Alphabet released third-quarter results that disappointed investors, with shares declining more than 8% following the announcement. The company reported negative free cash flow of $9.07 billion, a substantial miss compared to analyst expectations of $2.70 billion. This downturn occurred as the technology company continues aggressive capital expenditures to fund its artificial intelligence initiatives.
Revenue performance showed strength, growing 25% year-over-year to mark the fastest growth rate since 2021. However, net income declined to $26.17 billion, or $2.12 per share, down from $34.98 billion, or $2.87 per share in the prior-year period. Operating income totaled $40.58 billion, falling short of the $43.19 billion forecast from FactSet.
Capital expenditures reached $51.36 billion in the quarter, below the $55.09 billion analysts had projected. The company maintains elevated spending guidance, with full-year capital expenditure expectations between $195 billion and $205 billion, with annual capex anticipated to exceed $200 billion before potentially surpassing $300 billion in 2027. These figures underscore the company’s substantial commitment to its artificial intelligence infrastructure.
Cloud revenue demonstrated robust performance, more than doubling to $30.7 billion and exceeding analyst estimates of $28.7 billion. This segment, which houses the company’s artificial intelligence offerings, continues gaining market share from competitors Amazon Web Services and Microsoft Azure. Additionally, the company reported that its Gemini app reached 1 billion users, representing the fastest-growing product in company history. Search revenue grew 12% to $63.35 billion but fell short of the $64.96 billion estimate. Chief Executive Officer Sundar Pichai attributed strong query growth to artificial intelligence investments, noting the company had achieved its highest query growth rate in five years.
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