Alphabet Falls More Than 10%, Pushing Nasdaq 100 Futures Down 1.2% After Results

Key Facts

U.S. futures fell Wednesday evening, October 28, after Alphabet shares dropped in after-hours trading following the release of its third-quarter results. Nasdaq 100 futures fell 1.2% to 29,619.50 points by 19:39 Eastern Time, while S&P 500 futures slipped 0.5% to 7,743.25 points and Dow Jones futures fell 0.06% to 52,663.0 points, according to Investing.com. Alphabet shares had lost 9.8% in after-hours trading after the company reported earnings well below expectations. In a later report, the Associated Press said the stock fell more than 10% to $289.95 in the same trading session. The decline followed a U.S. session in which the major indexes ended with modest gains.

Alphabet’s net income fell to $26.17 billion in the July-to-September period, from $34.98 billion in the same period a year earlier, according to the Associated Press. By contrast, annual revenue grew 25% to $127.58 billion, but came in below the average analyst estimate of $127.97 billion. Earnings per share were $2.12, affected by an $8.7 billion loss on equity investments that reduced earnings by 55 cents per share. Analysts had estimated earnings per share of about $3.01. The company said its net income included the impact of the investment loss, while the revenue shortfall was another factor in the market’s reception of the results.

Alphabet’s business units delivered a mixed performance: Google Cloud revenue surged 103% year over year to $30.7 billion, while revenue from Google Search and other advertising rose 12% to $63.3 billion. YouTube advertising revenue increased 9% to $11.2 billion. Reuters said cloud revenue of $30.71 billion exceeded expectations and more than doubled its previous level, but was not enough to offset advertising performance. The company also recorded negative free cash flow of $9.07 billion, compared with cash burn of $5.9 billion in the previous quarter, according to Reuters. Alphabet also reported an operating loss of $7.66 billion at the company-wide level, which it attributed mainly to artificial intelligence research and development expenses.

Alphabet’s pressure coincided with a clear divergence among major technology stocks after the close: Microsoft shares rose about 3% after better-than-expected results, according to the Associated Press. U.S. indexes had advanced in Wednesday’s session before the results were announced, with the S&P 500 adding 0.3%, the Dow Jones rising 0.2% and the Nasdaq Composite gaining 0.3%. In Asia on Thursday, South Korea’s Kospi fell 2.2% to 5,880.25 points amid a decline in technology shares, while Japan’s Nikkei 225 rose 0.2% to 64,073.17 points. The yield on 10-year U.S. Treasury notes fell below 5.00% after briefly reaching about 5.04% on Wednesday. The two-year yield held at 4.68% after topping 4.77% in the previous session.

Artificial intelligence spending remains central to assessments of the company’s upcoming results. Chief Executive Sundar Pichai said infrastructure and AI solutions are key drivers of cloud growth. Alphabet expects a significant increase in capital spending in 2027 and will provide further details on its fourth-quarter earnings call, according to the Associated Press. Chief Financial Officer Anat Ashkenazi said, according to Reuters, that AI-driven capital spending will rise considerably in 2027, while the company’s spending outlook for the current year remains unchanged. On monetary policy, the Federal Reserve kept its target interest rate range at 3-3/4 to 4% in a decision issued Wednesday, with two of 12 members voting to raise it by a quarter of a percentage point. The statement said inflation remains elevated and that the committee will continue to assess the data to help determine the appropriate path back to its 2% target. Markets were awaiting the European Central Bank’s decision later Thursday, followed by the Bank of Japan’s expected decision on Friday.