Alphabet shares fall 12.6% in worst session in more than 20 years
Key Facts
Alphabet Class A shares fell 12.6% on October 29, their worst daily performance since they began trading more than 20 years ago, according to the Associated Press. The decline followed third-quarter results showing weaker-than-expected summer growth, renewing investor questions about the company’s ability to earn returns on its massive AI investments. The S&P 500 fell 0.3%, its first loss in four days, despite gains in most of its stocks. Pressure was heavier on the Nasdaq Composite, which fell 1.4%, while the Dow Jones Industrial Average lost 132 points, or 0.3%. Alphabet shares closed at $283.82, according to EL7 data.
The company’s net income fell to $26.17 billion in the July-to-September period, compared with $34.98 billion in the third quarter of the previous year. Quarterly revenue, meanwhile, rose 25% to $127.58 billion, but fell short of the analyst average estimate of $127.97 billion. The Associated Press said the summer results showed weaker growth than analysts had expected, intensifying focus on whether AI expansion would translate into financial returns. The figures show a divergence between revenue growth and declining net income, while total revenue came in slightly below estimates. This coincided with a sharp drop in the stock, while the broader index fell only modestly.
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. In advertising, revenue from Google Search and other advertising rose 12% to $63.3 billion in the third quarter. YouTube advertising revenue also increased 9% to $11.2 billion. Despite growth in both sources, the concerns highlighted in coverage focused on returns from large investments in AI technologies, alongside the effect of investment losses on reported earnings.
Concerns about technology companies’ AI spending extended into Asian trading on October 30. Intel shares fell 23% and Amazon shares 7% after the U.S. market closed, pushing Nasdaq 100 futures down 1.9%, according to Reuters via Investing.com. Reuters quoted a Pepperstone analyst as saying investors were "increasingly questioning whether shareholders will earn an adequate return on the huge amounts of capital being deployed." In Asia, South Korea’s Kospi fell about 4%, and Japan’s Nikkei 225 was down 2.3% in afternoon trading, according to the Associated Press. The moves in futures and indexes show that questions about returns on technology spending accompanied Alphabet’s decline beyond the U.S. session.
On the price backdrop, the core personal consumption expenditures index, excluding food and energy, rose 0.3% in September from the previous month and 3.1% year over year, according to the U.S. Bureau of Economic Analysis. In separate data, U.S. real gross domestic product grew at an annual rate of 3.4% in the third quarter, following growth of 2.2% in the second quarter. The bureau set November 25, 2026, for the release of its second estimate of third-quarter GDP and corporate profits, along with October personal income and outlays data. The bureau also listed November 25 as the release date for its October income and outlays report. These upcoming releases put growth, prices and spending data among the U.S. indicators markets will track after the wave of technology stock declines.