Alphabet Shares Sink as AI Spending Concerns Grow

Alphabet’s third-quarter revenue rose 25% year over year to $127.58 billion but missed expectations; net income fell 25% to $26.17 billion, including an $8.7 billion loss on equity investments, and earnings per share of $2.12 also missed forecasts. Search and other advertising revenue grew 12%, and executives said queries in Google’s AI Mode are less monetizable, raising concerns about pressure on the company’s core business. Google Cloud revenue more than doubled to $30.7 billion and profitability improved, but investors remained concerned about returns on Alphabet’s expanding AI investments. Capital spending was about $51.4 billion, free cash flow was a $9.1 billion outflow, and Alphabet maintained its 2026 capital-spending forecast of $195 billion to $205 billion while signaling a significant investment increase next year. Shares fell as much as 13%, wiping more than $500 billion from Alphabet’s market value; Microsoft’s stronger-than-expected cloud results sharpened the contrast, while CEO Sundar Pichai said the Gemini app had reached one billion users and Alphabet was at a half-trillion-dollar annual revenue run rate.