To The Moon

Q3 Earnings are here !

On Wed, 28 Oct 2026 the 2 megacap, tech giants - $Microsoft(MSFT)$ and $Alphabet(GOOG)$ announced their quarterly earnings, after US market closed.

Both showed strong cloud growth but strangely enough, the market treated them very differently. MSFT shares popped after hours while GOOG stock sank. Why ?

Preliminary analysis suggests that a big part of the answer is how each plan to pay for the massive outlays, both have planned.

Accelerating Cloud Growth.

(1) MSFT earnings at a glance:

• MSFT beat Wall Street's targets with sales/revenue up +19% YoY, reaching $92.3 billion and exceeding consensus estimates of approx. $90.63 billion.

• Earnings per share (GAAP) came in at $4.92.

• Net Income (Non GAAP) : was $36.4 billion. This is up +18% YoY (excluding OpenAI investment impacts).

• Earnings per share (Non GAAP) was $4.89, above Wall Street consensus of roughly $4.72.

• MSFT’s cloud platform Azure, revenue grew by +48% YoY to reach $33.17 billion.

• Free Cash Flow: $18.6 billion.

Shareholder Returns & Guidance

• Capital Return: Returned $10.2 billion to shareholders via dividends & share repurchases.

• Q2 FY27 Outlook: MSFT projects Azure revenue growth of 49 - 50% YoY and total revenue of $96.0 to $97.1 billion.

(2) GOOG’s earnings at a glance.

• GOOG's cloud growth was even stronger than MSFT's, details to follow later.

• Overall, sales / revenue reached $127.6 billion, a +25% YoY gain. However, it missed Wall Street estimates of $127.9 to $128.2 billion.

• Net income (GAAP) came in at $26.17 billion.

• Earnings per share (GAAP) was $2.12, missing analyst expectations of about $2.99–$3.02.

• Google Cloud’s revenue was $30.7 billion, up +103% YoY, outperforming expectations with cloud backlog reaching $561 billion.

• Operating Income was a healthy $40.58 billion, that is up +30% YoY with operating margin at 31.8%.

• Drilling down, Google Services raked $96.3 billion (up +11% YoY), in which

  Google Search & Other delivered $82 billion in ad revenue (registering decelerating growth at -12% YoY and coming in slightly below analyst projections).

• Free Cash Flow was a surprising negative -$9.07 billion. GOOG attributed this to massive AI infrastructure / capex spending.

Comparatively speaking, GOOG handed in a ‘better’ earnings report card.

However, if the earnings report is picked apart, certain shortcomings become apparent.

Real Problem - Cash Flow.

Part of GOOG's lower profit per share happened because the company lost -$8.7 billion on its stock investments.

Even excluding that loss (that works out to about $0.55 per share), overall EPS still came in well below what Wall Street was looking for.

While it is not a great look, the real issue, market is reacting to GOOG's cash picture:

• GOOG spent $51.4 billion on capex, up from $24.0 billion a year ago.

• Operating cash flow (cash actual business generated) was $42.3 billion.

• As a result, FCF was (negative) -$9.1 billion. This is worse than the -$5.9 billion GOOG reported last quarter.

During the quarter:

• GOOG raised $28.7 billion through senior unsecured notes.

• Raised additional $12.4 billion from equity sales under its at-the-market (ATM) stock program.

• Long-term debt surged to $125.1 billion, up from $46.5 billion at year-end 2025.

Probably what spooked market further was GOOG’s confession that:

• Capex guidance for 2026 remains at approx. $195 to $205 billion.

• However, said it expects 2027 capex to increase significantly.

Microsoft still paying its own way

MSFT, on the other hand, is still FCF positive.

• Like GOOG, the FCF figure is moving in the wrong direction.

• MSFT reported FCF of $18.63 billion, which is down -27% YoY.

• This happened after the company spent $39.37 billion in cash capital spending (capex).

During July 2026 earnings call, MSFT, CFO, Amy Hood said:

• The company expects to stay free-cash-flow positive for its current fiscal year.

• Although capex is expected to expand.

• Demand for MSFT’s cloud services was running ahead of supply.

Bottom Line.

MSFT at this point has a much healthier cushion in its quarterly cash flow and more room to keep spending while it waits for those investments to pay off.

GOOG on the other hand, is increasingly asking lenders and shareholders to help cover the bill and its growth is hard to argue.

However, the jury is out on whether the AI-bet will pay off for both companies.

Costs are climbing, and there is concern the numbers won't add up long term.

The Better Bet ?

There is never a better time to buy into either giant tech stock when they are at their “weakest”. That could happen in days or weeks.

To determine where the stocks are next heading, it’s time to look into their (1) Simple moving averages of 20-day, 50-day & 200-day, (2) MACD and (3) RSI.

MSFT Technical Analysis.

(1) Simple Moving Average (SMA).

On Wed, 28 Oct 2026, MSFT ended the day at $531.01; this is higher than its SMA of 20-day ($529.90), 50-day ($511.18) and 200-day ($437.32).

The ordering of stock price > 20-day > 50-day > 200-day, supports an established uptrend.

The golden cross formed on 28 Aug 2026, reinforces the longer-term bullish interpretation, although moving-average signals lag price movements.

(2) MACD.

The MACD line (+6.26) and Signal line (+8.04) are above the zero line, supporting a positive underlying trend. Neither line has crossed below zero to confirm a broader bearish momentum shift.

Before one celebrates, with the MACD line sitting below the Signal line, this is a bearish short-term configuration where the upward momentum has weakened relative to its recent average.

However, with the MSFT poised to open higher on Thu, 29 Oct 2026 and can be sustained, it might help to mitigate the ‘risk’.

However, with a negative divergence (-1.78), it indicates a weakening upward momentum and near-term bearish pressure.

(3) RSI.

MSFT’s 14-day RSI of 56.06 is above the neutral midpoint of 50, and way below the conventional overbought threshold of 70.

It indicates a modest positive momentum bias, rather than an overbought condition or a particularly forceful advance.

GOOG Technical Analysis.

(1) Simple Moving Average (SMA).

On Wed, 28 Oct 2026, GOOG ended the day at $321.89 per share, lower than its 3 SMAs of (a) 20-day ($336.31), (b) 50-day ($338.12) & (c) 200-day ($339.26).

The alignment of SMA stock price < 20-day < 50-day < 200-day is bearish.

The chart also shows a death cross, formed only on 26 Oct 2026, reinforcing the deterioration in the longer-term trend.

Further downside or weak consolidation is more likely than a sustained advance while price remains beneath these averages.

The closely grouped averages around $336–339 form a potential overhead resistance zone; reclaiming that zone would improve the technical picture.

(2) MACD.

Both MACD line (-6.08) and Signal line (-3.32) are trending way below the Zero line, indicating bearish underlying momentum.

The MACD line sitting below the Signal line, indicates that current momentum is weaker than its recent average.

GOOG combines a negative zero-line position with a bearish signal-line relationship. This is a more consistently bearish configuration.

A negative divergence (-2.75) with the latest red histogram bars are below zero and have expanded during the recent sell-off.

It showed that MACD has moved further below its signal line with downside momentum strengthening.

(3) RSI.

GOOG’s 14-day RSI is 38.47, below the neutral midpoint of 50 an above the conventional oversold threshold of 30.

This supports weak momentum without establishing that the stock is currently oversold.

GOOG’s chart shows a small recovery from its recent RSI trough, but not a return to positive momentum territory yet.

My viewpoints : (mine only)

After looking at both exceptional stocks, MSFT is a preferred long-term core holding.

Reasons because MSFT established enterprise relationships and its subscription platform provide opportunities to sell additional services, including AI, to existing customers.

GOOG offers a different opportunity through Search, YouTube, subscriptions and Google Cloud, but changes in AI-driven usage create uncertainty around monetisation and margins.

However, the better business is not automatically the better investment:

• MSFT’s strengths do not justify an unlimited valuation premium.

• A fall in GOOG’s share price does not automatically make it cheap.

Without a verified, like-for-like comparison of (a) current valuations and (b) normalised future earnings, neither can definitively be called the better-value purchase.

In short, favour MSFT at a sensible price, but choose GOOG if its valuation offers a sufficiently greater margin for error. Agree ?

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