Microsoft beat expectations with revenue up 19% and Azure growth accelerating to 48%, while Gil Luria says it remains free cash flow positive unlike Amazon, Google and Meta.
Google's search business, which held over 90% of the search market, slowed abruptly this quarter as users shift to ChatGPT and Gemini, and Google's free cash flow turned negative $9.1bn as capex topped $51bn.
Microsoft plans voluntary buyouts for 27% of its global workforce after nearly 5,000 AI-linked layoffs in July, which Ed Elson says looks structural rather than a correction.
Microsoft Climbs as Google Sinks After Earnings
Funding and deals
Oracle. Oracle changed its plan to raise about $20bn in equity and $10bn in debt, with vendor financing and bring-your-own-chip deals as plan B.
Meta. Meta's share sale was five times oversubscribed and worked, according to Gil Luria, and the company also borrows and uses special purpose vehicles to fund its build-out.
Guest interviews
Gil Luria, Head of Technology Research at D.A. Davidson. Microsoft delivered a clean beat, with Azure accelerating from 43% to 48% on a business worth more than $120bn, and it remains free cash flow positive while Amazon, Google and Meta do not. It makes fifteen-year commitments on part of its build and rents short-term neocloud overflow. Google Search growth slowed abruptly, but he says it is too early to call a trend. With free cash flow at negative $9.1bn, he expects Google back in capital markets.
Michael Gapen, chief U.S. economist at Morgan Stanley. Chair Kevin Warsh gave no convincing explanation for holding rates, he says, though 18 of 19 participants see inflation as supply driven and want to move gradually. He expects hikes in December and March, core inflation near 3% by year end and core PCE near 2.6% next year. He calls Warsh a reformer who wants the Fed to speak less.
News
Microsoft beats estimates as Azure grows 48%. Revenue rose 19% and Microsoft disclosed Azure revenue for the first time, showing cloud growth of 48%. Shares rose as much as 5% in after-hours trading.
Google falls as ad revenue misses expectations. Revenue grew 25% in the third quarter, but advertising fell short of expectations and free cash flow declined. Shares dropped as much as 11%.
Fed holds rates as two officials dissent for a hike. Governor Lisa Cook and Cleveland Fed president Beth Hammack wanted a quarter point hike, and traders put the odds of a December hike at 80%. The Fed upgraded its view of growth to strong.
Microsoft offers buyouts to 27% of workforce. The offer follows nearly 5,000 layoffs in July tied to AI. Ed Elson says cutting 27% would push headcount below its pre-pandemic level, which looks structural.
Oracle shares jump 11% on cash flow outlook. The company projected a return to positive free cash flow in 2029. Indices rose after the Fed decision, and Brent crude stayed near $114 a barrel.
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