Alphabet shares fall as Q3 revenue, profit miss estimates

Alphabet ↘ 12.29% shares fell in extended trading on Wednesday, October 28, after its third-quarter sales and profit came in below Wall Street forecasts. Google Cloud more than doubled its revenue, but rising spending on AI infrastructure pushed free cash flow further into negative territory. The results add to investor doubts about whether the company's AI spending is paying off. Bloomberg described the quarter as a sign that the company is failing to generate enough return to justify its massive investments in AI.bloomberg.com

Headline numbers fall short

Revenue rose 25% from a year earlier to $127.6 billion. Analysts had expected $128.22 billion. Earnings per share were $2.12, and net income was $26.5 billion. Bloomberg put the consensus EPS estimate at $2.99, while LSEG London Stock Exchange Group plc data put it at $3.02. A net loss of $8.7 billion on equity securities cut $0.55 from earnings per share.uk.finance.yahoo.com+2

Advertising was the weak spot. Google ad revenue was $82.0 billion against an expected $83.6 billion. Search revenue came in at $63.4 billion versus a $64.99 billion estimate, and YouTube advertising brought in $11.2 billion, short of the $11.4 billion forecast.uk.finance.yahoo.com

Cash burn deepens

Free cash flow was negative $9.07 billion. Analysts had expected a cash burn of just $36 million, according to LSEG data cited by Reuters. Shares fell more than 6% in extended trading after the release. Capital expenditure was $51.4 billion, below the $55.2 billion analysts expected, while operating cash flow of $42.3 billion missed the $52.72 billion estimate. This was the second straight quarter of negative free cash flow, following negative $5.86 billion in the second quarter. Later reports had the after-hours drop at more than 8%.investing.com+2

Cloud is the bright spot

Google Cloud revenue rose to $30.71 billion, ahead of estimates. Its operating income of $11.1 billion beat the $9.75 billion forecast. "Google Cloud revenues grew 103%, powered by huge demand for our AI infrastructure and AI solutions," CEO Sundar Pichai said, adding that the Gemini app has reached one billion users.investing.com+1

The stock had already been under pressure. It fell in five of the six sessions through Tuesday and was down about 7% for October before the report. Alphabet, Microsoft ↘ 0.16%, Amazon Amazon.com, Inc. ↘ 4.25% and Meta ↗ 1.96% are expected to spend well over $700 billion combined in 2026 on AI data centers, chips and networking.cnbc.com+1