Alphabet Shares Fall 12.6% Despite 25% Revenue Growth and 103% Cloud Surge
Key Facts
Alphabet’s Class A shares fell 12.6% on Thursday, October 29, their worst daily performance since they began trading more than 20 years ago, despite the company reporting annual revenue growth of 25%. The stock closed at $283.82 after Alphabet reported on October 28 results for the quarter ended September 30. Revenue reached $127.6 billion, compared with $102.346 billion in the same period a year earlier. But net income available to common shareholders fell to $26.170 billion from $34.979 billion. The company attributed part of the pressure on earnings to an $8.7 billion loss on equity investments.
Diluted earnings per share came in at $2.12, down from $2.87 a year earlier and below analysts’ estimates of about $3.01 per share, according to the Associated Press. Revenue also came in slightly below analysts’ average estimate of $127.97 billion. The agency said the investment loss reduced earnings by 55 cents per share, illustrating the effect of fluctuations in the value of holdings on quarterly results. Meanwhile, the reported revenue growth extends the company’s streak to 13 consecutive quarters of double-digit growth, according to an Alphabet statement. These indicators highlight the gap between the expansion of operating activity and the decline in net income and earnings per share during the quarter.
Cloud stood out as the strongest growth driver, with Google Cloud revenue rising 103% to $30.7 billion. Alphabet said the increase was driven by demand for AI infrastructure and enterprise solutions, alongside its core services, while sales of TPU systems also contributed meaningfully to revenue growth. In search and other advertising, revenue rose 12% to $63.3 billion, while YouTube advertising revenue increased 9% to $11.2 billion. The Associated Press described the gains in search and YouTube as below some analysts’ expectations. Search revenue growth also slowed from 19% in the first quarter and 17% in the second quarter to 12% in the third quarter, according to Investing.com’s analysis, while remaining above the 14.7% forecast cited in that analysis.
Chief Executive Sundar Pichai said the year-over-year growth rate in search queries was the highest in five years and that the Gemini app had reached 1 billion users. The remarks put the expansion in use of the company’s products alongside cloud revenue growth, as slowing growth in search and advertising raised investor questions about balancing those drivers with the scale of AI spending. Chief Financial Officer Anat Ashkenazi said the company expects capital expenditures to continue rising sharply in 2027. She said more details would be presented on the fourth-quarter earnings call. The spending trajectory comes as the company continues to expand the infrastructure it says is supporting growth in its cloud business.
Alphabet’s decline weighed on U.S. stock indexes: the Nasdaq Composite fell 1.4% on Thursday, while the S&P 500 lost about 0.3%, its first decline in four days. The Associated Press said Alphabet’s fall pressured the market despite gains in most stocks. After the results, Goldman Sachs maintained its buy recommendation on the stock and lowered its price target, according to information available on the bank’s stance. That reflects an analytical assessment separate from the market’s reaction on Thursday and does not change the fact that the stock recorded its worst trading day in more than two decades. Investing.com’s analysis set the next earnings announcement for February 2, 2027, and gave estimates for the quarter of earnings per share of $3.36 and revenue of $142.44 billion.