Microsoft closed fiscal 2026 with Azure crossing $100 billion in annual revenue, while Alphabet's Google Cloud growth accelerated to 82%. Alphabet's free cash flow turned negative, while Microsoft still generated billions in free cash flow. The two companies' latest earnings show Alphabet gaining ground in enterprise AI even as Microsoft's cloud business keeps printing cash.
Azure Crosses $100 Billion as Google Cloud Accelerates
Microsoft closed fiscal 2026 with Azure crossing $100 billion in annual revenue, and Alphabet answered days earlier with Google Cloud growth accelerating to 82%. Both companies are pouring cash into data centers, but only one is taking enterprise customers the other assumed were locked in.
Microsoft posted Q4 revenue of $90.01 billion, up 17.8%, with Intelligent Cloud reaching $39.31 billion, up 32%, as Azure grew 43%. According to 24/7 Wall St.: Satya Nadella told investors "demand continues to exceed available supply", a constraint visible in the commercial RPO backlog, which surged 84% to $678 billion.
Alphabet flexed different muscles. Q2 revenue hit $119.80 billion, up 24.2%, with Google Cloud reaching $24.77 billion. Sundar Pichai said nearly 90% of the Fortune 100 are using Gemini Enterprise, and Gemini now processes 22 billion API tokens per minute.
Alphabet Pushes Into Microsoft's Enterprise Turf
Microsoft's moat was supposed to be the Office tenant, but that moat is leaking. Alphabet is winning Fortune 100 mindshare with Gemini Enterprise while Google Cloud's backlog sits north of $460 billion. Microsoft's counterpunch is optionality: a catalog of more than 11,000 models spanning OpenAI, Anthropic, Mistral, xAI, and its own MAI family. Nadella framed the models as an input to the enterprise, not an extraction of its knowledge.
Copilot adoption is still growing. Microsoft cited NHS England rolling out to 505,000 clinicians and EY deploying E7 to 400,000 employees, but its pricing model is shifting to per-seat plus consumption billing, which admits that seat saturation alone will not carry growth forever.
Capex Splits the Two Companies' Cash Flow
Alphabet's aggression carries a bill. Its free cash flow flipped to negative $5.86 billion, the buyback was suspended, and long-term debt jumped to $98.2 billion. Microsoft, meanwhile, still generated $19.64 billion in Q4 free cash flow even after doubling capex. Quarterly capex ran to $35.80 billion at Microsoft against $44.92 billion at Alphabet.
On valuation, Alphabet's P/E sits near 17 against 82% cloud growth, and its shares are up 39.43% over the past year, versus Microsoft's roughly flat performance. Microsoft trades at a 27 P/E.
Source: 24/7 Wall St. (via Yahoo Finance)
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