Alphabet shares fell about 8% in extended trading on Wednesday, Reuters reported, after the Google parent's capital spending more than doubled to $51.4 billion in the third quarter and left it with negative free cash flow of $9.1 billion. Microsoft shares rose about 4% in extended trading after revenue at its Azure cloud business grew 48%, Reuters said.

For Asia, the reports are a direct read on demand for the chips, memory and servers the region builds for U.S. cloud companies. Taiwan's Taiex rose 2.04% to 47,035.58 on Wednesday, but turnover shrank as many investors waited for results from Microsoft, Alphabet and Amazon, Concord Securities analyst Kerry Huang said, according to Focus Taiwan.

Alphabet's revenue rose 25% to $127.6 billion, short of the $128.2 billion analysts expected, according to LSEG data cited by Reuters. Diluted earnings per share fell to $2.12 from $2.87 a year earlier. An $8.7 billion loss on equity securities cut 55 cents from per-share profit, the company said.

Google Cloud Doubles as Alphabet's Cash Turns Negative

Google Cloud revenue rose 103% to $30.7 billion, ahead of the $29.15 billion analysts expected, according to Proactive Investors. The unit's operating profit more than tripled to $11.1 billion from $3.6 billion. Alphabet said sales of its TPU systems, the custom AI processors it designs, were a meaningful contributor, and Chief Executive Sundar Pichai cited “strong demand for our TPU systems across a wide range of customers.”

The core advertising business caused the revenue miss. Google advertising brought in $82.01 billion, about $1.41 billion short of expectations, Reuters said. Search and other revenue grew 12% to $63.4 billion, below the $64.99 billion estimate cited by Proactive Investors.

Spending drove the cash burn. Purchases of property and equipment reached $51.4 billion in the quarter, against $24 billion a year earlier, bringing the nine-month total to $132 billion. Operating cash flow of $42.3 billion did not cover it. Analysts had expected Alphabet to come close to breaking even, according to LSEG data cited by Reuters. It was Alphabet's second straight quarter of negative free cash flow, after negative $5.9 billion in the April-June period.

Alphabet is borrowing and selling stock to bridge the gap. It raised $28.7 billion from senior unsecured notes in the quarter and $12.4 billion by selling Class A and Class C shares through an at-the-market program, its results release showed. It bought back no stock, compared with $11.5 billion of repurchases a year earlier.

Alphabet confirmed its full-year capital spending forecast, Fortune reported. It had raised that forecast in July to $195 billion to $205 billion, W.Media reported. Fortune said spending is expected to reach $200 billion in 2026 and $300 billion in 2027. Chief Financial Officer Anat Ashkenazi said more detail would come in the fourth quarter. Fortune put the decline in extended trading at more than 11%, erasing over $280 billion of market value.

Microsoft's Cloud Accelerates, Spending Comes in Below Plan

Microsoft's fiscal first-quarter revenue rose 19% to $92.3 billion, above the $90.69 billion analysts expected, according to Proactive Investors. Adjusted earnings of $4.89 a share beat the $4.73 estimate. Net income rose 32% to $36.6 billion.

Azure revenue rose 48% to $33.17 billion, up from $29.4 billion in the previous quarter and above Visible Alpha's estimate of $32.84 billion, Reuters reported. Microsoft Cloud revenue grew 30% to $63.9 billion. Commercial remaining performance obligation, a measure of contracted revenue not yet booked, jumped 73% to $677 billion, the company said.

Microsoft's spending also climbed, but less than it had planned. Capital expenditure was $45.2 billion, up from $34.9 billion a year earlier and below the company's own projection of $50 billion, Reuters said. Cash spent on property and equipment, the basis for free cash flow, was $39.4 billion, the release showed. Free cash flow came to $18.6 billion, more than double Visible Alpha's $8.54 billion estimate. Jonathan Neilson, Microsoft's vice president of investor relations, blamed delayed deliveries of third-party capacity rather than any change in spending plans, Reuters reported.

What the Spending Means for TSMC, SK Hynix and Taiwan's Server Makers

Alphabet, Microsoft, Amazon and Meta Platforms are projected to spend well over $700 billion combined in 2026 on AI data centers, chips and networking, according to Reuters. Asian companies make many of the parts: contract chipmaker Taiwan Semiconductor Manufacturing Co. produces advanced processors, South Korea's SK hynix and Samsung Electronics make memory, and IntelliNews counts Foxconn, through its server business, among the main beneficiaries of AI data center construction.

The link already shows up in the suppliers' numbers. Foxconn's August sales rose 52% from a year earlier to NT$921.77 billion, with its cloud and networking products growing sharply on AI demand, IntelliNews reported. TSMC, which posted a record quarterly profit this month, makes up more than 40% of the Taiex's market value, according to Focus Taiwan.

Reuters said industrywide shortages of advanced silicon and data center power have persisted, and that Alphabet's tensor processing units, used alongside graphics processors from other chipmakers, have helped it expand its cloud services. Alphabet's own Asia-Pacific revenue grew 12% to $19.9 billion in the quarter, its release showed.

The two reports also split on cash. Reuters said Microsoft's free cash flow sets it apart from Alphabet and Meta, whose cash generation has been squeezed by AI spending and which have borrowed more. Investors sold Meta and other AI-linked stocks last week after Meta raised its annual spending forecast and announced plans to sell new shares, Reuters reported.

Amazon reports next. Its earnings call is set for 2 p.m. Pacific time on Thursday, Oct. 29, which is 5 a.m. Friday in Hong Kong, according to the company's investor relations website.