MOUNTAIN VIEW, Calif. — Alphabet shares were down about 11% before the opening bell Thursday after the Google parent fell short of Wall Street forecasts on both sales and profit for the first time in nearly four years and reported that its massive artificial intelligence buildout pushed free cash flow deep into negative territory.
The company posted third-quarter revenue of $127.58 billion, up 25% from a year earlier but below the roughly $128.2 billion analysts had projected. Adjusted earnings came to $2.67 a share against expectations near $3.02. Net income slid to $26.17 billion from $34.98 billion a year ago, dragged in part by an $8.66 billion loss on its equity stakes after a huge gain in that category the quarter before.
The number that rattled investors most was cash. Free cash flow came in at negative $9.07 billion, far worse than the shortfall of about $2.7 billion analysts had modeled. Capital spending reached $51.36 billion for the quarter, and Alphabet kept its full-year range at $195 billion to $205 billion while signaling another big jump in 2027. Long-term debt has swelled to about $125 billion from $21.6 billion a year earlier.
Search advertising, still the company’s largest business, rose 12% to $63.35 billion but missed estimates. Chief Business Officer Philipp Schindler told analysts on the earnings call that lower ad revenue inside the AI Mode search feature was part of the reason, and that the company is now expanding ads in its AI products, including overseas.
The bright spot was Google Cloud, where sales jumped 103% to $30.7 billion, topping forecasts. Chief Executive Sundar Pichai said the Gemini app has passed 1 billion users, the fastest growth of any product in company history.
If the stock closes down more than 9.77% Thursday, it would mark the worst reaction to an earnings report since Alphabet went public in 2004. Microsoft, which reported the same evening, moved higher in early trading after its spending came in below expectations and its free cash flow stayed positive.
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