Alphabet shares slumped more than 9% after the search giant reported a drop in free cash flow during the third quarter.
Here’s how the company did, compared with estimates from analysts polled by LSEG:
Earnings per share: $2.67 adjusted vs. $3.02 expectedRevenue: $127.58 billion vs. $128.22 billion
Revenue grew 25% from a year ago, which marked the fastest rate of growth for any period since 2021.
Net income fell to $26.17 billion, or $2.12 per share, down from $34.98 billion, or $2.87 per share.
Google’s reported negative free cash flow of $9.07 billion, which fell far further than the $2.70 billion expected by analysts.
As questions mount over heightened spending on the artificial intelligence buildout, Google’s capital expenditures totaled $51.36 billion, falling short of the $55.09 billion expected by analysts.
Alphabet maintained its full-year capital expenditures forecast after lifting guidance to between $195 billion and $205 billion during the second quarter from $190 billion. Annual capex is expected to top $200 billion before exceeding $300 billion in 2027.
“We continue to expect our capex to increase significantly in 2027, and will provide further details on our Q4 call,” finance chief Anat Ashkenazi told analysts during an earnings call.
The company’s borrowing rose sharply during the quarter, with long-term debt climbing to $125.1 billion, up from $21.6 billion a year earlier — an increase of about 479%.
Operating income totaled $40.58 billion, missing a $43.19 billion forecast from FactSet.
Alphabet saw a $99.03 billion windfall in revenue from equity holdings in the second quarter, fueled by stakes in SpaceX and Anthropic. However, the category weighed on results in the third quarter, resulting in loss of $8.66 billion.
Google continues to open its wallet to fuel the AI expansion. That contributed to strong revenue growth in its cloud division, home to its suit of AI offerings.
Cloud revenue more than doubled to $30.7 billion, surpassing the $28.7 billion, or 90% growth expected by analysts. The company continues taking market share from larger rivals Amazon Web Services and Microsoft Azure.
The company’s aggressive push on its AI models also showed signs of a payoff. Google said its Gemini app reached 1 billion users, making it the fastest-growing product in its history.
CEO Sundar Pichai told analysts that the company is already seeing strong demand for its recently launched Argon Gemini model. Its Carbon iteration announced on Wednesday outperforms Argon “on almost every domain,” he added.
Alphabet’s search revenue grew 12% to $63.35 billion. That fell short of a $64.96 billion estimate. Pichai said the company’s AI investments powered the highest query growth rate over the last five years.
WATCH: Wall Street expects cloud growth to top 90% as search slows