Microsoft and Alphabet released earnings reports on Wednesday that diverged from recent trends of escalating capital expenditure forecasts among technology giants. Microsoft revised its yearly capex guidance downward to $170 billion from an earlier projection of $175 billion. Alphabet maintained its capex range at $195 billion to $205 billion, holding its prior guidance steady.
The reported figures triggered market reactions, particularly affecting emerging cloud infrastructure providers. Shares of CoreWeave, Nebius, IREN, and Oracle all declined following the announcements. Microsoft CFO Amy Hood attributed part of the company’s capex adjustment to delays from third-party graphics processing unit providers, indicating that certain capacity would not become available until the first half of 2027. Alphabet’s finance chief Anat Ashkenazi noted that external computing capacity only came online at the tail end of the third quarter. Alphabet’s shares fell approximately 10% in after-hours trading as the company missed earnings and revenue targets and posted negative free cash flow exceeding $9 billion.
Despite the shortfalls relative to analyst expectations, executives indicated that capital spending would likely accelerate in coming periods. Hood projected higher capital spending in the first half of 2027 driven by component cost increases and delayed equipment deliveries. Industry projections suggest hyperscaler capex could exceed $1 trillion in the following year, with some forecasts indicating continued growth beyond that level.
The infrastructure constraints highlight challenges facing emerging neocloud providers, which require billions in outside capital but lack investment-grade credit ratings. Rising interest rates and growing concerns about debt loads have prompted lenders to reduce market participation. Gartner analysts predicted that by 2030, approximately 80% of neocloud companies may be absorbed or cease operations. One high-profile example occurred earlier in the month when Nvidia-backed Firmus withdrew its planned initial public offering.
Microsoft’s stock performance diverged from the broader market reaction, as investors responded positively to the company’s better-than-expected earnings and revenue results, buoyed by 48% sales growth in Azure cloud services. Analysts at Cantor upgraded their one-year price target for Microsoft to $630 from $608, citing the quarter as validation of the company’s artificial intelligence-driven growth prospects.
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