Alphabet shares fall over 10% after earnings miss as AI spending drives cash burn
Rising infrastructure costs and weaker-than-expected advertising revenue weighed on the technology giant, even as its cloud business expanded rapidly
Alphabet shares plunged over 10% on Wednesday after the tech giant missed Wall Street profit and revenue projections, with AI spending driving its cash burn. Chief Financial Officer Anat Ashkenazi disclosed that capital expenditures, driven by AI, would surge significantly in 2027, but the company's 2023 capex forecast remained unchanged.
The tech firm reported a negative free cash flow of $9.07 billion, far from analysts' expectations of a near-even break-even point. The results were primarily due to the high costs of AI development, with cash burn increasing from $5.9 billion in the previous quarter to a new negative figure for Alphabet's 22-year public company history.
Alphabet's operating income loss in the third quarter amounted to $7.66 billion, mainly attributable to AI research and development expenses. Revenue for the period fell short of expectations, with Google's core advertising business generating $82.01 billion in revenue, $1.41 billion less than anticipated. Net income available to common shareholders dropped 25% to $26.17 billion, while adjusted earnings per share missed Wall Street targets by $0.35.
Despite these setbacks, Google Cloud's revenue exceeded estimates, doubling to $30.71 billion, and the company's investments in custom tensor processing units and third-party GPUs have bolstered its service delivery capabilities amid global AI data center expansion plans.
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