● Covered by 3 sources · 9 reportsMedium impact8 negative1 neutral
Alphabet Reports Q3 Profit Miss and Advertising Slowdown Amid Increased AI Spending
Key points
- Q3 net profit was $26.2 billion, a 25% decrease year-over-year.
- Advertising revenue grew 11% to $82 billion, below expectations.
- Google Search revenue rose 12% and YouTube ad revenue increased 9%.
- Alphabet recorded an $8.7 billion loss on equity investments, including SpaceX.
- The company reported negative free cash flow of $9.07 billion and increased AI spending.
- Q2 revenue was $127.6 billion, below the $128.2 billion expected.
- Adjusted EPS was $2.67, missing the $3.02 estimate.
- Google Cloud revenue doubled year-over-year to $30.71 billion.
- Gemini reached over 1 billion monthly active users.
- Shares dropped nearly 10% in after-hours trading.
- Alphabet's stock dropped over 10% in premarket trading.
- The report marks the first double miss for both EPS and revenue since Q4 2022.
- Google Search revenue missed forecasts for the second straight quarter.
- Alphabet's market value decreased by over $500 billion.
- AI summaries on search are affecting ad revenue.
- Amazon shares fell 7% in premarket trading.
- Intel shares plunged 25% in premarket trading.
- Amazon reported a Q3 miss on top and bottom line.
- Amazon maintained its capital expenditure forecast for 2026 at $220 billion.
- Intel issued weaker-than-expected guidance.
- Intel cited ongoing softness in the PC market.
- Alphabet shares closed 13% lower on Thursday.
- Alphabet's 13% drop was its worst single-day drop in history.
- Microsoft shares rose after remaining cash flow positive in Q3.
- Intel shares plummeted by 28% on Friday.
- Alphabet's stock fell another 1.4% on Friday.
- Reddit shares also fell.
- The Nasdaq index had its worst monthly slide since March 2025.
- Meta, Alphabet, Oracle, Amazon, and Microsoft committed to spending $800 billion on AI between them in 2026.
- Alphabet expects to spend up to $205 billion this year on investments, almost entirely AI-related.
- The Nasdaq exchange lost nearly $1 trillion in value in one week.
- The Nasdaq exchange lost approximately $2 trillion in value in one month.
- The S&P 500 fell by more than 1% on Friday.
- The Nasdaq composite fell more than 3% on Friday.
- The Nasdaq 100 is set to lose more than $2 trillion in market value this month.
- The Nasdaq 100 has fallen more than 5.8% so far in October.
Alphabet's Q3 Financial Performance
Alphabet, Google's parent company, reported a net profit of $26.2 billion for the third quarter, a 25% decline from the previous year. This figure, equating to $2.12 per share, fell short of analyst expectations. Revenue for the quarter increased by nearly 25% year-over-year to $127.6 billion, slightly below the $128 billion forecast by analysts.
Advertising Revenue Slowdown
The company's advertising business experienced a slowdown, with advertising revenue growing 11% to $82 billion, which was below expectations. Revenue from Google's search business, its largest income source, rose 12% to $63.4 billion, a decrease from the 17% growth seen in the prior quarter. YouTube's advertising revenue grew 9% to $11.2 billion, down from 13% growth in the previous quarter.
Investment Losses and Capital Expenditures
Alphabet recorded an $8.7 billion loss on its equity investments, which it attributed to its stake in SpaceX. The company also reported negative free cash flow of $9.07 billion for the quarter, significantly below the $2.70 billion analysts expected. Despite this, Alphabet maintained its full-year capital expenditure guidance of between $195 billion and $205 billion, indicating continued high spending on AI infrastructure.
Market Reaction
Following the earnings report, Alphabet's shares fell more than 10% in after-hours trading and premarket trading, erasing tens of billions of dollars in market value. This decline puts the company on course for its largest post-earnings drop since going public in 2004. Investors are scrutinizing tech companies' AI spending plans and the returns on those investments.
Updates
- The Nasdaq exchange lost nearly $1 trillion in value in one week.
- The Nasdaq exchange lost approximately $2 trillion in value in one month.
- The S&P 500 fell by more than 1% on Friday.
- The Nasdaq composite fell more than 3% on Friday.
- The Nasdaq 100 is set to lose more than $2 trillion in market value this month.
- The Nasdaq 100 has fallen more than 5.8% so far in October.
- Intel shares plummeted by 28% on Friday.
- Alphabet's stock fell another 1.4% on Friday.
- Reddit shares also fell.
- The Nasdaq index had its worst monthly slide since March 2025.
- Meta, Alphabet, Oracle, Amazon, and Microsoft committed to spending $800 billion on AI between them in 2026.
- Alphabet expects to spend up to $205 billion this year on investments, almost entirely AI-related.
- Amazon shares fell 7% in premarket trading.
- Intel shares plunged 25% in premarket trading.
- Amazon reported a Q3 miss on top and bottom line.
- Amazon maintained its capital expenditure forecast for 2026 at $220 billion.
- Intel issued weaker-than-expected guidance.
- Intel cited ongoing softness in the PC market.
- Alphabet shares closed 13% lower on Thursday.
- Alphabet's 13% drop was its worst single-day drop in history.
- Microsoft shares rose after remaining cash flow positive in Q3.
- Q2 revenue was $127.6 billion, below the $128.2 billion expected.
- Adjusted EPS was $2.67, missing the $3.02 estimate.
- Google Cloud revenue doubled year-over-year to $30.71 billion.
- Gemini reached over 1 billion monthly active users.
- Shares dropped nearly 10% in after-hours trading.
- Alphabet's stock dropped over 10% in premarket trading.
- The report marks the first double miss for both EPS and revenue since Q4 2022.
- Google Search revenue missed forecasts for the second straight quarter.
- Alphabet's market value decreased by over $500 billion.
- AI summaries on search are affecting ad revenue.
✨ This summary was generated by AI from the outlets' reporting listed below. It is not independently verified and may contain errors — check the original sources. How BrevFeed works →
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How outlets covered it
US tech stocks, including Intel, Alphabet, Amazon, and Reddit, experienced significant declines as investor concerns grew over substantial AI investments not consistently meeting earnings expectations. Intel's stock fell 28% and Alphabet continued its decline after reporting AI summaries impacted search ad revenue, while both companies increased AI-related spending.
A tech stock sell-off, driven by subpar earnings reports from major companies like Intel, Amazon, and Alphabet, caused US markets to decline significantly. The Nasdaq exchange lost nearly $1 trillion in value in one week and approximately $2 trillion in a month. This decline reflects investor scrutiny over the profitability of large AI investments and concerns about high interest rates impacting data center expansion.
Amazon shares fell 7% and Intel shares plunged 25% in premarket trading after both companies reported Q3 earnings that missed investor expectations. Amazon reported negative free cash flow for the second consecutive quarter, while Intel issued weak guidance due to a soft PC market, contributing to broader tech stock declines.
Alphabet's market value decreased by over $500 billion after its latest financial update revealed that AI summaries in Google Search are negatively affecting ad revenue. This decline occurred despite overall revenue growth, as increased AI investments led to a 25% profit drop and negative free cash flow, raising investor concerns about the balance between AI spending and core business growth.
Alphabet's search revenue grew 12% to $63 billion but missed estimates for the second consecutive quarter, despite strong search query growth. This revenue deceleration is attributed by some analysts to the increasing use of AI bots and agents, suggesting a potential shift in how users access information and commerce. Alphabet executives cited foreign exchange as the primary factor for the deceleration.
Alphabet's stock dropped over 10% in premarket trading following a double miss on EPS and revenue for the first time since Q4 2022, primarily due to Google Search revenue missing forecasts. This performance is impacting Nasdaq futures and raises concerns about Alphabet's funding for AI infrastructure amidst declining Search profitability.
Alphabet's shares fell 10% in premarket trading, potentially marking its largest post-earnings drop, after reporting negative free cash flow of $9.07 billion, significantly below analyst expectations. The company's search advertising revenue also missed forecasts, partly due to lower monetization within its AI Mode, while Microsoft's shares rose on more measured capital expenditures.
Alphabet reported Q2 revenue of $127.6 billion, below the $128.2 billion expected, and adjusted EPS of $2.67, missing the $3.02 estimate. Despite overall misses, Google Cloud revenue doubled year-over-year to $30.71 billion, and AI usage increased, with Gemini reaching over 1 billion monthly active users. The financial performance led to a nearly 10% drop in shares in after-hours trading.
Alphabet's shares fell over 10% after reporting lower-than-expected Q3 net profit of $26.2 billion and a slowdown in advertising revenue growth. The company attributed the profit miss partly to an $8.7 billion loss on equity investments, including SpaceX, while increasing capital expenditures on AI infrastructure.