Google parent reports 25% revenue growth as ad sales slow, spending doubles and free cash flow stays negative
Investors Dump Alphabet Stock After Profit Miss, Ad Slowdown and Eye-Watering AI Spending Spree
Google parent reports 25% revenue growth as ad sales slow, spending doubles and free cash flow stays negative
ByPenuel Joseph Ares
Published 29 October 2026, 3:30 PM GMT
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Shares in Alphabet, Google’s parent company, plunged more than 10 per cent in after-hours trading in New York on Wednesday after the company reported weaker-than-expected profit, slower advertising growth and a sharp rise in spending on artificial intelligence (AI) infrastructure.
Revenue rose 25 per cent year on year to $127.58 billion (£104.6 billion) in the third quarter, slightly short of analysts’ expectations. Net income fell 25 per cent to $26.17 billion (£21.4 billion), or $2.12 (£1.74) a share on a diluted basis.
Results were affected by an $8.7 billion (£7.1 billion) loss on equity investments. This included an unrealised loss linked to Alphabet’s investment in Elon Musk’s SpaceX, according to reporting on the earnings call. An unrealised loss reflects a change in an investment’s value and does not mean the stake was sold.
Cloud Growth Races Ahead as Ads Cool
Google Cloud was the standout performer. Revenue rose 103 per cent to $30.7 billion (£25.1 billion), while operating income more than tripled to $11.1 billion (£9.1 billion). Alphabet attributed the growth to demand for AI infrastructure and solutions, core cloud services and sales of its in-house tensor processing unit (TPU) chips.
Advertising grew more slowly. Google advertising revenue rose 11 per cent to $82 billion (£67.0 billion), with Google Search and other revenue up 12 per cent to $63.35 billion (£51.8 billion).