Alphabet Cloud Sales Double as AI Spending Hits Profits

Alphabet Inc. reported third-quarter revenue of $127.6 billion, representing a 25% year-over-year increase, although the total fell short of analyst estimates. The company's net earnings per share dropped 26% year-over-year to $2.12, while free cash flow shifted from a positive $24.5 billion in the prior-year quarter to a negative $9.1 billion.

These financial declines resulted from heavy spending on artificial intelligence, which triggered a decline in share price following the earnings report. Despite the impact on profits, the company's cloud computing segment grew significantly, with sales reaching $30.7 billion, a 103% increase over the previous year. Alphabet's cloud backlog rose to $561 billion, a 262% year-over-year increase.

Alphabet also noted strong demand for its custom AI chip business and announced that its Gemini app has reached one billion users.