Alphabet shares dropped 10% in premarket trading on Thursday, putting the company on course for its worst post-earnings reaction since going public in 2004, while Microsoft rose nearly 4% as investors reacted to both companies' third-quarter spending and free cash flow figures.
If Alphabet closes more than 9.77% lower on Thursday, it would mark its biggest-ever single-day drop following an earnings report.
Diverging capex and cash flow trends
- Microsoft reported $45.2 billion in capital expenditures and finance leases for the third quarter, up 30% from a year ago but below analyst projections of $50.67 billion. Its free cash flow fell 27% to $18.63 billion, remaining positive.
- Alphabet posted negative free cash flow of $9.07 billion for the third quarter, far below the $2.70 billion analysts had expected. The company maintained its full-year capital expenditure guidance of $195 billion to $205 billion.
Ben Barringer, global head of technology research at Quilter Cheviot, said "Microsoft is building out its architecture in a measured way and as such contains fewer surprises," while "Alphabet, by contrast, saw its share price hit after hours as a result of a fairly messy set of results and a poorly handled earnings call."
