Mad Money host Jim Cramer called Microsoft (MSFT) a buy after Big Tech earnings. He said Alphabet (GOOGL) carries too much baggage after a second straight quarter of negative free cash flow.
Alphabet has $27.6 billion of new shares left to sell under its at-the-market program, which can dilute existing holders. Microsoft, meanwhile, kept free cash flow, the cash left after capital spending, positive at $18.6 billion.
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Why Does Cramer Favor Microsoft Over Its Rivals？
Microsofts first-quarter free cash flow fell 27% year over year, yet Azure cloud revenue grew 48%. Chief Financial Officer Amy Hood said Microsoft expects to remain free cash flow positive through fiscal 2027.
Cramer credited that restraint for the gap with its rivals.
“They run it like a business, not a science project.”
Jim Cramer, CNBC
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However, Cramer said he would wait for analysts to cut estimates before buying more Alphabet.
Can Alphabet and Amazon Justify Their Spending？
Alphabets free cash flow was negative $9.1 billion in the third quarter, per its results. The second quarter was negative $5.9 billion.
It raised $12.4 billion through stock sales and $28.7 billion through notes while AI capex and debt fears linger.
Alphabet also agreed to pay SpaceX $920 million a month for compute through June 2029, per TechCrunch. The deal covers about 110,000 Nvidia graphics processing units (GPUs).
Amazon (AMZN) missed Wall Streets earnings estimate. Still, its operating margin hit a company-record 13.9%, according to its release.
Amazon Web Services (AWS), its cloud unit, grew 39.3% to a $184 billion annualized run rate. Cramer called Amazon a buy but wants to hear the earnings call first. His Charitable Trust owns all three stocks.
Together, the three Big Tech earnings reports suggest AI spending is splitting cloud giants by who can fund it internally. Microsoft appears to be the only one of the four largest spenders still generating positive free cash flow. Higher spending than guided could change that read.