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Two tech behemoths -- Alphabet (GOOG +1.60%) (GOOGL +1.34%) and Microsoft (MSFT -0.06%) -- reported earnings today. Both showed strong cloud growth, but the market is treating them very differently. Microsoft shares popped after hours while Alphabet stock sank. Why?

I think a big part of the answer is how each plans to pay for the massive outlays both have planned.

Cloud growth accelerated at both companies

Microsoft beat Wall Street's targets with sales up 19%, reaching $92.3 billion. GAAP -- generally accepted accounting principles -- earnings per share (EPS) came in at $4.92. Adjusted EPS was $4.89, above the roughly $4.72 the Street expected. Azure, its cloud platform, grew 48%, reaching $33.17 billion in revenue.

Alphabet's cloud growth was even stronger than Microsoft's: 103% growth for the unit, earning $11.1 billion in operating income on $30.7 billion in sales. Overall, sales jumped 25%, reaching $127.6 billion, slightly missing estimates, while GAAP EPS actually fell from $2.87 to $2.12. Search and YouTube ads also underperformed.

Alphabet's cash flow is the real problem

Some of Alphabet's EPS drop can be explained by an $8.7 billion net loss on equity securities, but even if you remove this -- worth $0.55 per share -- the earnings still came in well below what Wall Street was looking for.

While it's not a great look, I think the real issue the market is reacting to is the company's cash picture. Alphabet spent $51.4 billion on capital expenditures (capex), up from $24.0 billion a year ago. Operating cash flow -- the cash the actual business generated -- was $42.3 billion. That left free cash flow (FCF) -- the money left after paying for its capex investments -- at negative $9.1 billion. That's worse than the negative $5.9 billion the company reported last quarter.

During the quarter, Alphabet raised $28.7 billion through senior unsecured notes and $12.4 billion from selling stock. Long-term debt has grown from $46.5 billion at the end of 2025 to $125.1 billion.

Alphabet said its capex guidance for 2026 holds -- $195 billion to $205 billion -- but said it expects capex in 2027 to "increase significantly."

Microsoft is still paying its own way

Microsoft, on the other hand, is still FCF positive, though like Alphabet, that figure is moving in the wrong direction. The company reported FCF of $18.63 billion, down 27% year over year, after $39.37 billion in cash capital spending. Its broader capex figure, which includes finance leases, was $45.2 billion.

CFO Amy Hood said on July's earnings call that the company expects to stay free-cash-flow positive for its current fiscal year, though capex is expected to expand. On that call, she also said demand for its cloud services was running ahead of supply.

The bottom line

Microsoft at this point has a much healthier cushion in its quarterly cash flow -- more room to keep spending while it waits for those investments to pay off. Alphabet is increasingly asking lenders and shareholders to help cover the bill.

Obviously, the growth is hard to argue with, but I still think the jury is out on whether this bet will pay off for both companies. Costs are climbing, and I'm concerned the math won't pencil out long term.