Alphabet shares drop 8% despite record revenue
The move
Alphabet, where co-founders Larry Page and Sergey Brin remain large shareholders, reported Q3 revenue of $127.6 billion on Oct. 28, up 25% from a year earlier and just short of the roughly $128 billion analysts expected. Google Cloud revenue roughly doubled to $30.7 billion, up 103%, with its operating margin rising to 36.2% from 23.7%. Net income fell 25% to $26.2 billion, as an $8.7 billion loss on equity investments cut diluted earnings per share to $2.12 from $2.87, well below the nearly $3.00 Wall Street expected. Capital spending rose 114% to $51.4 billion for the quarter, pushing free cash flow to negative $9.1 billion. Shares fell 8.25% in after-hours trading, testing the $300 level.
Why it matters
It's a reminder that heavy AI spending and volatile investment gains can swing Alphabet's bottom line even when its core advertising and cloud businesses are growing fast.
The bear case
Revenue and cloud growth both topped last year's pace, and the earnings miss was driven mainly by a one-time investment loss rather than a change in the underlying business.
What to watch
Whether Alphabet's capex keeps climbing when it reports Q4 results.