Alphabet shares fell more than 8% after the search giant reported a decline in free cash flow during the third quarter.
Here are the company’s results, compared to the estimates of analysts surveyed by LSEG:
- Earnings per share: $2.67 adjusted versus $3.02 expected
- Income: $127.58 billion versus $128.22 billion
Revenue grew 25% over last year, representing the fastest growth rate on record since 2021.
Net income fell to $26.17 billion, or $2.12 per share, from $34.98 billion, or $2.87 per share.
Google reported negative free cash flow of $9.07 billion, far more than the $2.70 billion analysts expected.
As questions mount over increased spending on artificial intelligence development, Google’s capital expenditures totaled $51.36 billion, below the $55.09 billion expected by analysts.
During the second quarter, Alphabet raised its full-year capital spending forecast to between $195 billion and $205 billion, up from the previously reported $190 billion. Annual investments are expected to exceed $200 billion before surpassing $300 billion in 2027.
Operating profit came in at $40.58 billion, missing FactSet’s forecast of $43.19 billion.
Alphabet reported a $99.03 billion revenue windfall from equity holdings in the second quarter, fueled by stakes in SpaceX and Anthropic. However, the category weighed on third-quarter results, resulting in a loss of $8.66 billion.
Google continues to open its portfolio to fuel the expansion of AI. This contributed to strong revenue growth in its cloud division, which houses its suite of AI offerings.
Cloud revenue more than doubled to $30.7 billion, surpassing the $28.7 billion, 90% growth expected by analysts. The company continues to take market share from its major competitors Amazon Web Services and Microsoft Azure.
The company’s aggressive efforts towards its AI models have also shown signs of results. Google said its Gemini app has reached 1 billion users, making it the fastest-growing product in its history.
CEO Sundar Pichai told analysts the company was already seeing strong demand for its recently launched Argon Gemini model. Its Carbon iteration announced Wednesday outperforms Argon “in almost every area,” he added.
Alphabet’s search revenue increased 12% to $63.35 billion. This amount falls far short of the estimate of $64.96 billion. Pichai said the company’s investments in AI have generated the highest query growth rate over the past five years.
WATCH: Wall Street expects cloud growth to exceed 90% as search slows
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