Google Stock Plunges Q3: Revenue Miss, Cash Burn Rattle AI Bets
Alphabet shares fell more than 8% to 10% after the company missed Wall Street targets for third-quarter revenue and earnings, even as Google Cloud revenue…
Google stock plunges Q3 after Alphabet reported third-quarter revenue and earnings that fell short of Wall Street estimates and showed a deepening cash burn. Shares dropped more than 8% in Yahoo Finance's account and more than 10% in CNBC's after the report was released after the bell on Wednesday.
The miss stung because it came from the core ad business. Cloud was the bright spot, and it was not enough.
The numbers behind the drop
Alphabet reported revenue of $127.58 billion, up 25% from a year earlier. Analysts polled by LSEG expected $128.22 billion, according to CNBC. Net income fell to $26.17 billion, or $2.12 per share, from $34.98 billion, or $2.87 per share. Adjusted earnings per share were $2.67 against $3.02 expected, CNBC reported. CNBC said it was the company's first miss on both the top and bottom lines in nearly four years.
Operating income totaled $40.58 billion, below a $43.19 billion forecast from FactSet. A loss of $8.66 billion on equity holdings also weighed on results, after a $99.03 billion windfall in the second quarter tied to stakes in SpaceX and Anthropic.
Search revenue grew 12% to $63.35 billion, short of a $64.96 billion estimate. Advertising sales across Google came to $80.0 billion, up 10.6%, according to Variety. YouTube ad revenue rose 9.2% to $11.21 billion, slower than 15% a year earlier and 13% in the second quarter.
Cloud booms, cash goes negative
Google Cloud revenue climbed 103% to $30.7 billion, ahead of the $28.7 billion analysts expected. Jefferies analyst Brent Thill said on CNBC that the cloud business was the only one that beat. "The Street wanted 100%, so it didn't beat by much, and it missed some of the high-end targets. Everything else missed," he said.
Free cash flow was the sharper worry. Alphabet reported negative free cash flow of $9.07 billion, per CNBC, against the $2.70 billion analysts had expected. Yahoo Finance put the figure at -$9.06 billion, compared with -$5.85 billion in the second quarter.
Capital expenditures totaled $51.36 billion, up 114% from a year earlier but below the $55.09 billion analysts anticipated. Long-term debt rose to $125.1 billion from $21.6 billion a year earlier.
What it means for the AI trade
Investors have swung between worry and enthusiasm over whether the vast AI spending by the biggest tech companies will pay off. Last week, traders dumped CoreWeave stock amid questions about its debt load, pulling large parts of the market lower, Yahoo Finance reported.
Alphabet kept its full-year capex forecast at $195 billion to $205 billion. Finance chief Anat Ashkenazi told analysts, "We continue to expect our capex to increase significantly in 2027, and will provide further details on our Q4 call."
The report arrived hours after Google unveiled its Gemini 4 Carbon model. CEO Sundar Pichai said the Gemini app has passed 1 billion users, the fastest growth of any product in the company's history. He said query growth is the highest in five years.
Competition is also in view. Meta CEO Mark Zuckerberg said 10 million people have set up its Muse AI agent, mostly for shopping. Pichai described Google's own agentic tools as "an expansion opportunity" for search rather than a threat to it.
Dan Ives of Yorkville Ives took a bullish view of the quarter. "Cloud doubling on contracted demand with margin expanding at the same time settles the demand side of the capex debate for this quarter," he said.
Source: finance.yahoo.com
