Alphabet posted a cash outflow, and Nasdaq futures are down 1%

Alphabet’s free cash flow was an outflow last quarter. Microsoft spent heavily too, but its cash flow stayed positive. CNBC reported Thursday at 7:04 a.m. ET that Alphabet shares were down 10% and Microsoft shares were up 2.6%, with Nasdaq-100 futures down 1%, S&P 500 futures down 0.2%, and Dow futures little changed.

That Nasdaq decline is the one that shows up in the Invesco QQQ Trust QQQ, which tracks the Nasdaq-100. The State Street SPDR S&P 500 ETF Trust SPY tracks the smaller move.

Alphabet spent, and the cash went out

Alphabet said in its Wednesday filing that revenue rose to $127.6 billion in the quarter ended Sept. 30, from $102.3 billion a year earlier. Diluted earnings were $2.12 a share, down from $2.87. An $8.7 billion loss on equity securities cut that earnings figure by $0.55.

The adjusted figure excludes that loss. CNBC, using estimates from LSEG, a market-data firm, reported adjusted earnings of $2.67 a share against a $3.02 forecast, and said revenue missed a $128.22 billion forecast.

Search revenue rose 12% to $63.35 billion and missed a $64.96 billion estimate, CNBC reported.

Free cash flow was an outflow of $9.07 billion. CNBC said that fell much further than the $2.70 billion analysts expected. That $2.70 billion was an expected outflow.

Purchases of property and equipment more than doubled, to $51.4 billion from $24 billion. CNBC said analysts had expected $55.09 billion of capital spending. The cash miss came from operations, not from spending more than that forecast. Operating cash flow fell to $42.3 billion from $48.4 billion.

“We continue to expect our capex to increase significantly in 2027, and will provide further details on our Q4 call,” Chief Financial Officer Anat Ashkenazi told analysts.

Microsoft’s cash flow stayed positive

Microsoft said revenue rose 19% to $92.3 billion in the quarter ended Sept. 30. Earnings were $4.89 a share excluding gains on its OpenAI investment, and CNBC said that beat an LSEG estimate of $4.73. Revenue beat an LSEG estimate of $90.69 billion.

Azure revenue rose 48% to $33.2 billion. Chief Financial Officer Amy Hood told analysts she expects 49% to 50% growth this quarter once currency moves are stripped out, above a 45.1% forecast, CNBC reported.

The company spent $39.4 billion on property and equipment. Free cash flow fell 27% to $18.63 billion, CNBC reported. It was still positive.

The drop was not one stock

Reuters said Fortinet was down 25% before the open and ServiceNow was down 18.2%, after results that disappointed investors. It said the declines deepened worries that artificial intelligence is disrupting software.

Inflation data is the next test

The Federal Reserve on Wednesday held its benchmark rate at 3.75% to 4% and said inflation remains elevated. More information, it said, will help it decide how to get inflation back to 2%. Two officials dissented in favor of a quarter-point increase. At 8:30 a.m. ET the Bureau of Economic Analysis releases its first estimate of third-quarter gross domestic product and the September personal income and outlays report.

The European Central Bank announces at 9:15 a.m. ET. A Bloomberg survey published this morning found economists expecting the deposit rate to stay at 2.5%.

Econoday, which compiles economist forecasts, expects growth of 3.1% at an annual rate, up from 2.2% in the second quarter. It looks for personal consumption expenditures inflation of 3.6% from a year earlier, up from 3.4%, and core PCE inflation of 3.1%, up from 3.0%. As we see it, a hotter core reading would argue for leaving rates where they are. That is the risk for Alphabet and the software stocks already down.