Microsoft Beats, Alphabet Burns Cash, Apple's First Touchscreen Mac

Full transcript

Alex: Good morning, and welcome to Daily Tech News for Thursday, October twenty-ninth. I am Alex.

Jordan: And I am Jordan. Yesterday was one of those days where the market drew a very clear line between two companies spending on the same thing, and decided only one of them is doing it well.

Alex: That is the story of the day. Microsoft and Alphabet both reported earnings after the close on Wednesday, both are pouring staggering sums into artificial intelligence, and investors reacted in completely opposite directions. Microsoft shares rose about four percent in after-hours trading. Alphabet fell about ten percent.

Jordan: Let us start with the numbers, because they explain the split. Microsoft reported revenue of ninety-two point three billion dollars, up nineteen percent from a year earlier, beating analyst expectations. Adjusted earnings per share came in at four dollars and eighty-nine cents, above the four dollars and seventy-three cents Wall Street expected.

Alex: And the engine was Azure. Microsoft disclosed Azure's quarterly revenue in dollars for the first time, and it was thirty-three point two billion dollars, up forty-eight percent. That beat the forty-four to forty-five percent growth Microsoft itself had guided to back in July.

Jordan: Alphabet, meanwhile, actually grew its cloud business faster. Google Cloud revenue rose one hundred and three percent to thirty point seven billion dollars. More than double Azure's growth rate. And yet the stock fell off a cliff. So what went wrong?

Alex: Cash. That is the whole story. Microsoft spent forty-five point two billion dollars on capital expenditures this quarter and still generated eighteen point six billion dollars in free cash flow, more than double what analysts forecast. Alphabet spent fifty-one point four billion dollars, which was more than its operating cash flow, leaving a free cash flow deficit of about nine point one billion dollars.

Jordan: That is Alphabet's second consecutive quarter of negative free cash flow, and only the second time since it went public in two thousand and four. One analyst put it bluntly: investors are no longer giving every hyperscaler a free pass to spend without limit.

Alex: Microsoft also trimmed its capital expenditure guidance to around one hundred and seventy-five billion dollars, from about one hundred and ninety billion, partly by extending data center useful lives. Alphabet, by contrast, raised money through bonds and stock sales to keep funding its buildout.

Jordan: Both companies said the same thing on their calls: demand for AI computing exceeds available capacity. The difference is that Microsoft is paying for that capacity out of its own cash flow, and Alphabet is not. The Federal Reserve also held rates steady on Wednesday in a ten to two vote.

Alex: And the pain spread: Fortinet fell more than twenty-five percent after its own results, ServiceNow nineteen percent. Intel and Amazon report after the close today, so this story is not finished yet.

Jordan: Speaking of big product days, Apple held its Pro and Tell event in Los Angeles on Wednesday, and it delivered the thing we previewed yesterday: the first touchscreen Mac.

Alex: Yesterday we covered Apple's M six MacBook Pro and iMac announcement. What we did not yet have was the star of the show. Apple unveiled new fourteen-inch and sixteen-inch MacBook Pros with what it calls a PROLED XDR display, a tandem OLED panel with up to two thousand nits of peak brightness, a ten million to one contrast ratio, and a refresh rate up to one hundred and twenty hertz.

Jordan: And yes, you can touch it. The touchscreen MacBook Pro brings the iPhone-style Dynamic Island to the Mac, giving quick access to Spotlight, live activities, and Siri AI. It runs Apple's M five Pro or M five Max chips, not the newer M six, so the premium here buys the screen and the touch experience, not faster processing.

Alex: The fourteen-inch touchscreen model starts at two thousand eight hundred and ninety-nine dollars, and the sixteen-inch at three thousand three hundred and ninety-nine, roughly four hundred dollars more than the equivalent non-touch models, which stay on sale.

Jordan: Apple also refreshed the iPad mini with an OLED display and the A twenty Pro chip, from six hundred and ninety-nine dollars. Pre-orders for everything opened Wednesday, with availability starting Friday, November sixth.

Alex: Apple spent years saying touchscreens on laptops were a bad idea, that your arm would get tired reaching for a vertical screen. What changed is partly the display: a tandem OLED panel bright enough that Apple is pitching touch as a new way for professionals to work, not just a checkbox feature.

Jordan: I am skeptical until I try one, but Apple clearly believes creative professionals will use it for scrubbing timelines and pinching canvases. Reviews land with the November sixth launch.

Alex: Over to security now. A hacker collective calling itself the Department of Peace, working with the transparency nonprofit Distributed Denial of Secrets, published an archive codenamed Icepick containing login credentials for more than forty-one thousand Department of Homeland Security employees and contractors.

Jordan: The leak spans seven Homeland Security component agencies, including Immigration and Customs Enforcement and the Cybersecurity and Infrastructure Security Agency itself. The exposed data includes email addresses, phone numbers, and organizational details, and the attackers claim the breach was a response to the agency's immigration enforcement operations.

Alex: The breach reportedly originated from an Okta single sign-on system, with the most recent dataset update dated August nineteenth. Okta says its own systems were not compromised, and Homeland Security has not yet commented publicly.

Jordan: Two things matter here. First, the targeting risk: tens of thousands of federal personnel, including undercover agents, now have their contact details and roles in public. Second, the identity angle: if credentials tied to a single sign-on integration can be harvested at this scale, every organization should be asking whether its own identity integrations could be a similar weak point.

Alex: In other security news, the clock runs out today on two critical PHP flaws collectively called PHP two Shell. The Cybersecurity and Infrastructure Security Agency added them to its known exploited vulnerabilities catalog on October twenty-sixth, giving federal agencies until today to patch. The flaws allow an unauthenticated attacker to run code on PHP servers, and researchers say they have already seen successful exploit attempts on honeypot servers.

Jordan: And Cisco warned on Wednesday that attackers are actively exploiting a flaw in its Secure Firewall software that can force firewalls to reload, knocking out VPN connectivity. That one is tracked as CVE twenty twenty-six dash seven six four one eight, with a severity score of eight point six out of ten.

Alex: Quick hits before we go. NVIDIA says RTX Spark laptops from partners including ASUS, Dell, HP, Lenovo, Microsoft, and MSI are now available, starting at two thousand five hundred and ninety-nine dollars, alongside new Nemotron three point five AI models for local processing.

Jordan: Chipmaker Altera unveiled its Agilex twenty-seven FPGA, claiming one point eight times the performance per watt of its previous generation, aimed at AI data centers. Samples are not expected until the second half of next year.

Alex: And Marvell Technology fell more than nine percent on reports it is in advanced talks to buy data-center optics maker Lumentum, whose shares rose on the news. Neither company has commented.

Jordan: That is the show for Thursday, October twenty-ninth. The headline takeaway: the AI spending era is entering its prove-it phase. Microsoft proved it can fund the buildout and still print cash. Alphabet has not, at least not this quarter.

Alex: Plus, Apple finally touched the Mac, literally, and a massive federal credential leak reminds us that identity systems are now prime targets. We will be back tomorrow with whatever Intel and Amazon bring after the close today. Thanks for listening.