Alphabet reports higher cash burn on back of heavy cloud spending, shares dive — SkimNews
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- Alphabet reported third-quarter revenue of US$127.6 billion, below the US$128.2 billion analyst estimate, while adjusted earnings per share came in at US$2.67 versus US$3.02 expected; net income available to common shareholders fell 25% to US$26.17 billion.
- Alphabet generated negative free cash flow of US$9.07 billion as it boosted cloud capacity and funded AI research, versus expectations near break-even and US$5.9 billion of cash burn in the prior quarter, the first negative quarter in its 22-year history as a public company; shares fell more than 10% in extended trading.
- Google generated US$82.01 billion in advertising revenue, about US$1.41 billion below expectations, which the report identified as the cause of Alphabet’s overall revenue miss.
- Google Cloud exceeded revenue estimates and more than doubled revenue to US$30.71 billion in the third quarter, though that growth was insufficient to offset the advertising shortfall; cloud chief Thomas Kurian said TPU sales had become a meaningful contributor to the unit.
- Alphabet reported a US$7.66 billion operating loss in “Alphabet-level activities,” primarily reflecting AI research and development. CFO Anat Ashkenazi said AI-driven capex will increase significantly in 2027, this year’s forecast was unchanged, and she expects near-term margin pressure from third-party cloud capacity.
- Alphabet is seeking up to US$25 billion in fresh debt to finance its AI build-out.
- Gemini 4 Carbon was announced ahead of the results as Alphabet sought to counter perceptions that it had fallen behind in AI; Sundar Pichai told analysts the model meant Google was again “leading at the frontier.”
Why it matters: Google’s ad business missed by US$1.41 billion, and Alphabet’s US$9.07 billion cash deficit drove a more-than-10% after-hours selloff even as Cloud revenue more than doubled to US$30.71 billion. The concrete trade-off for Alphabet is larger 2027 AI capex and near-term margin pressure from third-party cloud capacity.
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