Alphabet falls 12.8% as post-results AI spending concerns mount
Key Facts
Alphabet shares fell 12.8% during trading on Thursday, October 29, heading for their worst day since they began trading more than 20 years ago, according to the Associated Press. The decline followed the release of third-quarter results, which showed revenue rising but missing analysts’ average estimate. GOOGL closed at $284.74, compared with $324.89 in the previous session, according to EL7 data. Official results showed net income available to common shareholders fell to $26.17 billion from $34.979 billion a year earlier. Diluted earnings per share also declined to $2.12 from $2.87.
Alphabet reported revenue of $127.58 billion for the July-to-September period, up 25% year over year but below analysts’ average estimate of $127.97 billion, according to the Associated Press. Search and other advertising revenue totaled $63.3 billion, up 12% year over year. YouTube advertising revenue also rose 9% to $11.2 billion. The agency said, however, that growth in search and YouTube advertising fell short of some analysts’ expectations. The figures put market pressure on growth in the advertising business, despite its continued increase from a year earlier.
Google Cloud provided a bright spot in the results, with revenue of $30.7 billion, up 103% year over year, according to the Associated Press. The company described the quarter as a period of record growth for the business. Alphabet’s purchases of property and equipment exceeded $51 billion during the quarter, the agency reported. The Associated Press said the company used more cash during the period, as measured by free cash flow, following those purchases. That puts cloud growth alongside the cost of expanding infrastructure as concurrent elements of the quarterly results.
Investors also linked the share decline to AI-related spending, amid questions about the scale of investment and the time needed to turn it into commercial returns. Reuters quoted an investment official as saying, "The AI buildout ecosystem is increasingly reliant on debt financing." Alphabet said the Gemini app reached 1 billion users in October 2026. Chief Executive Sundar Pichai also said the annual growth rate of Search queries reached its highest level in five years. He added that "Gemini 4 Argon and Carbon are leading at the frontier of technological competition," according to the company’s results filing with the U.S. Securities and Exchange Commission.
Selling pressure spread to the broader market on Thursday, with the Nasdaq Composite falling 1.6% and the S&P 500 declining 0.6%, heading for its first loss in four days, according to the Associated Press. Reuters, in a report carried by Investing.com, estimated that Alphabet was on track during the session to lose more than $464 billion in market value if losses continued, with the shares down 11.7% at the time of the estimate. The agency described the decline as on track to be the stock’s biggest one-day drop ever. Those estimates were made during trading, while GOOGL’s subsequently recorded close was $284.74, according to EL7 data. The course of future capital spending remains a focus for investors after a quarter that combined strong cloud growth with a decline in reported earnings.
Alphabet Chief Financial Officer Anat Ashkenazi said the company still expects capital expenditures to rise significantly in 2027. She added that further details would be provided during the fourth-quarter results call. Investors are therefore awaiting further clarification on the scale of spending after property and equipment purchases exceeded $51 billion in the third quarter. The company is pursuing this expansion alongside 103% growth in Google Cloud revenue and Gemini’s reaching 1 billion users. The fourth-quarter call is expected to provide further company details on capital spending forecasts.