Oct 28, 2026 · 49 min
Microsoft strength meets Alphabet’s search slowdown
Big Tech Earnings Put the Rally to the Test; Warsh’s Latest Fed Decision 10/28/26
The episode tests whether uneven technology earnings can sustain the rally as investors reassess AI spending, software valuations, and economic risks.
- 1Microsoft’s Azure acceleration and restrained capital spending strengthen the case for continued AI investment.
- 2Alphabet’s weaker search growth exposes a fault line in the market’s AI-driven technology trade.
- 3Fed policy, Treasury yields, credit risks, tariffs, and sanctions broaden the earnings story into a macroeconomic test.
Don't miss
Brent Thill contrasts Microsoft’s exceptional quarter with Alphabet’s broad weakness, especially the deceleration in search revenue.
The brief
A mostly flat session after the Federal Reserve held rates unchanged sets up a market test: can strong but uneven technology earnings keep the rally moving?
Microsoft delivers robust Azure and Microsoft 365 growth, lower-than-expected capital spending, and a surge in remaining performance obligations, easing some concerns about the AI buildout.
Alphabet provides the counterpoint, with weaker search revenue, an investment loss, and heavy spending intensifying questions about advertising, AI competition, and changing search behavior.
Treasury Secretary Scott Bessent discusses rates, Treasury yields, Iran sanctions, credit risks, tariffs, and the administration’s economic agenda, widening the episode’s focus beyond earnings.
Analysts Paul Hickey and Brent Thill weigh whether Microsoft and Oracle signal moderation in infrastructure spending, while software volatility and declining confidence pressure the broader trade.
What was said on this episode
18 statements · 11 positive · 5 negative · 1 mixed · 1 neutral
The Federal Reserve is likely to hike rates in December.
“there's likely to be a Fed rate hike in December”
Listen at 1:29
Investors want companies to provide a roadmap for reducing capital expenditures.
“investors don't necessarily want to see that CapEx keep going higher. They want to see a roadmap to an off-ramp.”
Listen at 2:07
- Paul Hickeyon Semiconductor and memory stocksPositive4:06
Semiconductor and memory stocks staying in range would support the broader trade.
“as long as they can stay in that range, I think it's very positive for the overall. trade.”
Listen at 4:06
- Paul Hickeyon CompaniesPositive7:33
Markets favor companies that generate cash flow and returns on investment.
“the market wants companies to produce cash flow and see a return on their investments.”
Listen at 7:33
Scott Bessent evaluates Chair Warsh's start positively.
“I think Chair Walsh is off to a great start.”
Listen at 8:35
The Federal Reserve should consider the energy supply shock transitory.
“I think they should have an open mind in terms of the transitory nature of the supply shock.”
Listen at 9:57
Third-quarter GDP will be strong.
“I think we're going to get a strong GDP number for the third quarter.”
Listen at 10:30
The oil market will be better supplied after the Iran conflict.
“We will get to the other side of this Iran conflict and the oil market is going to be better supplied on the other side.”
Listen at 12:10
Oil prices are highly correlated with long-term Treasury yields and crack spreads.
“we've seen a very high correlation between oil prices and the 10-year, the 30-year, the longer end of the market and between crack spreads.”
Listen at 12:57
Excessive monetary tightening could slow growth enough to reduce energy consumption.
“What you don't want to do is cause enough of a gross slowdown that energy consumption would drop.”
Listen at 13:34
Google likely does not need to raise additional capital.
“I don't think Google needs to raise capital from here.”
Listen at 23:57
Agentic commerce and search will challenge Google.
“agentic. commerce, agentic search is going to now be the challenge that Google needs to overcome.”
Listen at 24:36
Google should enter consumer AI with a Muse-like freemium model.
“I think this is a rich opportunity for Google to jump into this consumer AI market with a freemium model like Muse has. They should do it.”
Listen at 24:47
Alphabet has enough capital to complete its largest investment cycle.
“I think they've got enough capital to get through this investment cycle, the biggest one they've ever faced.”
Listen at 26:04
Mark Mahaney is not certain Alphabet will avoid further capital raising.
“I can't be 100 percent sure.”
Listen at 27:25
- Paul Hickeyon AI infrastructure buildoutPositive44:02
The AI infrastructure buildout has not yet peaked.
“as far as the build out, I think we're not. at the peak yet of that.”
Listen at 44:02
- Paul Hickeyon Alphabet sharesNegative44:18
Alphabet shares will weaken further without answers on search concerns.
“if they don't address them on this call, it's just going to be more weakness.”
Listen at 44:18
- Paul Hickeyon Market forward returns after gradual Fed policyPositive45:01
Markets historically deliver above-average three-month returns after gradual policy shifts.
“When you look at forward returns following those, you know, start, stop, start, stops, returns have been, you know, much better than average over even the next three months.”
Listen at 45:01
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
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