Azure grows 48% and Google Cloud doubles as AI capex climbs

All figures are for the quarter ended Sep 30, 2026, from the companies' releases and calls on Oct 28, 2026, unless stated otherwise. Comparisons are with the same quarter a year earlier. Figures marked as our math are our own calculations.

Microsoft and Alphabet reported on the same evening, and the two cloud businesses that rent out AI compute both sped up. Microsoft's release shows Azure revenue of $33.2B, up 48%, the first time the company has given Azure a dollar figure. Alphabet's release shows Google Cloud revenue of $30.7B, up 103% from $15.2B, with sales of TPU systems "a meaningful contributor." Google Cloud's operating income was $11.1B, up from $3.6B.

At the company level, Microsoft's revenue was $92.3B (+19%) and operating income $45.9B (+21%). Its commercial remaining performance obligation, contracted revenue not yet booked, rose 73% to $677B. Alphabet's revenue was $127.6B (+25%). Its net income fell to $26.2B, or $2.12 a share, from $35.0B, partly because of an $8.7B loss on equity securities.

The spending kept climbing at both. Microsoft's cash additions to property and equipment were $39.4B, up from $19.4B a year earlier. CNBC reported total capex including finance leases of $45.2B. That's below the "over $50B" Microsoft had guided in July, which CFO Amy Hood put down to delayed third-party capacity deliveries. Alphabet's purchases of property and equipment were $51.4B, up from $24.0B. The two companies count capex differently, so the figures shouldn't be added together. Our guide to reading capex explains why cash purchases, leases and guidance need to be kept apart.

Cash is where they split. Microsoft generated $58.0B from operations, leaving about $18.6B of free cash flow (our math: $58.0B minus $39.4B). Alphabet generated $42.3B from operations, so its free cash flow was negative $9.1B, after negative $5.9B in Q2, by its own definition. In the quarter Alphabet also raised $28.7B in net proceeds from new notes and $12.4B from selling shares under its at-the-market program, and it bought back no stock.

On the outlook, Hood guided December-quarter capex to "over $50 billion" and said that puts spending for the calendar year at "approximately $170 billion," citing the delayed deliveries. She expects Azure to grow 49% to 50% in constant currency and said Microsoft expects to "remain free cash flow positive in FY27." Alphabet kept its 2026 capex guidance at $195B to $205B and repeated that it expects capex to "increase significantly in 2027," with details on its Q4 call. CNBC reported that Alphabet shares fell more than 10% after the results, and that Microsoft shares rose about 4% in extended trading on Oct 28.

For builders, the demand signal is the line to watch. Hood said "we still have demand that exceeds supply," and Sundar Pichai said on the call that Google is "working hard to bring more capacity online." Alphabet's release adds that its first-party model APIs now process nearly 32 billion tokens per minute, more than four times a year ago.

We previewed these reports in this week's earnings calendar, and Meta's Q3 showed the same pattern of capex outrunning cash flow. Google's TPU sales are explained in TPU vs GPU. Amazon reports after the close on Oct 29.