Key facts
- Microsoft and Oracle rewarded for funding AI ambitions without excessive external financing.
- Alphabet punished for high cash burn and slower-than-expected search revenue growth.
- Microsoft reported $18.6 billion in free cash flow, exceeding expectations.
- Oracle expects to turn cash flow positive in the second half of fiscal 2028.
- Alphabet's capital expenditure is expected to increase significantly in 2027.
- Google Search revenue grew 12% in the September quarter, below expectations.
Wall Street is increasingly prioritizing companies that can fund their artificial intelligence ambitions through existing cash flow rather than relying on external financing. Microsoft and Oracle saw their shares rise after demonstrating this financial discipline, while Alphabet's stock fell sharply due to concerns over its significant cash burn and the competitive pressures on its core search business. Meta had previously signaled this shift in investor sentiment with its own cash burn concerns overshadowing revenue growth. Analysts noted the stark contrast between Microsoft's "disciplined growth" and Alphabet's cash-intensive approach, questioning if AI is impacting Google Search's market share.