Cash Flow Becomes a Dividing Line in Big Tech’s AI Spending Boom

Investors are putting a sharper cash-flow test on the artificial-intelligence boom, distinguishing between technology companies that can finance expansion from their existing businesses and those facing a growing funding burden.

Big Tech receives different market reactions

Microsoft shares rose more than 2% in premarket trading on Thursday, while Alphabet fell nearly 11%, Reuters reported. Oracle had gained almost 11% in regular trading the previous day after saying it expected to become cash-flow positive in the second half of fiscal 2028 and planned a ceiling on external financing.

Capital spending puts cash generation in focus

Alphabet committed 121.4% of its operating cash flow to capital spending in the September quarter, compared with 68% for Microsoft excluding finance leases, according to Reuters. Spending above cash generated from operations requires other funding, such as reserves or borrowing.

Alphabet’s Search revenue grew 12%, below the 14.7% analysts had expected. The slowdown sharpened questions about the business that has historically helped finance Google’s expansion, even as CEO Sundar Pichai said query growth was at its fastest pace in five years.

Google Cloud revenue more than doubled to $30.71 billion. However, Alphabet’s capital spending could reach $205 billion this year, and Reuters reported a $9.07 billion cash burn in the period described.

Microsoft’s cash flow provides a contrasting signal

Microsoft generated $18.6 billion in free cash flow in its fiscal first quarter, nearly $10 billion above Wall Street expectations, while spending $45.2 billion to expand computing infrastructure. Azure revenue rose 48%, and the company forecast stronger cloud growth in the following quarter.

CEO Satya Nadella said customers were moving beyond experiments with the newest models and signing longer-term contracts. The contrast suggests investors are looking beyond the size of AI commitments to the cash available to sustain them.

Sources: Reuters report; Gensler project imagery