Alphabet stock plummets as AI spending turns cash flow negative

A woman walks by a giant screen displaying the Google logo at an event at the Paris Google Lab on the sidelines of the AI Action Summit in Paris, Feb. 9, 2025. (AP Photo/Thibault Camus) **FILE** A woman walks by a giant … more >

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By Mary McCue Bell - The Washington Times - Thursday, October 29, 2026

Google’s parent company, Alphabet, saw its shares fall as much as 13% in early trading Thursday after it missed profit expectations and reported a second-straight quarter of negative free cash flow as spending on artificial intelligence surged.

The company reported third-quarter results Wednesday after the market closed.

Earnings were $2.12 per diluted share. Excluding an $8.7 billion loss on equity investments, which the company said cut earnings by 55 cents per share, adjusted earnings were $2.67, below the $3.02 analysts expected, according to the London Stock Exchange Group.

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Revenue rose 25% to $127.6 billion, short of the $128.2 billion expected. Advertising revenue was $82 billion, below the $83.4 billion expected.

Class A shares fell nearly 10% in after-hours trading Wednesday, while Class C shares fell 8.7%.

Sundar Pichai, CEO of Google and Alphabet, said in a statement that the company had a “strong quarter.”

“Our deep full stack approach is driving momentum across the business, with Alphabet revenues growing 25% year-over-year,” he said. “Our AI investments are driving overall Search query growth, including commercial queries. In fact, our year-over-year query growth rate is the highest it’s been in the last five years.”

Google Search and other revenue rose 12% to $63.35 billion.

Philipp Schindler, Alphabet’s chief business officer, said a larger-than-expected slowdown in search advertising growth was due to greater use of AI Mode, the company’s chatbot-style search interface.

Google Cloud revenue rose 103% to $30.71 billion, above analyst estimates. Operating income rose 30% to $40.6 billion.

Mr. Pichai also said the Gemini app reached 1 billion users, making it the fastest-growing product in Google’s history. He said the company surpassed 150 million YouTube Music and Premium subscribers globally, including trials.

Free cash flow was negative $9.07 billion, a larger shortfall than analysts expected. It was negative $5.9 billion in the second quarter.

Capital spending was $51.36 billion, up from $23.95 billion a year earlier, and exceeded operating cash flow of $42.29 billion.

Chief Financial Officer Anat Ashkenazi said on a conference call with analysts that capital spending would rise significantly in 2027 from this year’s forecast of $195 billion to $205 billion.