Alphabet Erases $480 Billion in Value as Shares Fall 12% Under Spending Pressure
Key Facts
Alphabet lost about $480 billion in market value during Thursday’s session on October 29, as its shares fell 12%, according to Forbes estimates. The decline followed the company’s announcement of third-quarter results on October 28, as investors focused on the impact of its expansion in AI infrastructure on cash and earnings. Consolidated revenue rose 25% to $127.6 billion, marking the thirteenth consecutive quarter of double-digit revenue growth, according to the company’s filing. But Reuters reported that total revenue came in below analysts’ estimate of $128.2 billion. Net income also fell 25% to $26.17 billion, and diluted earnings per share declined 26% to $2.12.
Cash pressure was evident as capital spending exceeded operating cash flow during the quarter. Operating cash flow was $42.3 billion, while capital expenditures reached $51.4 billion, most of it directed to technical infrastructure, according to the official filing. Reuters said free cash flow posted a deficit of $9.1 billion, compared with analysts’ expectations that it would come close to breakeven. This was the second consecutive time Alphabet recorded negative free cash flow. The figure is calculated by subtracting capital expenditures from operating cash flow, while Reuters also pointed to inventory pressure tied to unsold TPU chips.
By contrast, Google Cloud revenue surged 103% to $30.7 billion, compared with $15.157 billion a year earlier, according to the company’s results. Alphabet said growth spanned infrastructure, enterprise AI solutions and core GCP services. It added that TPU system sales made a “meaningful” contribution to cloud growth. The unit’s revenue exceeded analysts’ estimates, while its backlog reached $561 billion. The company expects to recognize more than 55% of that backlog as revenue over the next twenty-four months, according to Reuters.
Search activity continued to grow, but at a pace that may ease concerns about the company’s reliance on advertising. Google Search and other advertising revenue rose 12% to $63.350 billion in the third quarter, and did not contract. Alphabet said the annual growth rate in search queries reached its highest level in five years. The company attributed the increase in queries to broader use of its services on mobile devices, alongside growth in advertiser spending and improvements to ad formats and delivery. At the same time, Reuters reported that advertising revenue of $82 billion fell short of analysts’ estimate of $83.4 billion.
The share decline extended to U.S. indexes in Thursday’s session, with the S&P 500 down 0.3% and the Nasdaq down 1.4%. Alphabet’s Class A shares fell 12.6%, their worst day since trading began more than 20 years ago, according to the Associated Press. EL7 data show GOOGL shares closed at $324.89 on October 28, then at $283.82 on October 29 and $279.84 on October 30. Reuters attributed some of the cash pressure to building TPU system inventory to meet demand, as Alphabet buys inventory before customers pay. A Google Cloud official said sales of these systems are expected to rise in the current quarter and accelerate sharply in 2027.
Investors are focused on the spending outlook after the chief financial officer said capital expenditures would increase “significantly” in 2027. The company had kept its 2026 capital spending forecast within a range of $195 billion to $205 billion, according to Reuters, without specifying a figure for 2027. Alphabet said it would provide further details on its spending plans during the fourth-quarter earnings call. This comes as the company expects to convert more than 55% of Google Cloud’s backlog into revenue over the next twenty-four months. These expectations put cloud growth and demand for TPU systems, alongside the spending required to meet that demand, at the center of market scrutiny of upcoming results.