Alphabet shares fell 12.64% Thursday after its third-quarter equipment purchases exceeded cash generated by operations, putting the cost of its AI investment against strong Cloud demand and questions about Search advertising returns.
The Class A shares closed at $283.82 on Oct. 29. Intraday estimates of the company’s market-value decline differed: the Los Angeles Times put it at $511 billion at 9:35 a.m. EDT, while Forbes estimated $480 billion at 1:30 p.m. EDT. Those figures were taken at different times; the closing share-price change was 12.64%.
For the quarter ended Sept. 30, Alphabet reported $42.290 billion in operating cash flow and $51.355 billion in purchases of property and equipment. The company’s free cash flow measure subtracts capital expenditures from cash generated by operations, leaving a third-quarter result of negative $9.065 billion. It was negative $5.855 billion in the second quarter.
Revenue totaled $127.577 billion, up 25% from a year earlier. Google Cloud revenue increased 103% to $30.709 billion, and its operating income rose to $11.121 billion from $3.594 billion a year earlier. Google Search & other revenue grew 12% to $63.350 billion. Alphabet CEO Sundar Pichai said AI investment was driving growth in Search queries, including commercial queries, and that the year-over-year growth rate was at a five-year high.
Search Engine Land reported that Google Chief Business Officer Philipp Schindler said lower monetization in AI Mode weighed on Search advertising growth. Google did not quantify the effect. David Wagner, a portfolio manager at Aptus Capital Advisors, told The Associated Press (AP) that investors wanted Search growth to accelerate.
AP also reported that Chief Financial Officer Anat Ashkenazi told investors capital expenditures are expected to increase significantly in 2027. The company plans to provide more detail on that spending during its fourth-quarter earnings call.
