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Technology

Alphabet Shares Fall More Than 11% After Third-Quarter Earnings Miss on AI Spending

Google's parent reported $127.6 billion in third-quarter revenue and negative free cash flow of $9.07 billion, missing Wall Street expectations, while Google Cloud revenue more than doubled to $30.71 billion.

By admin Oct. 29, 2026 · 4:44 PM ET 2 min read

A large screen in a trading room showing a red line chart moving downward, with out-of-focus traders in the foreground
A large screen in a trading room showing a red line chart moving downward, with out-of-focus traders in the foreground

Shares of Alphabet fell more than 11% on Thursday after the Google parent reported third-quarter results that missed Wall Street profit and revenue expectations. As of 11:50 a.m. ET, the Class A stock was down 11.8%, and the company had lost $410 billion of market value, according to the Motley Fool. The report was Alphabet’s first bottom-line earnings miss against Wall Street consensus since the last quarter of 2022.

A large screen in a trading room showing a red line chart moving downward, with out-of-focus traders in the foreground

Alphabet reported total revenue of $127.6 billion for the third quarter, short of analysts’ estimate of $128.2 billion, according to data compiled by LSEG and reported by Reuters. Google’s core advertising business reported $82.01 billion in revenue, about $1.41 billion short of expectations. Net income available to common shareholders fell 25% to $26.17 billion.

Earnings of $2.12 per share came in against expectations near $3.02, according to the Motley Fool. The shortfall was amplified by an $8.2 billion non-operating, unrealized loss from a decline in the value of Alphabet’s equity stake in SpaceX, alongside a $5.2 billion cash payment for a European Union antitrust fine.

A large data center building with cooling towers at dusk

AI spending drove a second straight cash burn

Alphabet reported negative free cash flow of $9.07 billion, compared with analyst expectations that it would come close to breaking even, according to LSEG data reported by Reuters. The quarterly cash burn was an increase from $5.9 billion in the prior quarter, which was the first time the company went into the negative in its 22-year history as a public company.

Chief Financial Officer Anat Ashkenazi said capital expenditures driven by artificial intelligence will increase in 2027, while this year’s capital expenditure forecast was unchanged. She said she also expected near-term margin pressure from the use of third-party cloud capacity. The company spent $51.4 billion in capital expenditures in the quarter, according to the Motley Fool, and management held its full-year spending guide of $195 billion to $205 billion.

Alphabet reported a $7.66 billion operating income loss in “Alphabet-level activities,” which it said primarily reflected expenses related to artificial intelligence research and development. Earlier on Wednesday, Google announced its new Gemini 4 Carbon model, which Chief Executive Sundar Pichai told analysts meant the company was again “leading at the frontier.”

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Cloud revenue more than doubled

Revenue at Google Cloud exceeded estimates and more than doubled to $30.71 billion in the third quarter ended September 30, according to Reuters. Cloud chief Thomas Kurian made his debut on an earnings call, and Reuters reported that sales of Google’s tensor processing units, which compete with Nvidia’s graphics processing units, had become a meaningful contributor to the cloud business.

Alphabet, Microsoft, Amazon, and Meta are projected to collectively spend well over $700 billion in 2026 to expand artificial intelligence data center capacity, chips, and high-performance networking, according to Reuters. The cloud result was not enough to make up for the advertising side of Alphabet’s results in the quarter.

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Reporting based on coverage by Reuters via The Hindu BusinessLine and the Motley Fool.

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