Shares in Google parent Alphabet plunged more than 13% on Thursday after its quarterly results fell short of Wall Street expectations, while rising artificial intelligence (AI) spending and negative cash flow fuelled investor concerns.
The company reported revenue of $127.6 billion for the July-September quarter, up 25% from a year earlier but below analysts’ expectations of about $128 billion. Net income fell 25% to $26.17 billion, while earnings per share stood at $2.12.
Investor concerns centred on soaring investment in AI infrastructure. Capital expenditure reached $51.4 billion during the quarter, more than double the amount spent in the same period last year, as the company expanded its data centres, computing capacity and AI chip infrastructure.
Alphabet expects capital expenditure to reach between $195 billion and $205 billion in 2026, with spending forecast to rise significantly in 2027. Its free cash flow turned negative, recording an outflow of $9.07 billion during the quarter.
Google’s advertising business also missed market expectations. Advertising revenue reached $82.01 billion, while search revenue rose 12% to $63.35 billion. YouTube advertising revenue stood at $11.21 billion.
However, Google Cloud delivered stronger results, with revenue more than doubling to $30.71 billion, supported by demand for AI infrastructure and enterprise services.
Despite the cloud division’s growth, investors remain concerned about whether rising AI revenues will justify the enormous costs. The sell-off reflects growing market scrutiny of technology companies’ spending and the time required to generate sustainable returns from AI investments.
Disclaimer: For informational purposes only. Not investment advice.
