Level 1 - Absolute Beginner
Microsoft and Google told investors how they spend money on AI. They shared the news on Wednesday.
Microsoft's cloud business is called Azure. It grew 48 percent. Experts thought it would grow about 44 percent. Microsoft's stock went up about 3 percent on Thursday morning.
Microsoft spent 45.2 billion dollars on computers and buildings in three months. That is less than experts expected. Google kept its plan for this year the same.
Many people worry that AI costs too much. Investors want companies to earn money from AI, not only spend it.
- cloud
- Computer services you use over the internet.
- grew
- Became bigger.
- percent
- A number out of one hundred.
- stock
- A small part of a company that people can buy.
- investor
- A person who puts money into a company.
- expert
- A person who knows a lot about a subject.
- billion
- One thousand million.
- plan
- An idea of what you will do.
Level 2 - Elementary
Microsoft and Alphabet, the owner of Google, reported their latest results on Wednesday. Both companies avoided raising their plans for spending on artificial intelligence, and that calmed some worries on Wall Street.
Microsoft said revenue from its Azure cloud business grew 48 percent. Analysts had expected about 44 percent. The company also predicted 49 percent growth for the next quarter. Its shares rose about 3 percent before the market opened on Thursday.
Microsoft spent 45.2 billion dollars on equipment such as data centers in the quarter, below the 51 billion dollars analysts expected. CNBC reported that the company lowered its full-year spending forecast to 170 billion dollars from 175 billion.
Alphabet kept its 2026 plan at 195 to 205 billion dollars. Reports say its free cash flow, the money left after spending, turned negative at about 9 billion dollars. Meta, which reported a week earlier, raised the bottom of its spending range.
- revenue
- The money a company earns from sales.
- analyst
- A person who studies companies and predicts results.
- quarter
- A period of three months.
- data center
- A building full of computers that store and process information.
- forecast
- A prediction about the future.
- free cash flow
- Cash left after a company pays its costs and investments.
- range
- The space between a lowest and highest number.
- shares
- Small parts of a company that people can own.
Level 3 - Intermediate
Microsoft and Alphabet reported results on Wednesday, and investors found something unusual in both: a decision not to raise the price tag on the artificial intelligence build-out. Microsoft shares rose about 3 percent in premarket trading on Thursday.
Microsoft said Azure revenue grew 48 percent, ahead of the 44.3 percent analysts had expected, and guided to 49 percent growth next quarter. Revenue was 92.3 billion dollars. Capital spending was 45.2 billion dollars, well below the roughly 51 billion forecast, and CNBC reported the full-year plan was trimmed to 170 billion dollars from 175 billion.
Alphabet left its 2026 capital spending guidance at 195 to 205 billion dollars. Several reports say its free cash flow turned negative at around 9 billion dollars, a sign that spending is outrunning the cash the business generates. Meta had earlier guided to 135 to 145 billion dollars, lifting the bottom of its range.
The pattern matters because markets have been sorting AI spenders into two groups: those whose operating cash pays for the build-out, and those who may need to borrow. Analysts expect the largest cloud companies to spend more than a trillion dollars next year, so even a pause in raising forecasts becomes news.
- build-out
- The construction of large new infrastructure.
- premarket
- Trading before the official opening of the stock market.
- guided
- Told investors what results to expect.
- capital spending
- Money spent on long-lasting assets such as buildings and equipment.
- trimmed
- Slightly reduced.
- guidance
- A company's own forecast of future results.
- outrunning
- Growing faster than something else.
- generates
- Produces.
Level 4 - Advanced
The Thursday reaction to Microsoft's and Alphabet's earnings suggests that, for the moment, investors prefer restraint to ambition. After weeks of anxiety that artificial intelligence spending was racing ahead of its returns, neither company raised its capital expenditure forecast, and Microsoft's shares climbed roughly 3 percent before the opening bell.
The headline figures favoured Microsoft. Azure expanded 48 percent against consensus of 44.3 percent, with guidance of 49 percent for the coming quarter, on revenue of 92.3 billion dollars. Capital outlays of 45.2 billion dollars undershot the roughly 51 billion dollars analysts had pencilled in, and CNBC reported that the full-year budget was shaved to 170 billion dollars from 175 billion.
Alphabet's picture was more ambiguous. It held its 2026 guidance at 195 to 205 billion dollars, yet several accounts put its free cash flow at roughly negative 9 billion dollars, which implies the group is financing part of its expansion from sources other than operations. Meta, meanwhile, nudged the floor of its own range up to 135 billion dollars.
The divergence illustrates the market's new sorting logic: firms that can show spending converting into cloud revenue are rewarded, while those whose outlays exceed operating cash are scrutinised. With hyperscaler spending projected to top a trillion dollars next year, the debate has moved from whether to build to who can afford to.
- restraint
- Self-control; avoiding excess.
- capital expenditure
- Money spent on acquiring or upgrading physical assets.
- consensus
- The general agreement of analysts' forecasts.
- outlays
- Amounts of money spent.
- undershot
- Fell short of a target or forecast.
- shaved
- Reduced by a small amount.
- ambiguous
- Open to more than one interpretation.
- hyperscaler
- A very large cloud-computing company.