Fed holds rates as Google slides and Microsoft surges. Federal Reserve Chairman Kevin Warsh came in with markets' expectations and held on interest rates with the dollar. Not just that, that gave little away, and they are leaving macroeconomic data and company earnings reports to do the talking—the hard data.
Mixed one in big tech earnings, with the markets not liking Google's earnings report but favoring Microsoft's report, with MSFT shares up in the after-hours trading. I don't think it's all doom and gloom for Google, but just the business landscape through technology is changing. Such as search is changing from chatbot LLMs being used to search, which is taking some market share away from search as AEO (answer engine optimization) rises alongside SEO (search engine optimization). But Google is at the forefront of tech with its Google DeepMind Gemini and all its AI models.
With that, don't be surprised if the NASDAQ shrugs off the Google earnings report if PCE comes in line and no hotter than expected. In markets, we just speak in scenarios as anything can happen, and it's all speculation till PCE personal consumption expenditure data—the Fed's preferred inflation gauge—tomorrow, then the US cash open after it, Google down around 11% at the time of writing.
Alphabet Misses EPS on Heavy AI Outlay
ALPHABET (GOOGL) — Q3 2026. The Headlines & Numbers: Revenue: $127.6B (+25% YoY) vs. ~$127.9B expected. Net Income / EPS: Net income fell to $26.2B ($2.12 EPS) vs. $35.0B ($2.87 EPS) YoY, missing expectations ($3.00–$3.02 consensus).
Google Cloud: Surged 102.6% YoY to $30.71B (operating income reached $11.12B), massively driving top-line revenue. YouTube Ads: $11.21B (+9.2% YoY), slightly missing Wall Street projections.
Forward Guidance & Key Risks (Negatives): Shares dropped ~7% post-market following the bottom-line earnings miss. Surging CapEx & Free Cash Flow Compression: Full-year 2026 CapEx remains elevated at $195B–$205B. Accelerated AI infrastructure spend continues to drag heavily on free cash flow and compress net margins.
Microsoft Surges Following Azure Revenue Beat
MICROSOFT (MSFT) — FY26 Q1. The Headlines & Numbers: Total Revenue: ~$90.6B+ (+18% YoY) driven by core cloud expansion. Azure & Cloud Revenue: Azure rose 48% YoY to $33.17B, beating estimates ($32.84B) and accelerating on enterprise AI workloads. Action: Stock traded up ~6% post-market as cloud delivery reassured investors.
Forward Guidance & Key Risks (Negatives): Massive Debt-Fueled CapEx: Microsoft reconfirmed planned 2026 CapEx of $190B to clear AI capacity bottlenecks. Gross Margin Drag: Gross margin percentage contracted year-over-year due directly to heavy upfront AI infrastructure investments and surging compute usage costs. Hardware & SaaS Headwinds: Declines in hardware/devices sales and rising competitive threats from agentic AI tools impacting traditional seat-based productivity software.
U.S. equities saw choppy trading as the Federal Reserve kept interest rates unchanged, choosing to await an accumulation of further economic data before adjusting monetary policy. Fed Chair Warsh signaled that the central bank will weigh balance sheet issues early next year while moving to fewer rate-setting meetings in 2027.
In mega-cap tech, Google shares tumbled 9% after a $51 billion AI capital outlay deepened cash burn, despite launching a new cybersecurity-focused model. Conversely, Microsoft stock climbed 5% as quarterly cloud revenue topped expectations, buoyed by Azure growth even as total bookings stalled.
Oracle shares surged after management outlined a fiscal 2030 revenue target exceeding $225 billion, while Nvidia drew DOJ antitrust scrutiny regarding its $12.9 billion Hugging Face acquisition. In commodities, record LNG buying by India ran into record-high prices while European diesel margins held steady.
Traders Eye Incoming Core PCE Inflation Data
Meanwhile, solar supplier Enphase sank to a six-year low on a missed third quarter, and Nelson Peltz's Trian made a $3.8 billion take-private bid for Wendy's. Traders now eye incoming GDP, core PCE, and weekly jobless claims figures.
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