Alphabet Shares Slide 10% After Double Miss on Revenue and Earnings

Alphabet shares plunged about 10% in premarket trading on Thursday after the Google parent reported a third quarter that fell short of Wall Street's targets on both revenue and profit. Revenue totaled $127.57 billion, below the $128.2 billion consensus, while earnings per share dropped to $2.12, far under the $3.02 analysts had projected.

Investors focused on two figures in particular. Search revenue reached $63.4 billion, missing the $64.9 billion forecast and reviving concern that rivals such as Claude and ChatGPT are eroding Google's dominance, even after the heavy spending the company has devoted to defending it. Free cash flow came in at negative $9.1 billion, a much deeper hole than the negative $3.5 billion analysts had anticipated. The timing made the shortfall more painful. Markets have grown wary of cash burn among large technology companies, and Meta drew a similar reaction last week when it posted negative free cash flow for the first time in years.

Jeffrey Wlodarczak, CEO of Pivotal Research, acknowledged the bearish interpretation: that this may be the first quarter in which artificial intelligence visibly damages Google's search business, with YouTube possibly facing its own monetization problems. In his view, consumers are clearly seeing fewer ads as they turn to Google search and its AI tools, which now count 1 billion users and have pushed queries to a five-year high. He described this as a natural consequence of Google's shift toward an AI-driven world and, eventually, AI agents.

The selloff set the tone for the wider market. US stock futures split in premarket trading as Alphabet's results and renewed AI anxiety weighed on technology-heavy indexes. Contracts on the Dow Jones Industrial Average gained 0.3%, while those on the S&P 500 slipped 0.4% and Nasdaq-100 futures dropped 1.3%. The moves ended a positive run for tech stocks this week, as investors absorbed the Federal Reserve's decision on Wednesday to hold interest rates steady, along with earnings from Microsoft and Alphabet. Microsoft exceeded expectations on both revenue and profit, which made Alphabet's miss stand out.

Attention now turns to another major cloud and AI spender, Amazon, which reports after the closing bell on Thursday. A string of other large companies, including Eli Lilly, Mastercard, Intel, Caterpillar and Anheuser-Busch InBev, will also release results, offering further insight into the AI trade and the health of the broader economy.