Alphabet’s Q3 profit falls 25% to $26.2bn as equity losses weigh
Alphabet's net profit dropped 25% year-on-year to $26.2 billion in the third quarter, missing analyst estimates, after an $8.7 billion hit on equity investments including its SpaceX stake offset strong cloud growth.
Earnings per share came in at $2.12, falling short of forecasts compiled by FactSet. Total revenue climbed 25% to $127.6 billion, just under the roughly $128 billion analysts had penciled in.
Advertising sales, Alphabet’s core business, rose 11% to $82.0 billion but also undershot expectations. Search revenue, the company’s biggest earner, grew 12% to $63.4 billion, a slowdown from 17% growth in the prior quarter. YouTube ad revenue expanded 9% to $11.2 billion, down from 13% growth previously, even as its music and premium subscriptions topped 150 million worldwide.
Google Cloud was the standout, with revenue jumping 103% to $30.7 billion, beating estimates, while operating income for the division tripled to $11.1 billion. The company credited strong demand for its in-house AI chips (TPUs), which it is now selling to outside firms, putting it in direct competition with Nvidia. OpenAI is reportedly among the buyers.
The “Other Bets” unit, which houses robotaxi venture Waymo, posted $372 million in revenue and a $2.0 billion operating loss. Waymo is now running over 500,000 paid rides weekly across 15 US cities.
Capital spending surged to $51.4 billion, more than double a year earlier, driven by data centers and AI infrastructure. Alphabet guided for 2026 capex of $195 billion to $205 billion and reported a second straight quarter of negative free cash flow, at minus $9.1 billion. To help fund the buildout, it raised $28.7 billion in bonds and $12.4 billion through new share issuance.
Why it matters: As one of the largest components of the Nasdaq 100 and S&P 500, Alphabet’s earnings and heavy AI-related capital spending can sway sentiment across US tech stocks and broader index direction.
Source: Economic Times Markets