Market reaction and earnings results
Alphabet shares fell double digits from Wednesday evening into Thursday trading, erasing hundreds of billions of dollars in stock market value from the $4tn tech giant. Net profit for the July-to-September period slid 25% from a year earlier to $26.2bn, or $2.12 a share, which fell well short of expectations by analysts surveyed by FactSet. Alphabet booked an $8.7bn loss on its equity investments due to its stake in the Elon Musk-led company SpaceX, where shares have struggled significantly since the company went public in June. While revenue rose 25% to $127.6bn, this figure sat slightly below the $128bn analysts had forecast. Advertising revenue grew 11% to $82bn.
| Metric | July-September Result | Change from Previous Year |
|---|---|---|
| Net Profit | $26.2bn | -25% |
| Revenue | $127.6bn | +25% |
| Advertising Revenue | $82bn | +11% |
| Google Cloud Revenue | $30.7bn | +103% |
YouTube advertising revenue grew 9% to $11.2bn, a slowdown from 13% growth in the previous quarter. YouTube Music and Premium passed 150 million subscribers worldwide. Search revenue, the company’s largest income source, rose 12% to $63.4bn, which also slowed from 17% growth last quarter. The "Other Bets" division, including Waymo, posted revenue of $372m and an operating loss of $2bn. Waymo provides more than 500,000 paid rides a week across 15 US metropolitan areas and aims to reach 1m weekly rides by the end of the year.
AI investment and cloud expansion
Google Cloud revenue jumped 103% to $30.7bn, beating analyst expectations as sales of in-house AI chips, known as TPUs, drove growth. Operating income for the cloud unit tripled to $11.1bn. Alphabet spent $51.4bn on capital expenditures during the quarter, mostly on datacenters and AI chips, which is significantly more than the $24bn spent a year earlier. This spending outstripped the cash generated by Alphabet’s businesses for a second straight quarter, leaving a disappointing $9.1bn gap. Alphabet raised $28.7bn by selling bonds and $12.4bn by issuing new shares.
Google launched Gemini 4 at the end of September and released a cybersecurity version later. The Gemini app reached 1bn users. Google’s AI models now process nearly 32bn tokens, or units of text, per minute. Anthropic, the maker of the Claude chatbot, has committed to using up to one million Google AI chips. Sundar Pichai told analysts he would "broadly think of all of this as a long-range planning process, not a short-term allocation exercise."
