Alphabet and Microsoft report quarterly results after the U.S. market closes on Wednesday, Oct. 28. Both are growing their cloud businesses fast and spending heavily to keep up. Investors want to know whether that spending has started to show up in profit and free cash flow, or whether it will keep rising faster than the returns.
Alphabet (Q3 FY2026)
Wall Street expects third-quarter revenue of roughly $127.9 billion and earnings of $3.03 a share, according to Business Insider's pre-earnings coverage, which would mean revenue growth of about 25% and EPS growth of 5.6%. Bank of America's Justin Post forecasts revenue net of traffic-acquisition costs of $111.4 billion and GAAP EPS of $3.07, ahead of the Street's comparable estimates of $111.0 billion and $2.98. The two revenue numbers sit on different bases. Post's excludes traffic-acquisition costs; the $127.9 billion is consistent with total revenue.
Bank of America sees the likeliest upside in Google Cloud. It expects the unit to grow about 93% in the third quarter, against a consensus of 89%, citing capacity additions and incremental sales of Tensor Processing Units (TPUs). Cloud revenue rose 82% to $24.8 billion in the second quarter. Citizens' Andrew Boone also expects better-than-expected Cloud results, driven by pricing and utilization.
For Search, Bank of America expects growth of about 15%, in line with the Street, though its checks point to some deceleration. Boone is more cautious. He calls the Search business "incrementally cautious" because of growing competition from AI agents, and he expects the comparison to be tough. He also sees YouTube as a wild card, with the World Cup advertising boost fading and midterm-election ad spending ramping up.
Alphabet's 2026 capital expenditure will come in around $200 billion, Bank of America estimates, against a Street figure of $202 billion, with about $300 billion in 2027 and risk skewed upward. It forecasts operating expenses of $33.5 billion, below the Street's $34.3 billion, and depreciation and amortization of $8.0 billion against $8.9 billion. Higher depreciation is the cost of the build-out, and it could weigh on EPS even if revenue beats.
Boone expects the stock to react more to management's commentary than to the numbers, because of concern about Search. On the call, Bank of America will watch search volumes, a possible consumer agent launch, and data on TPU sales, which it calls a key 2027 upside case.

Microsoft (Q1 FY2027)
FactSet's consensus calls for adjusted EPS of $4.71 on revenue of $90.63 billion in fiscal first-quarter 2027. That would be growth of about 14% in earnings and 16.7% in sales, and the slowest earnings growth in nearly two years.
Azure, the figure most likely to move the stock, was guided to about 45% growth in constant currency, up from 43% in the prior quarter, and Microsoft said growth should keep accelerating through the first half of the fiscal year. Bank of America's Tal Liani expects 44.8%, or about $32.3 billion in Azure revenue, in line with Street estimates. Morgan Stanley's Adam Wood is higher, at about 47%.
Capital spending in the quarter will exceed $50 billion, Microsoft said, more than double the roughly $19 billion a year earlier. Liani models $50.8 billion including finance leases, up 24% from the prior quarter, and forecasts full-year fiscal 2027 spending of $220.7 billion, up 51.9%. In July, Microsoft lowered its calendar-2026 capex guidance to about $175 billion, from the roughly $190 billion it had guided in April.
CFO Amy Hood tied the drop to how future data-center leases are counted. Starting in fiscal 2027, Microsoft is extending the estimated useful life of its data centers and office buildings from 15 to 25 years, which moves more future leases into operating leases, and operating leases are excluded from capex. "Outside of this useful life impact, our calendar year 2026 CapEx investment expectations remain unchanged," Hood said. The $15 billion decline is therefore a reclassification rather than a cut in planned spending.
Free cash flow fell 23% to $19.6 billion in the fourth quarter, when capex reached $41 billion. Management expects free cash flow to stay positive in fiscal 2027. The commercial backlog stood at $678 billion, up 84%, and Microsoft 365 Copilot passed 30 million paid seats, with net seat additions more than doubling sequentially.
Liani sees steady mid-teens growth over the next three years, with some margin pressure from the shift toward Azure and Microsoft 365, partly offset by cost control. Wood, in an Oct. 19 note, wrote that improving sentiment and a higher valuation have raised the bar. He wants the next quarter's outlook to show Azure growth holding up as new data-center capacity comes online.
A weak tape for AI stocks
Meta shares fell more than 9% in the week of Oct. 19 after the company posted negative free cash flow for the first time since its public debut, and its five-year credit default swap spread reached an all-time high, CNBC reported. The Nasdaq Composite was on track to finish October down more than 3%. Semiconductors were down more than 15% for the month.
Hyperscalers reporting next week could disclose heightened capital spending, perhaps by as much as $100 billion, according to Mark Mahaney, who heads Evercore's internet research team. Alphabet shares had fallen more than 5% that week, and Amazon and Microsoft were each down about 1%. "The market fear is now in the stock," Mahaney said. If the companies said they did not need to raise capital, or announced only a modest equity or debt deal, the stocks could rise, he said.
Microsoft and Alphabet report on the same day as the Federal Reserve's policy decision. Amazon follows on Thursday, alongside the September PCE inflation data; core PCE was expected to have risen 3.1% over the past year, up from 3.0%, CNBC noted.
Ratings and targets
Bank of America reiterated its Buy rating on Alphabet. Boone kept his Buy but cut his price target to $450 from $515, citing execution risk and Search pressure. Business Insider counts 23 Buys and four Holds, a Strong Buy consensus, with an average target of $427.16. Most of the bull case rests on Cloud, TPUs and the company's own AI models.
Microsoft draws similar support. Liani reiterated a Buy with a $600 target, and Wood maintained a $600 target. J.P. Morgan's Samik Chatterjee kept an overweight rating and a $625 target, and said investors will focus on Azure, Microsoft 365 Commercial Cloud and Copilot. For both companies, the open question is whether the next quarter's numbers justify the capex.
Goldman Sachs includes both on its list of buy-rated tech stocks it sees with further upside into earnings. Its software analyst, Gabriela Borges, called Microsoft the best-positioned name in Goldman's software coverage to benefit from compounding AI product cycles. She pointed to the "unit economics and return on invested capital" of Azure, and to Microsoft's capex "flexibility." Microsoft shares were up more than 8% for the year as of Oct. 24, lagging the S&P 500, CNBC reported.
On Alphabet, Eric Sheridan acknowledged investor concerns about Search revenue growth, the lack of a formal consumer agent launch, and the risk that consumer behavior shifts toward agentic interfaces. He called much of that worry overdone. Goldman sees Alphabet's frontier models, Google Cloud and consumer applications as possible catalysts. Alphabet shares were up only about 2% for the year at that point.
What to watch Wednesday
For Alphabet, investors will be watching Cloud growth and margin, TPU sales commentary, Search growth against a tougher comparison, depreciation and operating expenses, and any change to 2026 capex guidance.
Management set up several of those comparisons on its second-quarter call. Alphabet raised its full-year 2026 capex range to $195 billion–$205 billion, from $180 billion–$190 billion, citing faster delivery of capacity to meet demand, and said capex would rise significantly again in 2027. At current spot rates, the CFO expects a slight foreign-exchange headwind to third-quarter revenue, after a one-point tailwind in Q2. Search also begins lapping an acceleration that started in Q3 2025. And because capacity remains supply-constrained, Alphabet plans to lean on more third-party capacity in Q3 while it builds its own, which management said will create modest near-term margin pressure in Cloud.
Microsoft's Azure figure will be read against the company's 45% constant-currency guide. Bank of America's 44.8% forecast is in line with Street estimates. Wood expects about 47% and wants the next-quarter outlook to show growth holding steady as new data-center capacity comes online.
On capex, Microsoft said first-quarter spending would exceed $50 billion, more than double a year earlier, and Bank of America models $50.8 billion including finance leases. Investors will read that number alongside the calendar-2026 outlook of about $175 billion, down from the roughly $190 billion guided in April. Hood said expectations were unchanged outside the useful-life change, so the reported figure and the underlying plan need to be read separately.
In the fourth quarter, free cash flow fell 23% to $19.6 billion; management expects it to stay positive in fiscal 2027. Commercial remaining performance obligation rose 84% to $678 billion, a backlog that helps only if it converts to revenue at a pace that justifies the capacity behind it. Microsoft 365 Copilot passed 30 million paid seats. Goldman's Borges points to "unit economics and return on invested capital" in Azure.