Shares of Google-parent Alphabet Inc. fell as much as 10% in extended trading on Wednesday after the company’s third quarter results missed analyst expectations for the first time in four years. The company also expects significantly higher capex in 2027, thereby adding to the street’s concerns.
Alphabet reported revenue of $127.58 billion during the third quarter, lower than expectations of $128.22 billion. The company’s Earnings Per Share (EPS) of $2.67 on an adjusted basis also turned out to be lower than the $3.02 estimate. On a year-on-year basis, the company’s topline grew 25%. This was the first instance since 2022 that Alphabet’s results missed analyst expectations.
Adding to the concerns is the fact that Alphabet, similar to Meta, turned in a negative free cash flow number this quarter. While analysts had anticipated that, but the $9.07 billion figure turned out to be way higher than the $2.7 billion figure they were working with.
Alphabet spent $51.36 billion as capex during the quarter, lower than the $55.09 billion that analysts had projected. The company also maintained its full year capex forecast to be between $195 billion to $205 billion, as mentioned in the previous quarter. Annual capex will be higher than $200 billion. However, capex for 2027 is likely to touch $300 billion. The management said they will provide further details on this capex plan in their earnings call for the Q4 results.
Alphabet’s long-term debt has increased nearly five-fold from last year to $125.1 billion from $21.6 billion earlier. Operating income during the quarter also missed expectations.
$99.03 billion was received by Alphabet as windfall revenue from their equity stakes in SpaceX and Anthropic. However, overall equity holdings resulted in a $8.66 billion loss for the company during the quarter.
The only saving grace during the quarter, if any, was Google Cloud, whose revenue more than doubled to $30.7 billion and was ahead of analyst expectations of $28.7 billion. The company is also grabbing market share from rivals AWS and Microsoft’s Azure.
Google Cloud CEO Thomas Kurian said they are witnessing extraordinary demand from across sectors, while CEO Sundar Pichai told analysts that the recently launched Argon Gemini model is also seeing strong demand.
Alphabet shares are down 9.5% in extended trade at $291.36. The stock had ended 1.6% higher in regular trade.
Alphabet Q3 Results: Here’s why the stock fell 10% in extended trading on Wednesday