Alphabet's miss, and Microsoft's bond

In one line, companies short of cash because they are buying AI equipment fell. Drugs and card networks, farther from that spending, rose.

Alphabet, Google's parent, fell ▼ 12.68% to $283.70. Third-quarter revenue of $127.6 billion and adjusted earnings per share of $2.67 both missed. DK said revenue and profit missing together was the first time in about four years. Cloud revenue rose ▲ 103%, but search revenue missed. Free cash flow, cash left after capital spending, was a $9.1 billion deficit. A deficit means cash was short, not left over. The company said next year's capital spending would rise a lot, and Citizens cut its view to market perform, a label that does not mean buy more. Capital spending was $51.36 billion, below a $55.09 billion forecast. The stock still fell because cash was already short and next year would cost more.

Microsoft fell ▼ 0.14% to $530.28. Revenue of $92.3 billion, up 19%, beat forecasts, and Azure cloud growth of 48% was faster than the prior quarter's 42%. The report was good. It still planned its first U.S. corporate bond since 2017, at least $25 billion. A corporate bond is a debt note issued by a company. Quarterly capital spending was $45.2 billion, below a $50.7 billion forecast, which the company blamed on late deliveries from outside suppliers.

ServiceNow fell ▼ 26.97% to $109.64, its worst day since listing. Revenue beat, but adjusted earnings per share of $1.00 missed $1.02. Next-quarter backlog growth guidance of 18.5% was below the 19.8% hope. Backlog means orders not yet finished.

Fortinet fell ▼ 20.24% to $138.85. Third-quarter results beat, but the yearly service-revenue outlook was cut from $5.15 billion to $5.17 billion. Product revenue growth slowed to 37% from 52%. Bank of America moved to neutral and cut its target to $140.

Eli Lilly rose ▲ 6.56% to $1,372.85. Third-quarter revenue of $24.4 billion, up 39%, beat by a wide margin, and the yearly revenue outlook rose from $91 billion to $92 billion, a third raise. Mounjaro revenue rose ▲ 65% and Zepbound 49%.

Lumentum rose only ▲ 0.68% to $920.12. DK said Marvell was in late talks to buy it, with a possible announcement as soon as the next week. Lumentum's market cap, the value of all shares, was about $83 billion, more than a third of Marvell's about $221 billion. The buyer could issue new shares and dilute existing owners, so Marvell fell hard. A report also said Nvidia had invested $2 billion in Lumentum.

Caterpillar fell ▼ 9.29% to $647.08 even after a record backlog of $78.1 billion. This year's tariff cost was about $2.2 billion, operating margin was at the low end of the company's target range, and the yearly revenue outlook was only maintained. A tariff is a tax on goods crossing a border. DK said an outside report confirmed revenue of $20.7 billion versus about $20.5 billion expected.

CoreWeave fell ▼ 4.99% to $60.74. Microsoft buying less equipment than expected was read as a sign that server supply to companies like this was late.

KLA rose ▲ 5.50% to $167.50. First-quarter revenue of $4.14 billion beat, and operating margin topped 46% for the first time. Next-quarter revenue of $4.7 billion would be about 14% above the prior quarter.

Merck rose ▲ 3.84% to $146.34. Third-quarter revenue of $18.1 billion and adjusted earnings per share of $2.49 beat, and the yearly earnings outlook rose. Of $830 million in injectable Keytruda sales, about $550 million was customers buying ahead. The next quarter has to show whether that effect drops out.

Mastercard rose ▲ 4.18% to $635.80, a 52-week high, the most expensive price in the past year. Third-quarter revenue of $9.8 billion rose 14%. Cross-border volume rose 11% and value-added service revenue 19%.

T-Mobile fell ▼ 0.51% to $147.32. Adjusted earnings per share of $3.22 beat $2.89, and postpaid net adds were 274,000. The churn rate rose to 1.09% over the year, which limited the gain.

Three lines to keep. A cash deficit from AI equipment spending hurt the stock even when some lines of business grew. A slower next quarter hurt software more than a sales beat helped. Drugs and card payments rose on the same day.