Alphabet Sheds $500bn After Profit Falls 25%
Google's parent reported lower-than-expected profit and slower advertising growth while keeping up heavy AI spending. Its shares fell by double digits.
Alphabet lost about $500bn in market value after its third-quarter profit came in below expectations. Shares in the Google parent fell by double digits from Wednesday evening into Thursday trading. The drop wiped hundreds of billions of dollars off the $4tn company.
Net profit slid 25% from a year earlier to $26.2bn for July to September, or $2.12 a share. Analysts surveyed by FactSet had expected far more. Alphabet booked an $8.7bn loss on its equity investments, which it attributed to its stake in SpaceX. Shares in the Elon Musk-led company have struggled since it went public in June.
Revenue rose 25% to $127.6bn, slightly below the roughly $128bn analysts had forecast. Advertising revenue grew 11% to $82bn, short of expectations. Search revenue rose 12% to $63.4bn, slower than the 17% growth of the previous quarter. YouTube advertising grew 9% to $11.2bn, down from 13%. YouTube Music and Premium passed 150 million subscribers worldwide, including trials.
Cloud and chips
Google Cloud revenue jumped 103% to $30.7bn, ahead of analyst expectations. Alphabet said sales of its in-house AI chips, known as TPUs, contributed significantly. Operating income for the unit tripled to $11.1bn. Google is also selling TPUs to outside companies, which challenges market leader Nvidia. OpenAI reportedly plans to buy some. Anthropic, a major cloud customer, has committed to using up to one million Google AI chips.
The "Other Bets" division, which includes the robotaxi company Waymo, posted revenue of $372m and an operating loss of $2bn. Waymo now gives more than 500,000 paid rides a week across 15 US metropolitan areas. It aims to reach 1m weekly rides by the end of the year.
Capital spending reached $51.4bn in the quarter, mostly on data centres and AI chips. A year earlier it was $24bn. Alphabet's forecast for 2026 is $195bn to $205bn, and it said it would keep raising spending significantly in 2027. The spending, which included a fine paid to the European Union, outstripped the cash its businesses generated for a second straight quarter, leaving a $9.1bn gap. In the quarter the company raised $28.7bn by selling bonds and $12.4bn by issuing new shares.
Chief executive Sundar Pichai told analysts: "I would broadly think of all of this as a long-range planning process, not a short-term allocation exercise."
Google has stepped up its pace of AI releases since a delay to a flagship model in July raised questions about whether it was falling behind OpenAI and Anthropic. It launched Gemini 4 at the end of September and later released a version focused on cybersecurity. The Gemini app has reached 1bn users. Google's models now process nearly 32bn tokens a minute, more than four times the level of a year ago.
Source: The Guardian