Google Stock Plunges 9% as Earnings Miss and AI Spending Concerns Investors

Key takeaways

• Alphabet shares dropped approximately 9% after disappointing Q3 earnings
• Cloud revenue surged 103% to $30.7 billion, while Google's Gemini AI app reached one billion users
• Alphabet's massive AI infrastructure investments and declining profits caused concerns about future profitability

Google parent company Alphabet saw its shares plunge approximately 9% in after-hours trading on Wednesday after reporting disappointing third-quarter earnings. Rising artificial intelligence infrastructure costs, weaker-than-expected profits and concerns over advertising growth overshadowed the company's impressive cloud performance.

Alphabet's stock fell toward $290 in extended trading, as investors questioned whether Google's massive AI investments would deliver sufficient returns.

<iframe src=”https://widgets.coincodex.com/w/0f0297a6-1f37-4a6f-b723-0f4f4733f338?site=coinpaper&mode=light” width=”100%” height=”420” frameborder=”0” referrerpolicy=”no-referrer-when-downgrade” style=”border:0;background:transparent;border-radius:0px;”></iframe>Google Earnings Fall Short of Wall Street Expectations

Alphabet reported third-quarter revenue of $127.58 billion, which is a 25% increase from the previous year. However, the figure fell slightly below analysts' expectations of approximately $127.97 billion.

Net income declined to $26.17 billion from $34.98 billion a year earlier, while earnings per share reached $2.12, compared with Wall Street estimates of approximately $3.01. An $8.7 billion loss on equity investments contributed to the earnings disappointment.

Meanwhile, Google's advertising business showed signs of moderating growth. Search and related advertising revenue increased 12% to $63.3 billion, while YouTube advertising revenue climbed 9% to $11.2 billion.

Google Cloud Revenue103% as Gemini Hits Major Milestone

Despite the earnings disappointment, Alphabet's cloud business delivered exceptional growth. Google Cloud revenue surged 103% year over year to a record $30.7 billion, driven by strong demand for AI infrastructure, enterprise solutions and cloud computing services.

(Source: Google)

CEO Sundar Pichai also revealed that Google's Gemini AI application reached one billion users. Additionally, Alphabet reported its 13th consecutive quarter of double-digit revenue growth.

However, these achievements were not enough to prevent the sharp selloff in Google stock.

Massive AI Spending Raises Concerns About Google's Future Profits

One of the biggest concerns surrounding Alphabet's earnings was its increasing AI infrastructure expenditure. The company recorded approximately $51.36 billion in capital expenditures during the quarter, contributing to negative free cash flow of roughly $9.1 billion.

Alphabet maintained its full-year 2026 capital expenditure forecast of $195 billion to $205 billion, but also warned that investment spending would increase significantly in 2027.

The announcement intensified concerns about the financial burden of competing in the global AI race.

With Google stock falling sharply after its earnings release, investors will be watching whether accelerating cloud revenue and Gemini adoption can eventually justify Alphabet's enormous infrastructure investments.