Alphabet Shares Drop After Missing Third-Quarter Earnings Expectations
Alphabet Inc. shares fell up to 10% after reporting a revenue miss and the first negative free cash flow in its public history.
Shares of Alphabet Inc. fell between 7% and 10% in after-hours trading following a third-quarter earnings report that missed analyst expectations for both revenue and earnings per share. The company reported revenue of $127.6 billion, a 25% increase year-over-year, but investors reacted negatively to underperformance in core search and YouTube advertising, which grew 12% and 9.2% respectively.
Alphabet reported negative free cash flow of $9.1 billion, marking the first such deficit in its 22-year history as a public company. This cash burn resulted from a 114% year-over-year increase in capital expenditures to $51.4 billion, driven by AI research and cloud capacity. The company expects full-year spending to reach $200 billion in 2026 and $300 billion in 2027.
Earnings per share fell to $2.12, missing the estimated $3.03. This decline was impacted by an $8.7 billion net loss on equity securities, including a stake in SpaceX. In contrast to the core business struggles, Google Cloud revenue surged 103% year-over-year to $30.7 billion, expanding its profit margin to 36.2%.
