Alphabet shares slide more than 10% as AI spending pushes free cash flow negative

Alphabet shares fell more than 10% in after-hours trading after the Google parent reported third-quarter results on October 28. Revenue grew 25% from a year earlier, but the company posted its first top-and-bottom-line miss in nearly four years, CNBC reported.

The biggest concern was negative free cash flow of $9.07 billion, far worse than the $2.70 billion analysts expected. Net income fell to $26.17 billion, or $2.12 per share, from $34.98 billion a year earlier. After a $99.03 billion windfall from equity holdings including SpaceX and Anthropic in the second quarter, that category produced an $8.66 billion loss this quarter. Operating income of $40.58 billion missed FactSet's $43.19 billion forecast.

Spending on the AI buildout remains heavy. Capital expenditures were $51.36 billion, slightly below estimates, and Alphabet kept its 2026 capex forecast of $195 billion to $205 billion. "We continue to expect our capex to increase significantly in 2027," CFO Anat Ashkenazi said; CNBC reported annual capex is expected to exceed $300 billion next year. Long-term debt climbed to $125.1 billion from $21.6 billion a year earlier.

Google Cloud, home to the company's AI offerings, grew revenue 103% to $30.7 billion, ahead of the $28.7 billion expected. Google Cloud CEO Thomas Kurian, in his first earnings-call remarks, cited "extraordinary demand" from AI labs, capital markets, financial institutions and enterprises. Jefferies analyst Brent Thill told CNBC that cloud "was the only business that beat… Everything else missed."

Search revenue rose 12% to $63.35 billion, short of the $64.96 billion estimate. CEO Sundar Pichai said AI investments drove the highest query growth in five years and that the Gemini app has reached 1 billion users, the fastest-growing product in the company's history.

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Sources: CNBC, Alphabet Q3 2026 earnings release (SEC). Image: CNBC / Getty Images