How Microsoft and Google's AI Spending Affected Their Shares

Investors are rewarding Microsoft for its artificial intelligence strategies while penalizing Alphabet's Google unit over concerns that massive budgets may not yield sufficient returns. Microsoft shares gained about 1.6% thanks to profit and revenue figures that beat expectations and strong growth forecasts for Azure. In contrast, Alphabet shares experienced a sharp drop of nearly 11% in pre-market trading after the search giant reported disappointing revenue and announced it would continue high spending on AI next year.

Google's core search revenues increased by 12% to reach approximately $63.3 billion, but free cash flow dropped to a $9.1 billion loss due to infrastructure investments. In contrast, Microsoft made $45.2 billion in capital expenditures last quarter while generating $18.6 billion in free cash flow.