Alphabet Search Growth Slips to 12% as Cloud Doubles — SkimNews
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- Alphabet generated roughly $63 billion in search-and-other revenue, up 12% from a year earlier but below estimates for a second straight quarter, while Google said search-query growth was the strongest in five years.
- Alphabet executives said foreign exchange was the biggest factor behind search’s revenue deceleration and said the currency impact would be greater in Q4; search revenue growth had slowed from 19% in Q1 to 17% in Q2 and 12% in Q3.
- Alphabet stock fell about 10% in extended trading after the weaker-than-expected earnings and a $9 billion negative free-cash-flow result, three times the estimated deficit; the prior quarter’s $5.9 billion outflow was the first negative figure in the company’s public-company history.
- Gemini helped advertisers generate more than 1.5 billion campaign assets in Q3, up more than sevenfold year over year, while Alphabet said AI drove most product launches and improved its understanding of user intent for more relevant ads.
- Google Cloud revenue more than doubled to nearly $31 billion, with backlog around $560 billion and just over half expected to be recognized over the next 24 months; Microsoft Azure grew 48% to $33.2 billion.
- Alphabet kept 2026 capital-spending guidance at $195 billion-$205 billion and said outlays would rise significantly in 2027, including for TPUs it began selling externally in Q2; CFO Anat Ashkenazi said cash leaves first to build inventory and returns when systems are delivered and billed.
- UBS and Mizuho both put fears of AI-driven share loss back at the center of the Alphabet debate, while D.A. Davidson’s Gil Luria urged investors not to rush conclusions from one quarter.
Why it matters: Alphabet’s investors now have to judge AI on two clocks: Search growth fell from 19% to 12% across three quarters, while Cloud revenue more than doubled to nearly $31 billion and Alphabet plans $195 billion-$205 billion of 2026 capital spending. The 10% after-hours drop makes the cash-versus-growth tradeoff immediate for shareholders.
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