Two of the market's most closely watched AI spenders report after the closing bell on Wednesday. Alphabet and Microsoft will update investors on cloud growth and capital spending just hours after the Federal Reserve's rate decision, setting up a high-volatility session for large-cap technology stocks that have been rebounding for two days.
Alphabet is the more closely scrutinized name. Analysts expect third-quarter revenue of about $127.8 billion, up roughly 25% from a year earlier, and earnings of about $3.00 per share. Google Cloud is the central focus after revenue grew 82% to $24.8 billion in the second quarter, with operating profit of $8.8 billion and a margin of 35.6%. Expectations for the third quarter call for Cloud revenue above $29 billion, and one major bank sees about $30.3 billion, which would imply growth near 90%.
The bear case centers on cash. Alphabet's 2026 capital expenditure guidance stands at $195 billion to $205 billion, and free cash flow turned negative in the second quarter, which helped push the shares lower after that report despite the Cloud surge. Cloud backlog of about $514 billion provides visibility, but investors want proof that spending is converting into revenue and margin. Search is another watch item, with growth having slowed to 17% in the second quarter against tougher comparisons.
Competitive pressure is also on the agenda. Meta's new Muse assistant has climbed to the top of the U.S. App Store, and Wall Street has begun asking how personal AI agents might change the way consumers reach information without a traditional search results page. Meta reported capital expenditure of $34.91 billion in its recent quarter and also posted negative free cash flow, so the group-wide question is whether AI returns are arriving fast enough to justify the build-out.
Microsoft enters its fiscal first-quarter report with its own set of questions. The company plans to spend about $190 billion on capital expenditures in 2026, largely tied to AI, and on Monday it offered voluntary buyouts to roughly 60,000 employees in the United States, Canada, India and the United Kingdom at level 70 and below. Investors will focus on Azure growth and capex commentary. The stock closed at $532.60 on Monday and was slightly lower in early premarket trading, remaining close to a record high.
The market backdrop shapes how these results are received. AI-linked shares had been weak since the start of October before this week's rebound, with the S&P 500 and Nasdaq posting back-to-back gains and semiconductor stocks leading Tuesday's rally. The 10-year Treasury yield is near 5%, which raises the bar for long-duration growth names, and a hawkish tone from the Fed could amplify any disappointment in capex or free cash flow guidance.
The scenarios are clear. Strong Cloud growth, capex held within guidance and reassuring commentary on free cash flow could extend the rebound and support the broader AI infrastructure complex. A capex raise paired with weak free cash flow could renew the debate that has weighed on technology shares this month. Because both reports land after the bell, the reaction will play out in after-hours trading and set the tone for Thursday's open, which makes position sizing more important than directional conviction.