After the financial reports of Alphabet ( Alphabet , GOOGL ) were released, the stock price plummeted on Thursday, while Microsoft ( MSFT ) remained unscathed. In other words, Microsoft's stock price did not decline in tandem with Google's. The reason behind this is actually quite simple.

The market believes that Microsoft's performance this quarter exceeded expectations and represents sustainable high growth; in contrast, Alphabet's performance this quarter was weak, and it also signaled that growth rates may further slow down in the coming quarters.

Microsoft's sales growth in its cloud business Azure exceeded analysts' expectations by about 300 basis points. Excluding the impact of exchange rate fluctuations, the overall revenue from this core cloud business increased by 48% year-on-year. Management has set a revenue growth target for this quarter of Azure at 49%-50%, which is 4 percentage points higher than the market's consensus expectation.

The company's capital expenditures were about $5 billion less than expected, while revenue from other business segments also exceeded expectations. Both overall revenue and profits for this quarter surpassed analysts' forecasts.

Steyer ( Stifel ) analyst Brad Reback stated: "Overall, this financial report has strengthened our confidence. We believe that Microsoft has the capability to maintain double-digit revenue growth, and at the same time, good cost of sales and operational efficiency in expenses will drive further expansion of the operating margin."

Microsoft Real-Time Market Data: $524.19, down $6.82 (-1.28%), at 12:15:39 PM Eastern Time, during the trading session.

The third-quarter financial report was disappointing, with performance falling short of expectations, and when compared to Microsoft, it looked even more inadequate, resulting in a 12% drop in the stock price. There are mainly two issues: First, Google's search business revenue of $63.4 billion was lower than the expected $64.9 billion. The underperformance has exacerbated market concerns: even with substantial investments, the foundation of Google's search business is gradually being eroded by products such as Claude, ChatGPT, and other similar AI products.

Secondly, Google's free cash flow is -$9.1 billion, while Wall Street's expectation was only -$3.5 billion. The current market is highly sensitive to negative free cash flows from large tech companies (refer to last week's market reaction to Meta's financial report; Meta experienced negative free cash flow for the first time in many years, putting pressure on its stock price). Google's free cash flow figures have greatly dissatisfied the market.

KeyBanc Analyst Justin Patterson stated: "The third-quarter financial reports of Alphabet confirm our concerns that existed prior to the reports: the search business is slowing down, and short-term profit margins have peaked. In the next 1-2 quarters, there may be a period of valuation vacuum in the market. Investors will be waiting for signals to determine whether this phenomenon is a short-term fluctuation or a structural long-term change."