Alphabet’s cloud business had a blockbuster quarter. Investors still hit the sell button.
Shares of the Google parent slumped more than 10% after its third-quarter report on Wednesday, CNBC reports. Revenue grew 25% to $127.58 billion, short of the $128.22 billion analysts expected, and adjusted earnings of $2.67 per share missed the $3.02 estimate. CNBC says it was the company’s first top-and-bottom-line miss in nearly four years.
Cloud was the bright spot
Google Cloud revenue more than doubled to $30.7 billion, beating the $28.7 billion analysts expected. “We are seeing extraordinary demand and strong growth from both AI labs, capital markets, financial service institutions, and enterprises,” said Google Cloud CEO Thomas Kurian in his first public earnings call remarks.
Alphabet also said the Gemini app has reached 1 billion users, calling it the fastest-growing product in its history. Search revenue grew 12% to $63.35 billion, below the $64.96 billion estimate.
The spending question
The worry is cash. Alphabet reported negative free cash flow of $9.07 billion, far worse than the $2.70 billion analysts expected. Capital expenditures were $51.36 billion for the quarter, and the company kept its full-year capex guidance at $195 billion to $205 billion.
“We continue to expect our capex to increase significantly in 2027, and will provide further details on our Q4 call,” CFO Anat Ashkenazi told analysts. Long-term debt climbed to $125.1 billion from $21.6 billion a year earlier.
Net income fell to $26.17 billion from $34.98 billion, partly because equity holdings that delivered a windfall last quarter produced an $8.66 billion loss this time.
Why it matters
Set the stock reaction aside and the buyer signal is clear: enterprises and AI labs are spending heavily on Google Cloud, and Google keeps taking share from AWS and Azure. Multi-cloud is the norm for large US enterprises now.
For IT services firms, Google Cloud partners and data and AI consultancies, that means more accounts actively evaluating or expanding on Google Cloud. Those are the companies to target with migration, data platform and AI deployment offers while budgets are being committed.
Sources: CNBC. Written by the xRapid Media LLP team.
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