Fed Decision and Big Tech Earnings Collide on Wednesday
Wednesday afternoon brings a rate decision and Big Tech earnings together. The Federal Reserve announces its decision at 2 p.m. on Oct. 28, Chair Kevin Warsh holds a press conference at 2:30 p.m., and after the market closes, Microsoft and Alphabet report earnings.
The Federal Open Market Committee meets Oct. 27 and 28. The current federal funds target range is 3.75% to 4.00%. It was set Sept. 16, when the committee voted unanimously to raise rates by a quarter percentage point, the first increase since July 2023. Consumer price inflation was 3.7% in September. This meeting has no Summary of Economic Projections or dot plot. The next meeting is Dec. 8 and 9.
Markets and economists expect rates to stay on hold at this meeting. A Reuters poll of 100 economists conducted Oct. 16 to 20 found that 94 expected a hold in October. Futures markets also lean toward a hold. That is a market expectation, not a signal from the Fed. In the same poll, all 100 respondents expected a rate increase in December, so what matters most this week is the statement language and what Warsh says at the press conference about December.
The timing matters because the rate path affects tech companies’ funding costs and investor sentiment, while both companies must show that spending on artificial intelligence infrastructure is turning into results.
Microsoft reports fiscal first-quarter 2027 results after the market closes Wednesday. Its own guidance calls for revenue of $89.85 billion to $90.95 billion and Intelligent Cloud revenue of $40.95 billion to $41.25 billion. Azure and other cloud services revenue is guided to grow about 45% in constant currency, faster than the 43% pace of the prior quarter. Capital spending for the quarter is expected to exceed $50 billion. Demand continues to exceed available supply, so the pace of capacity expansion is the key question, and this is the first quarter in which Azure revenue is disclosed as a standalone line.
Alphabet reports third-quarter 2026 results after the market closes Wednesday, with an earnings call at 4:30 p.m. Google Cloud grew 82% from a year earlier in the second quarter to $24.8 billion in revenue, and its backlog stood at about $514 billion. The company has raised its 2026 capital spending guidance to $195 billion to $205 billion. This quarter, the questions are whether cloud growth continues and how much heavy infrastructure spending pressures margins and cash flow. Analyst estimates for Alphabet vary with the revenue basis used, at about $127.9 billion on a total revenue basis and about $111.8 billion excluding traffic acquisition costs.
The question running through both reports is the same. Is artificial intelligence demand showing up in cloud revenue, and is it keeping pace with the spending now going into data centers? A rate decision on Wednesday afternoon that changes market expectations could also change how the evening earnings are read.
The week’s earnings continue with Amazon after the market closes Thursday.
