Microsoft, Alphabet, Amazon, and Oracle added a combined $1.857 trillion in market value over three trading sessions after earnings eased fears about AI spending. Microsoft led the group with a $720 billion gain, backed by an 18% revenue increase, a 45% operating margin, and free cash flow that still covered its dividend and buybacks despite rising capex.
Microsoft, Alphabet, Amazon, and Oracle added a combined $1.857 trillion in market capitalization in three trading sessions, from the July 29 close through Aug. 3 — a gain roughly equal to conjuring a company as valuable as Broadcom out of thin air. Microsoft accounted for the largest share, adding $720 billion, more than Amazon's own gain over the same stretch.
That reversal follows a rough month for the group. Alphabet's stock closed down 7.1% the day after its July 22 earnings report, in response to higher capital-expenditure guidance and fears of margin compression and lower free cash flow. By the July 23 close, Microsoft was down 21.1% year to date and Oracle had fallen 38.4%, while Alphabet and Amazon were each up only a little over 1%.
Earnings ease AI-spending fears
Sentiment turned once Amazon and Microsoft reported earnings the following week. Amazon posted $8.82 billion in negative quarterly free cash flow — more cash burn than Alphabet — but detailed how the profitability of its cloud business justifies the upfront cost, given the long life of data centers and savings from its custom AI chips. Amazon Web Services also notched its fastest growth in 18 quarters, evidence that cloud demand isn't slowing.
As a result, by the Aug. 3 close Amazon's stock had climbed to up 23% year to date, Alphabet to up 19.3%, Microsoft had erased its losses to sit up 0.8%, and Oracle had trimmed its decline to 27.2%. Over the three sessions alone, Microsoft's market cap rose 24.8%, from $2.901 trillion to $3.621 trillion.
Amazon's market cap gained 25.3% over the same stretch. Alphabet's added 10.9%.
Microsoft's margins set it apart
Microsoft's own earnings explain why its stock led the rebound. Revenue rose 18% year over year, while Microsoft Cloud revenue grew 27%.
The company still posted a 67% gross margin and a 45% operating margin despite rising expenses. It also generated $19.6 billion in free cash flow, down 23% year over year because of higher capex.
That was enough to cover $6.8 billion in dividends and $3.4 billion in stock buybacks. Microsoft also said roughly two-thirds of its capex is going toward short-lived assets such as CPUs and GPUs to support Azure demand.
Looking ahead, Microsoft guided for fiscal 2027 revenue and operating income growth in the double digits, outpacing mid- to high-single-digit growth in operating expenses. It also expects to stay free-cash-flow positive while operating margins fall by less than one percentage point. Motley Fool analyst Daniel Foelber argues valuation still leaves room to run: Microsoft trades at 24.9 times forward earnings, versus 21.2 times for the S&P 500, a premium he calls reasonable given the business's quality.
Source: Motley Fool
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