ZACKS·2026-02-06 17:15Core Insights - The Q4 earnings season for 2025 is progressing rapidly, with many S&P 500 companies, including Microsoft and Alphabet, reporting results amid the AI trend [1] Microsoft Earnings - Microsoft reported adjusted EPS of $4.14, a 24% year-over-year increase, and sales of $81.3 billion, growing 17% from the previous year [3] - Concerns have arisen regarding high capital expenditures (CapEx) totaling $37.5 billion, with $29.9 billion allocated for property and equipment to support Azure demand [5] - The Intelligent Cloud segment, which includes Azure, saw sales grow 28% year-over-year to $32.9 billion, but gross margins were impacted by ongoing AI investments [5] Alphabet Earnings - Alphabet achieved adjusted EPS of $2.82, a 31% increase year-over-year, with sales rising 18% [12] - Google Cloud revenues surged by 48% to $17.7 billion, driven by increased adoption of enterprise AI solutions [12] - CapEx guidance for 2026 is projected to be between $175 billion and $185 billion, indicating a significant investment in future growth [13] Market Reactions and Valuation - Both Microsoft and Alphabet have faced negative market reactions post-earnings, with Microsoft experiencing more pressure [17] - Microsoft shares have underperformed the S&P 500 over the last five years, with a 62% increase compared to the S&P 500's 82% gain [11] - Despite the negative sentiment, both companies are seeing positive earnings estimate revisions, indicating bullish trends for their current fiscal years [10][16]