Alphabet’s stock sinks after shocking investors with top-and-bottom line miss

Alphabet's stock plummeted by more than 9% in after-hours trading following a disappointing earnings report for the third quarter. The tech giant reported adjusted earnings of $2.67 per share, falling short of the expected $3.02 per share. Revenue also missed targets, rising 25% to $127.58 billion, but still below the anticipated $128.22 billion.

The quarter marked Alphabet's first top-and-bottom line miss in nearly four years, leading to a drop in net income to $26.17 billion, down from $34.98 billion in the same period last year. Negative free cash flow of $9.07 billion also fell short of the expected $2.7 billion. The company's capital expenditures totaled $51.36 billion, less than the $55.09 billion analysts had predicted.

CFO Anat Ashkenazi reiterated plans for capital spending to exceed $300 billion by 2027. Investors expressed concerns over Alphabet's spending on AI infrastructure, questioning its ability to generate returns. The company also borrowed heavily, with long-term debt increasing to $125.1 billion, a 479% rise year-over-year. Despite a $99.03 billion revenue windfall from investments in AI firms, net losses from those investments reached $8.66 billion.

Google Cloud revenue more than doubled to $30.7 billion, exceeding analyst expectations. However, search revenue rose only 12% to $63.35 billion, missing the $64.96 billion forecast. CEO Sundar Pichai highlighted strong demand for Google's AI products and models, with Gemini reaching over 1 billion users for the first time.