Alphabet sinks 10% as it holds 2026 capex unchanged, expects significant increase in 2027 — SkimNews
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- Alphabet shares slumped more than 10% after adjusted EPS of $2.67 came in below the $3.02 analysts expected and revenue of $127.58 billion missed the $128.22 billion estimate — its first top-and-bottom-line miss in nearly four years. Net income fell to $26.17 billion ($2.12 per share) from $34.98 billion ($2.87), and operating income of $40.58 billion missed the $43.19 billion FactSet forecast.
- Alphabet posted negative free cash flow of $9.07 billion, far worse than the $2.70 billion analysts expected, while long-term debt climbed to $125.1 billion from $21.6 billion a year earlier, an increase of about 479%.
- Anat Ashkenazi said Alphabet expects capex to increase significantly in 2027, with more detail due on the Q4 call; the company maintained its full-year forecast of $195 billion to $205 billion (raised from $190 billion last quarter), with spending expected to top $200 billion before exceeding $300 billion in 2027, after Q3 capex of $51.36 billion undershot the $55.09 billion estimate.
- Google Cloud revenue more than doubled to $30.7 billion, beating the $28.7 billion estimate, with Thomas Kurian citing extraordinary demand from AI labs, capital markets, financial institutions and enterprises and the division taking share from Amazon Web Services and Microsoft Azure; Brent Thill noted the Street wanted 100% growth, so 103% barely beat, and every other business missed.
- Gemini reached 1 billion users, the fastest-growing product in Google's history, and Sundar Pichai said demand is already strong for the recently launched Argon Gemini model, whose Carbon iteration outperforms Argon "on almost every domain."
- Alphabet's equity-holdings line swung from a $99.03 billion windfall in the second quarter, fueled by stakes in SpaceX and Anthropic, to an $8.66 billion loss in the third quarter.
- Sundar Pichai said Alphabet's AI investments produced the company's highest query growth rate over the last five years, but search revenue grew 12% to $63.35 billion, short of the $64.96 billion estimate.
Why it matters: Alphabet's cloud beat and 1 billion Gemini users show AI demand is real, but the 10%-plus drop shows investors are grading the company on cash: free cash flow swung to negative $9.07 billion and long-term debt jumped 479% to $125.1 billion, against a plan to exceed $300 billion of capex in 2027.
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