Alphabet shares dropped sharply in extended trading Wednesday after the tech giant posted third-quarter earnings that trailed Wall Street forecasts, weighed down by slowing advertising growth and aggressive spending on artificial intelligence infrastructure.
The company reported revenue of $127.58 billion, up 25 percent from a year earlier, but below consensus estimates of $127.93 billion, Yahoo Finance reported. Earnings per share landed at $2.12, missing analyst expectations of $3.01. Shares dropped between 8 percent and 11 percent in post-market and overnight trading following the report.
Cash flow strains and ballooning capex
Google burned through cash as it poured capital into computing hardware. Free cash flow dropped to negative $9.07 billion for the quarter, worsening from negative $5.9 billion in the second quarter, according to Gizmodo. Long-term debt climbed to $125.1 billion, and the company disclosed approximately $1 trillion in future purchase commitments.
Alphabet Chief Financial Officer Anat Ashkenazi said during an earnings call that capital expenditures would reach between $195 billion and $205 billion for the current fiscal year, with spending planned to increase substantially next year. Ashkenazi explained that the vast majority of those resources target technical infrastructure and tensor processing unit inventory.
“We expect to generate an attractive ROIC that remains meaningfully above our cost of capital, and anticipate generating strong cash flow from operations,” Ashkenazi said, while acknowledging short-term pressure on cash reserves.
The company also took an $8.66 billion loss from equity holdings, reversing a $99.03 billion gain recorded in the previous quarter from stakes in SpaceX and Anthropic, CNBC reported.
Cloud surges while search growth cools
Google Cloud provided a bright spot, posting revenue of $30.7 billion—a 103 percent surge year over year that surpassed projections of roughly $29 billion, according to CNBC and Yahoo Finance. Thomas Kurian, the cloud unit’s chief executive, noted broad adoption across financial firms and enterprise clients.
However, the company’s dominant money engine showed signs of fatigue. Core Google Search revenue grew 12 percent to $63.35 billion, falling short of the $64.96 billion projected by analysts. That marked a steady slowdown from 17 percent growth in the second quarter and 19 percent in the first quarter, TechCrunch reported. Total advertising revenue reached $82.01 billion, missing estimates of $83.5 billion.
Chief Business Officer Philipp Schindler attributed part of the pressure to rapid adoption of AI Mode, which currently features lower monetization rates than traditional search. To counter that, Google announced Wednesday that it is taking advertisements in AI Mode into international markets alongside multi-turn ad formats in the U.S.
Frontier models and market skepticism
Hours before the financial release, Google introduced Gemini 4 Carbon, a frontier model that Chief Executive Sundar Pichai described as the company’s most capable release to date. Pichai said the Gemini application reached one billion monthly users, calling it the fastest-expanding consumer product in corporate history.
Despite those benchmarks, investor skepticism around broad industry returns on artificial intelligence has intensified. Outside tech, Apollo Global Management chief economist Torsten Slok recently argued that generative tools have produced negligible financial returns for broader corporate America, Gizmodo reported.
Whether Google can accelerate monetization of its AI search tools fast enough to offset climbing capital obligations remains the central question facing leadership heading into the next fiscal year.
