Alphabet Shares Slide About 10% as Q3 Free Cash Flow Turns Negative on $51.4 Billion Capex

Alphabet shares fell more than 10% in US premarket trading on Thursday after the Google parent’s third-quarter results showed negative free cash flow and slower growth in its core search advertising business, TheStreet reported, even as quarterly revenue rose 25% to $127.6 billion.

According to the company’s earnings release, diluted earnings per share for the quarter ended September 30 came in at $2.12, down from $2.87 a year earlier, with net income of $26.5 billion. Investing.com said analysts had expected $3.02 a share. Alphabet said a loss on equity securities cut net income by $6.7 billion and EPS by $0.55; Investing.com attributed the loss to an unrealised loss on Alphabet’s investment in SpaceX.

Cloud doubles, search slows

Google Cloud revenue rose 103% to $30.7 billion from $15.2 billion a year earlier, and the unit’s operating income climbed to $11.1 billion from $3.6 billion. Google Search and other revenue grew 12% to $63.4 billion, which StockTitan noted was down from 17% growth in the previous quarter. YouTube advertising revenue rose to $11.2 billion from $10.3 billion, while group operating income increased 30% to $40.6 billion.

Chief executive Sundar Pichai said in the release that Alphabet is “now on a half-trillion dollar revenue run rate.” On the earnings call, he said year-on-year query growth was at its highest in five years, according to an Investing.com transcript.

Spending outpaces cash

Purchases of property and equipment more than doubled to $51.4 billion from $24.0 billion a year earlier. Against operating cash flow of $42.3 billion, that left free cash flow at negative $9.1 billion for the quarter. Alphabet made no share buybacks in the period, compared with $11.5 billion a year earlier, and its release showed $28.7 billion raised net through senior notes, along with at-the-market sales of Class A and Class C shares that brought in about $12.4 billion net.

Reuters, as cited by StockTitan, said the results “reignited concerns over mounting AI costs.” Daniela Hathorn, senior market analyst at Capital.com, told TheStreet that markets are no longer rewarding companies simply for investing heavily in AI.

The reaction contrasted with Microsoft, whose shares rose about 2.6% before the open after it beat quarterly earnings forecasts on 48% growth in its Azure cloud business, TheStreet reported. StockTitan said Nasdaq 100 futures were down about 1% early on Thursday.

What’s next

Chief financial officer Anat Ashkenazi said on the call that Alphabet’s full-year 2026 capital expenditure guidance of $195 billion to $205 billion is unchanged and that capex is expected to rise significantly in 2027, according to Investing.com. She also flagged near-term margin headwinds as the company puts the new capacity to use, while executives said sales of its TPU chips would scale in the fourth quarter with a larger ramp in 2027.

Alphabet’s board declared a quarterly cash dividend of $0.22 per share on its Class A, B and C stock, payable on December 14 to shareholders of record on December 7.

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