Hyperscaler Earnings Previews: Alphabet, Microsoft And Amazon - Maybe The Bearish Sentiment Will Help

The name of the game for investors around mega-cap tech seems to be evolving to be less about the typical revenue, EPS and operating income growth, and earnings and revenue guidance, and more about sector capital, free cash flow and capex growth, debt issuance and the ability to raise capital, as well as the longer-term prospects for a firm's credit standing. With capex determining free cash flow around the AI-related stocks, and free cash flow being the primary valuation component (at least in terms of the discounted cash flow model), the science of valuation has become the art of valuation. Microsoft seems to be the safer bet coming into these September quarter earnings, but outsized capex guidance, particularly for calendar 2027 if companies should choose to give it, will be the defining metric. The greater the upside to capex, the lower the forward estimates to free cash flow.