.92, up 32%. Excluding OpenAI investments, net income was $36.422 billion and earnings per share was $4.89, up 18%. Compare $4.89 with the roughly $4.73 consensus cited by CNBC.
In Microsoft Alphabet earnings, the release gives the Azure growth rate, not a dollar total. Microsoft Cloud revenue was $63.9 billion, up 30%, and Azure revenue increased 48%. The $33.17 billion Azure dollar figure comes from filing reporting, including CNBC, which put the StreetAccount estimate at about $32.32 billion.
Microsoft reported a remaining performance obligation of $677 billion, up 73%: contracted revenue not yet recognised, not cash collected. Only about 30% was expected within 12 months, per call reporting. Agents and Infra revenue was $76.8 billion, up 25%; Devices and Consumer revenue was $15.5 billion, down 3%.
On spending, Microsoft Alphabet earnings require care with definitions. Cash additions to property and equipment were $39.4 billion, about double a year earlier. Including finance leases, capital expenditure was $45.2 billion, up about 30%, as CNBC reported. The lease figure counts rented capacity differently, so the totals must not be swapped. Free cash flow was $18.6 billion, down 27%; operating cash flow rose 29% to $58.0 billion.
Microsoft Alphabet Earnings: What Alphabet Reported
In Microsoft Alphabet earnings, Alphabet showed strength and strain together. Revenue rose 25% to $127.577 billion, and operating income rose 30% to $40.576 billion, per its release as reproduced by Securities.io. Google Cloud revenue rose 103% to $30.709 billion, and cloud operating income more than tripled, to $11.121 billion. Cloud beat estimates cited by Reuters and CNBC, from about $28.7 billion to $29.57 billion.
The miss sat in advertising. In Microsoft Alphabet earnings, Google Search and other revenue rose 12% to $63.35 billion, below the $64.96 billion estimate cited by CNBC, and YouTube ads rose 9% to $11.21 billion, also below estimate. Total revenue was just under the roughly $128.2 billion consensus.
That gap needs both EPS figures, labelled clearly. In Microsoft Alphabet earnings, GAAP earnings per share fell to $2.12, from $2.87, and net income to common shareholders fell 25% to $26.17 billion. A net loss on equity securities of $8.664 billion, cut earnings per share by $0.55. Adjusted earnings per share was $2.67, against about $3.02 expected. Never mix the figures.
Chief Financial Officer Anat Ashkenazi said other income was negative $8.2 billion due primarily to an unrealised SpaceX loss, per call reporting: a valuation adjustment, not a sale or payout. It explains why operating income rose 30% while GAAP earnings per share fell 26%. Equipment purchases were $51.36 billion, operating cash flow was $42.29 billion, and free cash flow was negative $9.07 billion.
Microsoft Alphabet Earnings: Why Cash Flow Split the Reaction
Reuters reported Alphabet shares fell 10% in after-hours trading on October 28. Microsoft shares rose, but reports of the size varied by timestamp, from about 4% to more than 5%. In Microsoft Alphabet earnings, the market rewarded a beat with positive free cash flow, and punished a miss with cash burn.
Microsoft Alphabet earnings both showed demand straining capacity. Alphabet said third-party bridging capacity came online only at quarter end, per its call transcript, and warned of margin pressure. Microsoft cited delayed deliveries and demand exceeding supply. Reuters reported advertising missed expectations by about $1.41 billion, and Philipp Schindler said, per call reporting, that AI Mode use slowed search advertising growth.
The TPU Demand Story, Updated
Is TPU demand visible in reported revenue? In Microsoft Alphabet earnings, Ashkenazi said TPU system sales were a meaningful contributor to Google Cloud growth, per the call transcript. Thomas Kurian said demand remains strong, with nearly 100 customers using the systems, naming Anthropic, Apple, Oracle and Crux AI.
That still gives no TPU revenue total, margin or Oracle-specific figure; none was disclosed in the material checked. The prior report noted a TD Cowen estimate of about a 20% operating margin for external TPU sales, against roughly 35% for Google Cloud overall, per CNBC. That is an analyst estimate, not a Google disclosure.
Backlog needs the same caution. In Microsoft Alphabet earnings, Google Cloud backlog reached $561 billion, with just over 55% expected over 24 months, per call reporting. That supports demand, not a TPU split or margin. Ashkenazi said TPU inventory building would weigh further on free cash flow, per Reuters, as inventory is built before revenue is recognised.
Confirmed, Reported and Still Unknown
Confirmed: Microsoft revenue, Azure growth, Microsoft Cloud revenue, operating income and earnings come from the Microsoft release. Alphabet revenue, Google Cloud revenue and operating income, the equity-securities loss and free cash flow come from the Alphabet release. Its 2026 capital expenditure range stayed at $195 billion to $205 billion; the 2027 increase direction comes from the call.
Reported, via secondary or call reporting: the Azure dollar total, the Microsoft finance-lease total, the adjusted Alphabet earnings figure, the SpaceX explanation, the TPU customer count and named agreements, and the backlog timing splits. Where surveys differ, this article gives the range.
Still unknown: the 2027 capital expenditure total, the TPU revenue and margin split, Oracle pricing and deployment size, any OpenAI TPU purchase terms, and whether AI Mode ads will restore search growth. The OpenAI plan to buy TPUs remains a plan, not a confirmed purchase.
Quick Answers
What do Microsoft Alphabet earnings mean for TPU demand?
Microsoft Alphabet earnings show TPU system sales were a meaningful contributor to Google Cloud growth, but disclose no TPU revenue total. Demand looks real in backlog and customer counts, while proof in recognised revenue and margin remains a 2027 question.
Why did Alphabet earnings per share fall while operating income rose?
Operating income rose 30% to $40.6 billion, but a net loss of $8.66 billion on equity securities, against a gain a year earlier, reduced GAAP earnings per share by $0.55, to $2.12. The adjusted figure was $2.67.
Why are the capital expenditure figures not directly comparable?
Microsoft reported $39.4 billion in cash additions to property and equipment and $45.2 billion including finance leases, which count rented capacity differently. Alphabet reported $51.36 billion in purchases of property and equipment. Compare them only with definitions attached.
What should readers watch in the next quarter?
Watch the 2027 capital expenditure number at Alphabet, any TPU revenue or margin split, search growth as AI Mode ads roll out, Azure growth against the 49% to 50% guide and whether Alphabet free cash flow stabilises.
The Verdict
Microsoft Alphabet earnings proved demand, not affordability. Azure at 48% and Google Cloud at 103% show customers buying AI capacity at scale. Microsoft paired demand with a beat and positive free cash flow; Alphabet paired faster cloud growth with a miss and negative free cash flow.
The TPU story survives, but it narrows. Selling chips outside Google Cloud is now an operating business with named customers and a backlog. The cost is also visible, in inventory, third-party capacity and a 2027 spending increase with no number attached. Judge it in 2027, on recognised revenue and margin.
Sources and Attribution
- Microsoft, FY27 Q1 earnings press release, October 28, 2026: Microsoft Investor Relations release. Headline Microsoft figures come from this release.
- Alphabet, Q3 2026 earnings release, October 28, 2026, as reproduced by Securities.io: Alphabet Q3 revenue rises 25% as Google Cloud revenue jumps 103%. Headline Alphabet figures come from this reproduction.
- Reuters, Alphabet stock sinks as search woes cause revenue miss, cash burn worsens, October 28, 2026, via BusinessWorld: Reuters report on Alphabet results. Share move, advertising miss and TPU inventory warning are attributed to Reuters.
- Alphabet Q3 2026 earnings call transcript, via Motley Fool: Alphabet earnings call transcript. TPU sales and capacity commentary are attributed to the call.
- MarketBeat, Alphabet Q3 earnings call highlights, October 29, 2026: Alphabet earnings call highlights. Customer count, named agreements and backlog timing are attributed to call highlights.
- Securities.io, Microsoft Q1 revenue rises 19% to $92.3 billion as Azure grows 48%: Microsoft Q1 results summary. Consensus comparisons are attributed to this summary and to CNBC and LSEG reporting as cited there.
PetaTech24 did not test any chip, cloud service or AI model for this article. All earnings figures are attributed as described above. This article is not financial advice, and after-hours share moves change quickly and should not be treated as a settled price.
