Alphabet Revenue Rises 25% to $127.58 Billion as Shares Fall 10.5%
Key Facts
Alphabet shares fell 10.5% in premarket trading on October 29 after the company reported third-quarter results that paired strong revenue growth with lower net income. Revenue reached $127.58 billion, up 25% year over year, but missed analysts’ average estimate of $127.97 billion, according to a FactSet survey cited by the Associated Press. By contrast, Microsoft shares rose 3.5% after the company reported results, according to Reuters via MarketScreener. The divergence in the two stocks’ moves highlighted investors’ differing responses to the performance of two major companies in cloud computing and artificial intelligence. The reactions come as investors scrutinize when AI spending will translate into returns.
Alphabet’s third-quarter net income was $26.17 billion, down from $34.98 billion in the same period a year earlier, according to the Associated Press. The company reported earnings per share of $2.12 after a $8.7 billion gain on equity investments reduced earnings by 55 cents a share. The agency cited a FactSet survey showing an average revenue estimate of $127.97 billion, compared with actual revenue of $127.58 billion. This adjustment puts the earnings-per-share figure in context, while the decline in net income and the investment gain remain among the quarter’s most prominent components.
Alphabet’s segment performance was mixed: Google Cloud revenue rose 103% to $30.7 billion, according to the Associated Press. Chief Executive Sundar Pichai said AI infrastructure and solutions were driving the business’s growth, describing Cloud’s growth rate as 103%. In Search, he said year-over-year query growth reached its highest rate in five years. But Google Search and other advertising revenue rose 12% to $63.3 billion, while YouTube advertising revenue increased 9% to $11.2 billion, with growth in both businesses falling short of some analysts’ expectations, according to the agency. The figures reflect a divergence within the company between rapid Cloud expansion and slower-than-expected growth in key advertising businesses.
Pichai cited indicators of wider use of Google’s AI products, saying the Gemini app reached 1 billion users in October. He added that the company’s model APIs process nearly 32 billion tokens per minute, up 40% from the previous quarter and more than four times the level a year earlier. The figures show the scale of usage alongside the expansion of its cloud infrastructure business. At the same time, an investment official told Reuters that investors had begun scrutinizing the timing of returns relative to the pace of capital spending. The official added that some investors were no longer giving major cloud companies a blank check to spend without limits.
Microsoft reported revenue of $92.3 billion in its first fiscal quarter, ended September 30, 2026, up 19% year over year. Operating income was $45.9 billion, up 21%, while diluted earnings per share reached $4.92, an increase of 32% on a GAAP basis, according to the company’s statement. Microsoft Cloud revenue rose to $63.9 billion, up 30%, while Azure revenue increased 48%. The company’s shares rose 3.5% in premarket trading, and Reuters said investors welcomed its cash flow and cloud growth outlook. Alphabet shares, by contrast, fell 10.5%, reflecting the market’s differing reception of the two companies’ results and outlooks.
Monetary policy provides additional context for market moves. On October 28, the Federal Reserve kept its target range for the federal funds rate at 3.75% to 4%, according to the central bank’s statement. The statement was approved by a 10-to-2 vote. Lisa D. Cook and Beth M. Hammack dissented, preferring to raise the target range by a quarter of a percentage point. On spending, Alphabet’s chief financial officer said capital expenditures would increase significantly in 2027. She added that more details would be presented during the fourth-quarter earnings call, putting future spending plans in focus for investors.