Google parent Alphabet on Wednesday missed Wall Street profit and revenue expectations, and AI spending accelerated its cash burn, sending its shares down more than 10 percent in extended trading. Capital expenditures, driven by AI, will increase significantly in 2027, said Chief Financial Officer Anat Ashkenazi, adding that this year's capex forecast was unchanged. She said she also expected near-term margin pressure from the use of third-party cloud capacity. The tech giant reported negative free cash flow of US$9.07 billion, compared with analyst expectations that it would come close to breaking even, according to data compiled by LSEG. The results reflect the huge costs of the AI buildout, with investors in the sector concerned both by potential overspending and the risk of falling behind rivals by not spending enough. The quarterly cash burn is an increase from US$5.9 billion in the prior quarter, which was the first time the company went into the negative in its 22-year history as a public company. Alphabet's cash burn was driven by spending to boost cloud capacity and fund AI research. It reported a US$7.66 billion operating income loss in "Alphabet-level activities," which it said primarily reflected expenses related to AI research and development. The tech giant's total revenue for the third quarter was US$127.6 billion, short of analysts' estimate of US$128.2 billion, according to LSEG data. The revenue miss was caused by Google's core advertising business that reported US$82.01 billion in revenue, about US$1.41 billion short of expectations. Net income available to common shareholders fell 25 percent to US$26.17 billion, and adjusted earnings per share of US$2.67 missed Wall Street targets of US$3.02. Earlier on Wednesday, Google sought to preempt its results and counter the perception it had fallen behind in the AI race by announcing its new Gemini 4 Carbon model, which CEO Sundar Pichai told analysts during the earnings call meant it was again "leading at the frontier." Revenue at Google Cloud exceeded estimates and more than doubled to US$30.71 billion in the third quarter ended September 30, but was not enough to make up for the ad-side performance. (Reuters) Edited by Cecil Wong

Microsoft on Wednesday forecast fiscal second-quarter cloud growth and overall sales that beat Wall Street estimates, sending shares up more than 5 percent in after-hours trading. The forecast came after Microsoft had earlier beaten expectations for first-quarter cloud revenue, offering fresh evidence that its hefty AI investments were paying off as Wall Street grows increasingly wary of Big Tech's debt-fuelled spending. The software and cloud company also generated US$18.6 billion in free cash flow in its fiscal first quarter ended September – some US$10 billion more than analysts expected – as capital spending came in below the company's own forecast and Microsoft's Azure cloud computing business surged 48 percent. Microsoft said it expects second-quarter Azure growth of 49 to 50 percent, above analyst estimates of 47.6 percent, according to Visible Alpha data. The company forecast overall sales of US$96 billion to US$97.1 billion, above estimates of US$95.6 billion, according to LSEG data. That financial firepower set Microsoft apart from rivals such as Alphabet and Meta, whose heavy AI investments have squeezed free cash flow and increased their reliance on borrowing. Alphabet reported negative free cash flow of US$9.07 billion in the third quarter as capital spending jumped, overshadowing a doubling of its cloud sales and sending its shares down 8 percent in extended trading. Microsoft shares have risen about 9 percent so far this year, through Wednesday's close. Its five-year credit default swaps – a measure of perceived default risk – remain the tightest among the largest tech companies, according to Truist, even as spreads have widened across much of the AI trade. The results also show Microsoft capitalising on corporate demand for AI, easing fears that the technology threatens its software empire and that its AI fortunes are too closely tied to unprofitable OpenAI. CEO Satya Nadella has sought to capture that demand by giving customers cheaper options, as businesses grapple with the rising cost of deploying AI. Microsoft has rolled out a string of lower-cost models, while its new Copilot Cowork agent allows users to switch between models. "By helping organisations build and own their own intelligence, and earning trust through agent safety and security, we are translating our innovation into growing adoption," Nadella said in a statement on Wednesday. "Microsoft's first-quarter report was about as clean as it gets for a company this size," said Jesse Cohen, senior analyst at Investing.com. "After Meta's and Alphabet's numbers revived AI-spending anxiety, this is the counterweight. Demand still exceeds supply, the commercial backlog is enormous, and returns are finally showing up in earnings and overall revenue." Revenue at Microsoft's Azure cloud computing business grew to US$33.17 billion in the quarter, topping Visible Alpha's estimate of US$32.84 billion. Overall revenue rose by a fifth to $92.28 billion, and an adjusted profit of US$4.89 per share beat an average estimate of US$4.73 a share. (Reuters) Edited by Cecil Wong

Wall Street stocks finished higher on Wednesday after a choppy session, digesting a status quo US Federal Reserve decision as markets monitored the latest earnings from US tech giants. The Fed, as expected, held interest rates steady, citing the need for more data in the fight against inflation despite persistently elevated pricing pressure. Two dissenting members of the panel voted for an immediate interest rate increase. Major US indices spent most of the day in positive territory but traded within a fairly narrow range. The broad-based S&P 500 finished up 0.3 percent. Art Hogan of B Riley Wealth Management said the market's biggest priority this week is sifting through a deluge of earnings, including Microsoft and Google parent Alphabet, two of the biggest companies in artificial intelligence. The tech results are "100 percent the focus," said Hogan. "The market is taking a 'nothing to see here' attitude towards what the Fed did today." Citing higher energy prices in recent weeks, Fed Chair Kevin Warsh said "our job is to ensure that relative price changes in some sectors do not broaden out across the economy," Warsh said at a news conference. Still, he said the Fed needed more information in the coming weeks to "determine the policy stance appropriate to ensure a timely return of inflation to the two-percent goal." The AI trade enjoyed a broad lift earlier on Wednesday from blockbuster earnings from the South Korean chip giant SK hynix, which soared almost 11 percent, helping to lift Seoul's Kospi index more than six percent. SK hynix, a specialist supplier of high-bandwidth memory chips to US industry behemoth Nvidia, unveiled plans to return an additional US$45 billion to shareholders after reporting operating profits about seven times the year-ago level. The global race to build AI data centres has transformed the company's fortunes, despite concerns that the sector may be overvalued. The report by SK hynix added to optimism surrounding the sector after Anthropic, the creator of Claude AI, said on Monday that its first-half revenue surged about 1,300 percent and flagged heavy capital spending ahead, fuelling enthusiasm ahead of an expected IPO next month. AI stocks took a beating earlier this month over worries about the massive investments and debt levels in the sector, but then welcomed Anthropic's IPO. In other markets, oil prices moved higher following reports that the United States is planning to mount a new military attack in Iran after the US midterm elections. Gains in the US dollar, meanwhile, moderated after Fed Chair Kevin Warsh's press conference. Warsh is saying the Fed's first interest rate hike in September "had a large impact, which indicates that he doesn't think the Fed has that much more to do," said Adam Button, currency analyst at investingLive. The S&P 500 rose 0.3 percent, to 7,744, the Dow rose 0.2 percent, to 52,475, while the Nasdaq rose 0.3 percent, to 26,550. (AFP) Edited by Robert Kemp