GOOGL: Alphabet Stock Drops 10% as Wall Street Searches for Better Earnings

Alphabet’s cloud business doubled, but softer advertising and a hefty AI bill gave investors plenty to click away from.

📉 Google’s earnings lose the popular vote

• Alphabet shares GOOGL dropped roughly 10% in after-hours trading Wednesday, putting Google’s parent on the defensive despite quarterly revenue growth of 25%.
• Third-quarter revenue reached $127.6 billion, with earnings of $2.12 a share. Consensus called for $3.02 in earnings and $128.22 billion in sales.
• The advertising engine delivered less than investors wanted. Ad revenue of $82 billion fell short of a reported $83.5 billion forecast, while Search generated $63.35 billion against expectations of $64.96 billion.

☁️ Cloud delivers, but the bill gets bigger

• Google Cloud supplied the quarter’s strongest growth story, with revenue jumping 103% to $30.7 billion. The division’s operating profit climbed to $11.1 billion from $3.6 billion a year earlier. That’s meaningful evidence of AI demand translating into business.
• Building that capacity came with a $51.4 billion quarterly price tag. Capital expenditure — spending on infrastructure such as servers and data centers — more than doubled from $24 billion a year earlier but still landed below estimates around $55 billion.
• Investment losses also dented the bottom line. Alphabet recorded an $8.7 billion loss on equity securities, reducing earnings by $0.55 a share after tax. That helps explain the headline weakness, although setting that drag aside would still leave earnings below the cited $3.02 consensus.

🔎 Traders want more than another AI demo

• The underlying operations held up better than the earnings headline suggests. Operating profit rose 30% to roughly $40.6 billion, with the operating margin expanding. Still, negative free cash flow hit $9.07 billion, much steeper than the $2.7 billion anticipated.
• Gemini’s audience offers a sign of scale, with the app reaching one billion users, according to the earnings report. Turning that reach into durable revenue remains the commercial test.
• Once the drop is factored in when the market opens, shares of Alphabet will be in the red for the year, signaling that the AI boom might have reached its peak point, at least for now.