Alphabet's stock price fell to $290 during after-hours trading, due to investors questioning whether Google's substantial AI investment would yield sufficient returns.
Google's profits fall short of Wall Street's expectations
Alphabet announced third-quarter revenue of $127.58 billion, a 25% increase from the same period last year. However, this figure is slightly lower than analysts' forecast of around $127.97 billion.
Google Cloud revenue grows by 103%, Gemini reaches an important milestone
Despite disappointing profit performance, Alphabet's cloud business still achieved strong growth. Driven by strong demand for AI's infrastructure, enterprise solutions, and cloud computing services, Google Cloud's revenue soared by 103% year-on-year, reaching a record of $30.7 billion.
CEO Sundar Pichai also revealed that Google's Gemini AI applications have reached 1 billion users. In addition, Alphabet achieved double-digit revenue growth for the 13th consecutive quarter.
However, these results are still not enough to stop a significant sell-off in Google's stock price.
Huge AI expenditures raise concerns about Google's future profits
One of the most concerning aspects of the Alphabet financial report is its continuously rising AI infrastructure expenditures. The company's capital expenditures for this quarter amounted to approximately $51.36 billion, resulting in a free cash flow of about -$9.1 billion.
Alphabet maintains its capital expenditure guidance for 2026 between $195 billion and $205 billion, but also warns that investment spending in 2027 will increase significantly.
This statement has exacerbated market concerns regarding the financial burden of the global AI competition.
As Google's stock price tumbled significantly after the release of its financial report, investors will continue to pay attention to the rapidly growing cloud revenue and the adoption rate of Gemini. Whether these will ultimately prove that Google's substantial infrastructure investments in Alphabet are justified remains to be seen.
