Shares in Google parent Alphabet fell more than 10% in after-hours trading Wednesday as the company reported lower-than-expected profit and a slowdown in its advertising business while it maintained big spending on AI.
Net profit slid 25% from a year earlier to $26.2 billion in the July-to-September period, or $2.12 per share, well short of expectations by analysts.
Alphabet booked an $8.7 billion loss on its equity investments, which it attributed to its stake in SpaceX, the Elon Musk-led company where shares have struggled since going public in June.
Revenue rose 25% to $127.6 billion, slightly below the roughly $128 billion analysts had forecast.
Advertising revenue grew 11% to $82 billion, also short of expectations. Revenue from Google’s search business, still the company’s largest source of income, rose 12% to $63.4 billion, slowing from 17% growth in the previous quarter.
YouTube saw advertising revenue grow 9% to $11.2 billion, down from 13% growth in the previous quarter. YouTube Music and Premium passed 150 million subscribers worldwide, including trials.
Google Cloud, which rents computing power and AI tools to businesses, saw revenue jump 103% to $30.7 billion, ahead of expectations.
The company said sales of its in-house AI chips, known as TPUs, contributed significantly to that growth. Operating income for the unit tripled to $11.1 billion.
Google is also selling its TPU chips to outside companies, in a growing challenge to market leader Nvidia.
Alphabet’s Other Bets division, which includes robotaxi company Waymo, posted revenue of $372 million and an operating loss of $2.0 billion.
Waymo now provides more than 500,000 paid rides per week across 15 US metropolitan areas and aims to reach 1 million weekly rides by the end of the year.
Alphabet spent $51.4 billion on capital expenditures during the quarter, mostly on data centres and AI chips, more than double the $24 billion a year earlier.
Its latest forecast for capital expenditure (capex) spending is between $195 billion to $205 billion in spending for 2026.
The company said it would continue to increase capex spending significantly in 2027.
“I would broadly think of all of this as a long-range planning process, not a short-term allocation exercise,” Google CEO Sundar Pichai told analysts of the company’s investment splurge.
The company’s spending, which included a fine paid to the European Union, outstripped the cash generated by Alphabet’s businesses for a second straight quarter, leaving a $9.1 billion gap.
During the quarter Alphabet raised $28.7 billion by selling bonds and $12.4 billion by issuing new shares to help pay for its AI ambitions.
Google has stepped up the pace of its AI releases since a delay to a flagship model in July raised questions about whether it was falling behind rivals OpenAI and Anthropic.
It launched Gemini 4 at the end of September and later released a version focused on cyber security.
The Gemini app has reached 1 billion users. Google’s AI models now process nearly 32 billion tokens, or units of text, per minute, more than four times the level of a year ago, the company said.
Anthropic, the maker of the Claude chatbot, is also one of Google’s largest cloud customers. It has committed to using up to 1 million Google AI chips.
In September, a US judge declined to order Google to sell off parts of its advertising technology business, imposing restrictions on how it operates instead.
AFP
Ltd
