Google says the Gemini app hit 1 billion users and its cloud more than doubled, but its stock still fell. Microsoft's Azure grew 48%.

Alphabet and Microsoft both reported results Wednesday afternoon, and AI was the story at both. At Alphabet, Google Cloud revenue rose 103% to $30.7 billion, and the company said sales of its TPU AI chip systems "were also a meaningful contributor" (Alphabet release). Sundar Pichai said the Gemini app now has 1 billion users, Google's own model APIs handle nearly 32 billion tokens a minute, and search query growth is the highest in five years (Google, Sundar Pichai on X).

Investors focused on the cost. Alphabet missed analyst estimates on revenue and earnings, its free cash flow was negative $9.07 billion, and shares fell more than 10% after hours, according to CNBC. Alphabet kept its 2026 capex guidance at $195 to $205 billion and says spending will "increase significantly in 2027" (CNBC).

On the call, Google said nearly 100 customers use TPUs. It named Anthropic, Apple, Physical Intelligence and Citadel Securities, plus new partnerships with Oracle and Crux AI to deliver TPU systems. It did not mention OpenAI, which The Information reported this week plans to buy Google TPUs (call transcript). Microsoft's revenue rose 19% to $92.3 billion. Azure grew 48%, and for the first time Microsoft put a dollar figure on it: $33.17 billion for the quarter. Shares rose about 4% after hours (Microsoft, CNBC).

Microsoft's filing shows $10 billion of that revenue came from its deals with OpenAI, nearly 11% of the total (TechCrunch). CFO Amy Hood said demand still exceeds supply and pointed to about $170 billion in capex for calendar 2027. Satya Nadella said Copilot daily users grew nearly 50% from last quarter (Satya Nadella on X).

What to watch: both companies say they can't build data centers fast enough, and both are paying for outside capacity in the meantime. That's the same squeeze behind the usage limits people keep hitting on AI plans. Google says TPU sales will "continue to scale in Q4" before a bigger ramp in 2027, so watch whether OpenAI shows up on that customer list next quarter.