Microsoft said in its quarterly report filed on 28 October 2026 that its net cash from operations was $58.0 billion in the three months to 30 September, on total revenue of $92.3 billion. Alphabet’s results release the same day puts its net cash provided by operating activities at $42.3 billion, on total revenues of $127.6 billion.
By our arithmetic, Microsoft turned about $63 of every $100 of revenue into operating cash in the quarter, up from about $58 a year earlier. Alphabet turned about $33, down from about $47.
Business Pill · Free Cash Flow
An evergreen Business Engineer explainer on free cash flow, the cash a company has left after capital expenditures. It explains the general idea only and does not discuss Microsoft’s or Alphabet’s quarter.
The key insight: By our arithmetic from the companies’ filings, Microsoft turned about $63 of every $100 of revenue into operating cash in the September 2026 quarter, against about $33 at Alphabet.
Microsoft’s report says cash from operations increased $12.9 billion to $58.0 billion, “primarily due to an increase in cash received from customers and a decrease in cash used to pay income taxes, offset in part by an increase in cash paid to suppliers.” By our arithmetic, that is a 29% increase on the $45.1 billion of a year earlier.
Net income was $36.6 billion in the quarter. By our arithmetic, operating cash exceeded net income by about $21.4 billion. The same report shows $39.4 billion of additions to property and equipment, which by our arithmetic operating cash covered about 1.5 times.
Net cash from operations per $100 of revenue, Microsoft and Alphabet, quarters to 30 September 2025 and 2026. Ratios are our arithmetic from the companiesโ filings and results releases. Sources: Microsoft Forms 10-Q; Alphabet Q3 2026 results release.
Customers Billed a Year Ahead
Microsoft’s report says unearned revenue “is generally invoiced annually at the beginning of each contract period for multi-year agreements and recognized ratably over the coverage period.” It adds that unearned revenue “comprises mainly unearned revenue related to volume licensing programs, which may include cloud services and Software Assurance”.
The report puts current unearned revenue at $66.9 billion and long-term unearned revenue at $2.7 billion on 30 September, a total of $69.6 billion. A year earlier the total was $61.5 billion, according to the September 2025 report. By our arithmetic, the balance rose about 13% and equals about 75% of a single quarter’s revenue.
The June Quarter Does the Lending
The balance follows Microsoft’s fiscal year, which ends in June. Microsoft’s filings put total unearned revenue at $53.7 billion on 31 March 2026 and $75.7 billion on 30 June 2026. By our arithmetic from its cash flow statements, the change in unearned revenue added about $22.4 billion to operating cash in the June 2026 quarter, against about $18.4 billion in the June 2025 quarter.
The September quarter runs the other way. Microsoft’s unearned revenue note shows $44.0 billion of revenue deferred and $50.2 billion recognised in the quarter, against $44.3 billion and $50.0 billion a year earlier. Its cash flow statement shows the change in unearned revenue reduced operating cash by $5.9 billion, against $5.4 billion a year earlier.
Across the four quarters to September 2026, by our arithmetic from the filings, changes in unearned revenue added about $8.8 billion to Microsoft’s operating cash, against about $5.6 billion in the four quarters before. For the year to June 2026, the annual report shows $194.2 billion of revenue deferred, against $187.0 billion the year before.
Where Alphabet’s Cash Went
Alphabet’s release shows net cash provided by operating activities of $42.3 billion in the quarter, against $48.4 billion a year earlier; by our arithmetic, a fall of about 13%. Its cash flow statement shows $3.2 billion going into inventory, against $0.5 billion a year earlier, and $7.8 billion into other assets.
Alphabet’s balance sheet puts deferred revenue at $9.4 billion on 30 September 2026, against $6.6 billion on 31 December 2025, and the change in deferred revenue added $2.6 billion to operating cash in the quarter. By our arithmetic, its deferred revenue equals about 7% of a quarter’s revenue.
On the earnings call, according to a caption transcript, Alphabet’s chief financial officer Anat Ashkenazi said operating cash flow was hurt by the build-up of inventory for TPU system sales and by a $5.2 billion cash payment for a 2018 European Commission fine after the appeal process ended.
A year earlier the same arithmetic gave about $58 for Microsoft and about $47 for Alphabet, so the gap widened from about $11 to about $30 per $100 of revenue.
Microsoft’s unearned revenue, which its report says is generally invoiced annually in advance, stood at $69.6 billion on 30 September; Alphabet’s deferred revenue was $9.4 billion, about 7% of a quarter’s revenue by our arithmetic.
By our arithmetic from Microsoft’s cash flow statements, changes in unearned revenue added about $22.4 billion to operating cash in the June 2026 quarter alone.
Microsoft Form 10-Q, quarter to 30 September 2026, Cash Flows
“Cash from operations increased $12.9 billion to $58.0 billion for the three months ended September 30, 2026, primarily due to an increase in cash received from customers and a decrease in cash used to pay income taxes”
Three Implications
FOR MICROSOFT Net cash from operations was $58.0 billion on revenue of $92.3 billion, and additions to property and equipment were $39.4 billion, according to its 10-Q.
FOR ALPHABET Net cash provided by operating activities was $42.3 billion on revenues of $127.6 billion, with $3.2 billion going into inventory, according to its results release.
FOR THE TIMING Microsoft’s total unearned revenue was $53.7 billion on 31 March 2026 and $75.7 billion on 30 June 2026, according to its filings.
The Business Engineer Lens
This story maps onto the Business Engineer framework The AI Capex Map.
The framework argues of the AI capex cycle: “It is a sovereign-scale financing problem dressed in tech-company clothing — and the financial architecture is starting to invert.”
Microsoft’s and Alphabet’s filings show how much operating cash each generated per dollar of revenue in the quarter; they do not say how either company weighs that cash against its capital plans. The framework was published in May 2026 and does not discuss these figures.
What Is Not Established
Microsoft does not say how much of the cash received from customers came from cloud contracts, and unearned revenue is what has been invoiced, not necessarily collected. In the September quarter the change in unearned revenue reduced operating cash; most of the build-up shows in the June quarter, so a single quarter does not show the full year’s pattern.
Operating cash per $100 of revenue is our arithmetic, not a measure either company reports. The two companies run different businesses on different fiscal calendars, so the comparison measures the combined effect of their business models, not one decision.
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Microsoft’s operating cash rose 29% to $58.0 billion in the quarter, which its report credits primarily to more cash received from customers and less paid in taxes. Its unearned revenue, which its report says is generally invoiced annually at the beginning of each contract period, stood at $69.6 billion. Alphabet’s operating cash fell to $42.3 billion. By our arithmetic, Microsoft turned about $63 of every $100 of revenue into operating cash, and Alphabet about $33.
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A note on sourcing. Microsoft figures come from its Form 10-Q filed on 28 October 2026, its Forms 10-K for fiscal 2025 and 2026, its Form 10-Q for the September 2025 quarter and the XBRL financial data it filed with the SEC; Alphabet’s from its third-quarter 2026 results release and a caption transcript of its earnings call. Ratios, sums and percentage changes are our arithmetic; linked earlier pieces carry their own sources.
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
