Microsoft Got an A. Meta Got a C-. We Graded All Five Big Tech Earnings Reports.

By AltIndex Research · 17 min read · July 30, 7:43 pm

Five megacaps reported in nine days, spent more than $170 billion on capital projects between them, and every single one beat on revenue. The market still moved them 15% up and 8% down. We graded all five on what actually separated them, and on what our alternative data says about the quarter nobody has reported yet.

Alphabet, Microsoft, Meta, Apple, and Amazon all reported in the last nine days, and all five beat on revenue. The reactions ran from a 15.51% single-day gain to an 8% loss, and the fastest-growing company of the five was the one that fell.

We graded each report on the three things that did separate them. First, how much cash was left after the capital expenditure bill. Second, whether the cloud revenue underneath that spending is accelerating or coasting, because acceleration is the only evidence that reliably buys a hyperscaler permission to spend more. Third, what our alternative data shows about hiring, employee sentiment, and demand heading into a quarter that will not be reported until late October.

Alphabet raised its capex guidance and lost ground. Amazon raised its capex guidance nine days later and gained 11%. The spending number in isolation never mattered. What mattered was the cloud line underneath it.

The Report Card

The grades are not a ranking of business quality. All five of these are exceptional businesses and four of them just posted records of some kind. What the grades measure is how well each management team is currently handling the trade between growth and the cash it costs to buy that growth, which is the specific question the market repriced all five of these stocks on this month. An A means the spending is producing visible, accelerating revenue and the company can still fund it from operations. A C- means the bill arrived and the revenue proving it was worth paying has not.

Microsoft: A

Revenue of $90.01 billion beat the $87.62 billion consensus and grew 18%. Adjusted EPS of $4.74 beat $4.24. But the number that moved the stock was Azure, which accelerated to 43% constant-currency growth from 40% the prior quarter, against a Street looking for 40%. Azure crossed $100 billion in annual revenue for the first time. Commercial remaining performance obligations, the contracted work not yet recognized as revenue, jumped 84% to $678 billion, more than twice Microsoft's entire fiscal 2026 revenue.

Capex is what earned the A. Spending including leases landed at $41 billion, below the roughly $42.4 billion the Street feared, while CFO Amy Hood committed to staying free-cash-flow positive through fiscal 2027. Microsoft was the only one of the three cloud reporters whose spending number moved in the direction investors wanted, and the only one that rallied. Copilot passed 30 million paid seats, and Hood noted that nearly 90% of Microsoft Cloud revenue now comes from customers outside the frontier AI labs, which is a direct answer to the backlog concentration risk we flagged across the hyperscalers three days before this print, and a reinforcement of the structural shift we traced in our Microsoft deep dive.

Two asterisks belong on this print. Microsoft extended the useful life of office and data center buildings to 25 years from 15, an accounting change that lowers depreciation and flatters margins. And GAAP EPS of $4.81 included a gain tied to the OpenAI stake. Neither changes Azure's 43% or the $678 billion backlog, which are cash-generating numbers no accounting choice can manufacture.

What our data says: Microsoft carries an AI Score of 40, the lowest of the five and inside the sell range. That looks strange next to the best earnings report of the week, and it comes almost entirely from the labor signals. Job postings averaged about 1,410 a month in July, down 17.3% year over year and less than a quarter of the October 2025 peak above 6,100. Employee business outlook has fallen every few months for a year, from 76% of reviewers positive last July to 70% now. LinkedIn headcount of roughly 233,500 is down 0.6% from a year ago. Microsoft is producing 18% revenue growth and 43% Azure growth on a workforce that is not expanding, which is excellent operating leverage and a signal worth watching in both directions. The metric to track into the October print is whether job postings turn up as the company brings a gigawatt of new capacity online per quarter.

Amazon: A-

Amazon crossed $200 billion of quarterly revenue for the first time, at $200.61 billion against a $196.47 billion consensus. Operating income rose 43% to a record $27.5 billion. AWS grew 36.7% to $42.2 billion when the Street modeled 31%, its fastest rate in 18 quarters, and AWS operating margin expanded 650 basis points to 39.4%. The AWS backlog stands at $496 billion, and Amazon's AI and custom chips businesses each now run above $25 billion annualized.

Then Amazon raised 2026 capex guidance to about $220 billion from $200 billion, blaming inflated memory and component prices, and the stock rose 11% in after-hours trading anyway. Alphabet had done the same thing eight days earlier and fallen. The market forgave the spending because AWS accelerated for the fifth consecutive quarter, which is the only evidence that reliably buys a hyperscaler permission to spend more.

The A- rather than an A comes down to three things. Reported EPS of $5.75 looks like a triple beat against the $1.82 estimate, but $53.4 billion of the $62.6 billion in net income was a non-cash gain from marking up the Anthropic stake. Trailing twelve month free cash flow swung to an outflow of $7.6 billion from an inflow of $18.2 billion a year ago. And Q3 guidance of $197 billion to $202 billion sits below consensus, which management attributes to Prime Day timing shifting into Q2.

What our data says: Amazon's AI Score of 57 sits in hold territory. Job postings tell the most useful story here. They bottomed near 11,200 a month in December 2025 and have climbed to roughly 18,100 in July, a 61% recovery off the low, though still well below the 24,200 of a year ago. That trajectory is what a capacity buildout looks like in the labor data before it shows up in the revenue line. LinkedIn headcount is up 4.6% year over year to about 776,000. The weak spot is employee business outlook at 57%, the lowest of these five and down from 61% a year ago, a reminder that record operating income and internal morale are not the same signal.

Alphabet: B

On the operating numbers Alphabet had the best quarter of the five. Revenue of $119.8 billion grew 24%, the twelfth straight quarter of double-digit growth, and operating income rose 30% to $40.8 billion. Google Cloud grew 82% to $24.8 billion with operating margin at 35.6%, and its contracted backlog jumped more than $50 billion in a single quarter to $514 billion. Search grew 17% to $63.3 billion.

The stock fell anyway. Capital expenditure hit a record $44.9 billion for the quarter, roughly double the year-ago level, and management raised full-year guidance to $195 billion to $205 billion from $180 billion to $190 billion, against a Visible Alpha consensus near $188 billion. That pushed Alphabet to its first negative quarterly free cash flow since the 2004 IPO, an outflow of roughly $5.9 billion. GAAP EPS of $9.11 was inflated by a $98.0 billion unrealized equity gain, and on an adjusted basis Alphabet earned $2.85 against $2.89 expected, the one clean miss in the release.

The grade is a B rather than an A because 82% cloud growth is exactly the evidence that should buy permission to spend, and Alphabet still did not get it. What it lacked was Microsoft's ability to say the spending would stay inside cash generation.

What our data says: Alphabet holds an AI Score of 60, the only one of these five inside the buy range, and its labor signals are the strongest of the group. Employee business outlook sits at 82% and has climbed in a straight line from 76% last July, the highest reading of the five megacaps and the only one improving. Job postings averaged about 4,410 a month in July, up 30.4% year over year. The caution flag is the shape of that curve: postings peaked near 5,920 in March and have declined in each month since, so the hiring surge that began in February is cooling even as capex guidance climbs.

Reported capital expenditure, Q2 2026, company filings

Four companies, one quarter, roughly $170 billion. Apple is the conspicuous absence from that chart, and its absence is the entire reason its report was graded differently.

Apple: B-

Apple posted its strongest June quarter ever. Revenue of $109.42 billion grew 16% and beat the $108.65 billion estimate, EPS of $2.02 rose 29% against $1.89 expected, and gross margin reached 50.1%. iPhone revenue climbed 21.7% to $54.25 billion and Mac revenue jumped 28.7% to $10.35 billion against an $8.74 billion estimate. The installed base passed 2.5 billion active devices and paid subscriptions passed 1.5 billion.

The stock fell 7% in after-hours trading, and the reason was everything downstream of that quarter. September-quarter guidance of 9% to 11% growth implies revenue of $111.69 billion to $113.74 billion, below the $114.84 billion consensus. Greater China came in at $18.8 billion versus $19.6 billion expected. Services grew 12% to $30.74 billion, a June-quarter record but under the $31.22 billion the Street wanted. And the gross margin that looked so good carried about two percentage points of benefit from tariff refunds, with September guided down to 47% to 48%.

Tim Cook called memory pricing a "100-year flood." He also framed the September constraint as self-inflicted: the root cause is not a supply problem but a demand forecast problem, because iPhone and Mac are selling better than Apple planned for. That is the most flattering possible version of a guidance cut, and it is still a guidance cut. This was Cook's final earnings call before John Ternus takes over as CEO on September 1.

What our data says: Apple carries an AI Score of 52, squarely in hold territory, and its alternative data looks nothing like the other four. Apple skipped the capex arms race and is spending on people instead. LinkedIn headcount has grown 18% year over year to roughly 194,600, the fastest headcount expansion of these five, and job postings are up 19.4% year over year at about 3,780 a month. R&D spending rose 32% to $11.7 billion in the quarter. Employee business outlook has been flat at 72% to 73% for the entire year, neither improving nor deteriorating. The signal we are watching into the iPhone 18 cycle is search interest, where Apple's Google Trends score fell to 55 in June from 80 in April.

Meta: C-

Meta grew revenue 28% to $60.80 billion, its fastest growth since late 2021, and beat the $60.17 billion consensus. Advertising revenue rose 27% to $59.36 billion, ad impressions grew 14%, average price per ad grew 12%, and daily active people across the Family of Apps reached 3.60 billion. The demand side of this business is in excellent shape.

Everything below the revenue line went the other way. EPS of $6.18 missed the $7.22 estimate by more than 14%, snapping six straight quarters of beats. Total costs rose 55% to $42.03 billion, including $2.40 billion of legal charges and $1.18 billion of severance from the May headcount reduction of roughly 8,000 people. Operating margin compressed to 31% from 43%. Free cash flow fell 91% to $784 million from $8.55 billion a year earlier, which is the number that defines this report. Meta spent $31.08 billion on capex in the quarter and generated less than a billion dollars of cash after it.

Guidance made it worse. Q3 revenue of $61 billion to $64 billion has a midpoint of $62.5 billion against a $63.15 billion consensus. Full-year expenses moved up to $165 billion to $169 billion. Capex guidance was narrowed to $130 billion to $145 billion by raising the floor from $125 billion, a deliberate commitment that spending will not come in light. The tax rate outlook for the remaining quarters rose to 15% to 17% from 13% to 16%.

The C- reflects a specific structural problem. Microsoft, Amazon, and Alphabet are funding infrastructure with cloud revenue that grows as the infrastructure grows. Meta is funding a comparable buildout out of an advertising engine, with no cloud line to show that the compute is being sold to anyone. Alphabet's negative free cash flow came with an 82% cloud growth rate attached. Meta's near-zero free cash flow came with a 3% increase in daily users.

What our data says: Meta's AI Score of 47 sits in hold territory, and the single most alarming signal in this entire earnings week belongs to Meta's workforce. Employee business outlook has collapsed from 63% of reviewers positive last July to 46% now, a 27% decline and by far the steepest deterioration of the five. The slide began in January, four months before the May headcount reduction was announced, which means employees were pricing in trouble well ahead of the severance charge that hit this quarter's EPS. Job postings are down 36.7% year over year at roughly 1,440 a month, though they have risen in each of the last three months off an April low.

What Employees Saw Before the Market Did

Stack all five outlook curves on one chart and the earnings week stops looking like five separate events.

AltIndex employee business outlook data, July 2025 to July 2026

Alphabet, the only company here whose employee outlook has improved for twelve consecutive months, delivered the strongest operating quarter of the group. Meta, whose outlook fell off a cliff starting in January, delivered the worst. Apple's flat line matched a quarter that beat on execution and stumbled on forecasting. This is a slow signal, not a trading signal, and it has been directionally right on all five for a year.

The counterargument deserves stating plainly. Employee sentiment is not a leading indicator of a single quarter's EPS, and it did not predict Microsoft's 15% day. Microsoft carries the lowest AI Score of these five precisely because our model weights labor signals heavily, and it just posted the best report of the week. If the story of the next four quarters is megacaps producing more revenue on flatter headcount, then declining postings and softening outlook read as operating leverage rather than deterioration, and scores like Microsoft's 40 will look too pessimistic.

The Bottom Line

Alphabet is the cleanest setup of the group. It posted the strongest operating quarter of the five, its employee outlook sits at 82% after rising every month for a year, and job postings are up 30% year over year. The B grade came from the first negative free cash flow since the IPO, and that outflow bought 82% cloud growth and a $514 billion backlog. Amazon is the second cleanest: AWS accelerating for a fifth straight quarter at a 39.4% margin, and job postings up 61% off their December low as the buildout staffs up.

Microsoft is the hardest call, and not in the direction the tape suggests. It delivered the best report of the week on a workforce that is not growing: hiring down 17% year over year, headcount flat, and employee outlook falling for twelve straight months. That is either exceptional operating leverage or the first edge of a ceiling, and anyone acting on the A is paying 15.51% more than they would have on Wednesday. Apple sits outside the capex race entirely, so its next four quarters turn on memory costs and the iPhone 18 cycle rather than AI returns. Meta is the only name where the quarter and the internal data agree, with outlook down from 63% to 46% and postings down 37% year over year.

Disclosure: This article is for informational purposes only and does not constitute investment advice. AltIndex aggregates publicly available alternative data signals. Past signal performance does not guarantee future results. Always do your own due diligence before making investment decisions.