Investors now judge AI giants by cash flow, and Microsoft and Alphabet show the gap

Three stocks, one new test

As Cailian Press reported, earnings from three big tech names showed what investors now want to see. Microsoft grew revenue and profit and kept cash flow positive even while planning to spend well over a hundred billion dollars in its next fiscal year. Its shares rose after hours.

Oracle also gained, rising by more than ten percent. The reason was not current cash but a forecast: investors expect its free cash flow to turn positive in the second half of a fiscal year still some way off.

Alphabet is the cautionary case

Alphabet moved the other way. Its latest quarter came in below expectations, and its free cash flow turned negative, at roughly nine billion dollars below zero. Free cash flow is the money left after a company pays for running the business and for big equipment and building costs. Alphabet's shares fell nearly ten percent after hours.

Melissa Otto of S&P Global's Visible Alpha research unit said the Microsoft and Alphabet results were starkly different. Microsoft showed steady, disciplined growth, while Google was burning cash and its core business also missed expectations.

The search question hanging over Google

Otto said Alphabet's results could make investors ask whether AI threatens Google's core search business. Google has long earned rich profits from dominating search, but chatbots and AI agents are changing how people look things up.

Google is also spending heavily on AI, yet it has not built the same kind of lead there that it holds in search. Jeremy Saltzberg of Check Capital defended the spending. He argued that with OpenAI and Anthropic competing, Google has to invest at scale to stay in the race.

A real dilemma for the giants

The article describes a squeeze. Without heavy investment, computing capacity and model upgrades suffer, which erodes the advantages these companies already have. But if cash drains away unchecked, investors lose patience, and raising money gets harder.

Tech analysts quoted by the outlet say companies pouring money into AI infrastructure may need to turn toward controlling costs, and that layoffs could be one way to do it.